This is the third in our series of blog posts regarding the recent increase in interest surrounding international remote working and the second of two blogs regarding the compliance element of this subject. Once again, in the context of this series of articles we will focus on the area of international remote working where an employee performs duties for their employer while being physically located in a different country.
In our previous blog post on the matter, we looked at the key issues of compliance associated with an international remote worker’s tax and social security liabilities. In addition to these, there are issues associated with the right to work, which laws govern the relationship between the employee and employer and payroll issues among others. This article will attempt to cover the pertinent points HR practitioners need to consider in relation to each of these areas.
Does the employee have the right to work?
This is likely to be the area which attracts the most scrutiny before a company decides to utilise international remote working arrangements such as virtual assignments. Indeed, immigration and labour law compliance was cited as the second most challenging issue concerning international remote work for participants in our 2022 Global Mobility Now survey. One of the first issues for a company to address is whether an employee not only has the right to be present where they are working but also has the right to actually do the work there. For example, if an employee who is presently working for a company based in Singapore decides to move to Thailand for a short, medium or long period of time and continue performing his/her services for the company while based there, a crucial question for the employee and employer will be, does the employee have the right to be in Thailand and work from there?
There are likely to be multiple immigration options for the employee, ranging from entering Thailand on a standard tourist visa through to more long-term solutions such as obtaining long-term residence permission, but many of these options will not permit the employee to work. For example, most employees seeking to work remotely while being based in Thailand would likely feel that they can enter Thailand on a standard 60-day tourist visa. However, this does not give the person the right to engage in paid employment while there. While the employer may take a hands-off approach when it is the employee who chooses to work remotely, assuming it to be the employee’s choice, there can still be implications for the company. Notwithstanding the fact that the employee may not work while being in Thailand on a standard tourist visa, if the employee uses a short-stay visa option and chooses to renew it on a regular basis, there may be procedures involved which can be time consuming, such as the employee’s need to exit and then re-enter the country, which will impact the employee’s productivity. There may also be limitations on the number of times this is permitted before the employee is then prohibited from re-entering, which may put the employee’s ability to work for the employer at risk. Most importantly, even if these practicalities can be overcome, it is important to remember that in the overwhelming majority of cases a person may not undertake paid employment if they enter a country on a tourist visa. As such, as reported in our recent Global Mobility Now survey, over 90% of respondents will only allow an employee to undertake international remote work if they have the right to work in the location in which they choose to base themselves.
Which employment legislation will apply?
An additional concern is which labour laws will apply to the employee while working remotely? In the case of long-term assignments, this tends to be straightforward in that the employee and employer must act in compliance with the labour laws of the country to which the employee is assigned. However, what will happen when the employee is assigned to work for a company in the Philippines but remains physically in Japan? Which country’s labour law will apply to the employee?
If in the above example the employee enters into an employment contract with the Philippines company, the terms and conditions will be the same as those provided to other locally recruited staff in the country. However, as the employee is physically located in Japan, Japanese labour law may take precedent and be applied in areas regarding mandatory provisions such as leave and termination. As such, any company seeking to utilise international remote working will need to consult employment law specialists in the locations where they expect their workers to be based and where the employer is based in order to determine which employment laws will apply to the employee.
Payroll
In terms of payroll, the most pressing issue will be whether or not the company is able to pay the employee in their location and currency of choice. This is straightforward when an employee remains in the home country while performing services for an entity in another location on a virtual assignment basis: the employee will continue to receive their salary via home country payroll as they did prior to the assignment. However, the company will need to be mindful of where taxes need to be paid on the employee’s salary, as discussed in our previous post on the matter.
However, other cases are less straightforward. Our example above of the employee who chooses to relocate from Singapore to Thailand for a short period of time will likely accept the fact that the company will continue to pay their salary in Singapore dollars and will accept both the inconvenience of having to withdraw money from an ATM on a regular basis and the possible impact of currency volatility during this time, as the move has been at the employee’s request. However, the Japanese employee who works for a Philippines-based company while continuing to be based in Japan will not wish to be paid in pesos and the company may not have the ability to pay the employee in a foreign currency in a foreign bank account (the actual salary to be paid will be discussed in the next blog in this series). One potentially valuable solution to this challenge would be the engagement of a third party to act as an Employer of Record which can also provide payroll services.
Healthcare
The Covid-19 pandemic led to a significant increase in home working and with it questions regarding the employer’s liabilities in the event of accidents which occur at home in the course of an employee performing their duties for an employer. This is also applicable to international remote working and different jurisdictions have different laws on the matter. Therefore, it is important for HR personnel to know what is required and what the company’s liabilities are. For example, a person based in Singapore who chooses to work remotely from home for an employer based in Australia may be covered by Australian laws in relation to workplace accidents. I.e., if the employee has an accident at home in Singapore while performing their job for the Australian employer, they may be liable to compensation in accordance with Australian legislation.
There is also the issue of medical coverage in the event of an accident. We discussed the issue of eligibility for membership of social security schemes in our last blog in the context of the retirement benefit component of such schemes. The same principle applies in terms of government-provided medical services. Several countries limit access to government healthcare to citizens, residents or those who make contributions to their social security schemes. Therefore, a person from Australia who is employed by a company in China but prefers to base themselves in Hong Kong may not have the same level of access to public hospital services. Furthermore, the fees they pay for such services they can obtain will be significantly higher than those applicable to Hong Kong residents.
Another consideration is medical insurance. Before utilising international remote work or a virtual assignment the HR team should also check with their medical insurance provider if employees who continue to remain in their home country and work from the company’s operations there would still be covered by the company’s medical insurance policy if the employee is working for the benefit of a subsidiary in another country. Likewise, if an employee chooses to relocate to another location for a short period of time (e.g. 2 months) but continues to work for their employer, they may not be covered by the employer’s medical insurance policy as many policies have geographical limitations regarding coverage or in terms of the period of stay in a location other than the employee’s designated home country for which the insurance policy remains valid.
Data security
An area often overlooked but of significant importance is data protection and security. A person on a virtual assignment or who is working remotely may be based in one country but accessing data such as employee records, confidential financial information or other sensitive information on a computer network or servers in another country. There may be legislation or contracts between companies and their clients which prevent this from happening. For example, common inclusions in commercial contracts are clauses prohibiting one party from transferring data in relation to their commercial relationship to its operations and employees based in other countries. Furthermore, legislation needs to be considered. For example, the European Union’s General Data Protection Regulation (GDPR) provides rules on personal information and what companies need to do to keep it secure including when accessing it. Therefore, a person based in Korea on a virtual assignment for a company in Germany will need to comply with GDPR requirements if they are accessing personal information relating to the German entity’s employees or clients.
Many countries have legislation regarding the storage of personal data and will levy penalties, including fines, in the event of a breach, with the EU’s presently the most severe. This means that companies will need to take measures to ensure that when their staff are accessing their networks from other countries, they are doing so securely. For example, a person who is undertaking a virtual assignment for a company in Singapore while located in Vietnam will likely compromise the company’s IT security infrastructure if they are accessing the company’s IT network courtesy of an insecure Wi-Fi network in a coffee shop with any breach liable to bring financial and reputational consequences for the company.
Conclusions
While tax, social security and legal issues (such as immigration and employment legislation) are the areas that will attract the most attention when companies are evaluating compliance and administrative issues associated with virtual assignments, this article shows there are other areas which also require care and attention from HR staff when managing or formulating policies for virtual assignments and international remote working. It is clear that such policies must also encompass both the company’s and the employee’s respective roles, responsibilities and liabilities regarding healthcare, occupational health and safety and even data security.
FIND OUT MORE
Have a look at other blog posts of the series to refresh your knowledge on international remote working:
Our new International Remote Work Report is now available to purchase, or free to those who participated in the survey! (Updated January 2024)
Please contact us to speak to a member of our team directly.