Remote work abroad? – Matters to consider
Remote work refers to work performed outside the actual workplace as agreed with the employer and the employee. Now, after almost two years of the pandemic, the overall concept of where and how we work has changed significantly and the option of working remotely abroad is gaining popularity. In this article, we have listed some practical matters for employers to consider before agreeing to allow employees to work remotely abroad.
Firstly, consider how remote work abroad would fit into the employer’s organization and business. Secondly, consider if the work performed by the employee is such that it can be performed abroad (e.g. Will a different time zone cause challenges? Will the work sometimes require the employee’s presence at the office at short notice? And who would pay for the travel costs in such cases?).
Remote work abroad is largely a matter of trust between the employee and the employer. With this in mind, the employer should make a case-by-case assessment of each employee’s ability to work remotely abroad, but also at the same time take into consideration the principle of equal treatment. The destination country and its legislative peculiarities should also be carefully assessed.
Income from employment is usually taxed in the employee’s country of residence. In addition, the employer obligations do not normally apply to Finnish employers abroad, but the employees themselves must attend to their obligations to the local tax authorities. However, the rules vary from jurisdiction to jurisdiction, and the employee’s earnings may be subject to reporting to the local tax authorities, even if the employer is Finnish.
In addition, it is important to note that the employee working from the home office may create corporate tax liability (permanent establishment) for the employer in the jurisdiction where the home office is located. This would also trigger significant registration and filing obligations for the employer, including the fact that the employer’s obligations to the local tax authorities will be similar to those of domestic employers. Careful planning is key in avoiding any additional foreign tax liabilities.
A work permit is not required e.g. for countries located in the European Union (EU)/European Economic Area (EEA), but the employee should be registered locally after 3 months of remote work in the destination country. Depending on the country, a work permit may require a permanent establishment in the country in question.
The employer should apply for an A1 certificate for the employee to show which country’s social security laws apply and to which country the employer/employee should pay social insurance contributions. An employee’s remote work in a country not located in the EU/EEA (or other non-contractual country) may mean double contribution obligations to the employer, i.e. the employer’s social security contributions must be paid both to Finland and to the country where the employee is working. Without an A1 certificate, social security laws (and contributions) in the country of employment apply from the first day of work.
Check the coverage of the employer’s insurance policies. Remind the employee of the importance of their own travel and health insurance, especially if the employer’s insurance policies do not (fully) cover accidents or sickness while working remotely abroad. The employer can always require the employee to have such insurance before agreeing on working remotely abroad. For insurance purposes, remote work abroad is not considered as a business trip or as “posted employee” work.
The employer has a duty to take care of the safety and health of its employees also when they are working remotely in a foreign country. It is advisable for the employer to discuss occupational health matters with their own occupational health service provider and check what is covered by their contract. Nowadays, it may be possible to access some of the occupational health care remotely.
Also, to the extent necessary, information on the content of the foreign country’s relevant legislation should be obtained in advance. In practice, naturally the employer’s supervision regarding the remote work abroad is more limited than it would be if the employee worked at the office. Though the employer cannot transfer its mandatory work safety obligations to the employee, it is important to emphasize the employee’s own responsibility for their work safety and well-being when working remotely.
Find out about any security issues and costs (phone and internet connection etc.) in the country in which the employee would be working remotely. Remote working requires compliance with the employer’s data protection and security principles as well as a reliable network connection.
Always enter into a written agreement on remote work abroad (what, where, when, how long, etc.). The agreement should provide that the remote work arrangement can be discontinued at any time in case anything unexpected occurs or the employer needs the employee back in the office. The allocation of costs between the employer and the employee should be provided for in the remote work agreement.
If remote work abroad becomes relevant at your organization, Roschier’s experts would be happy to explain these topics in more detail and, among other things, assist in drafting remote work agreements suitable for your organization.