With temperatures rising, you may find that your employees are discussing plans for beach holidays and far-off adventures. In pre-covid times an employee’s ‘traditional’ route to a holiday would have been to book annual leave and leave all work behind until their return to the office. However, it is undeniable that the pandemic brought about a radical change to the way we work and, so it would seem, also to the way we holiday. 

‘Workcations’ are now a phrase that employers are growingly familiar with. A workcation is a fusion of work and leisure; they allow employees to work from anywhere — a beach, a Parisian café, or nana’s house in Spain. Their popularity has exploded in the past few years. Unlike traditional annual leave, where employees were expected to switch off completely whilst abroad, workcations blend productivity with downtime. 

Workcations typically happen when employees ‘tack’ a few working days onto an existing period of leave. By way of example, where an employee is travelling to Italy for four weeks to visit family, and they want to spend two weeks as annual leave and have two weeks spent working remotely from Italy. 

Too good to be true?

This sounds like an employee’s dream. In recent years, we’ve seen employers showing greater flexibility in exploring agile ways of working to promote a better work-life balance. In an increasingly globalised workforce, and the ever-present war for talent, this can be an excellent way for UK employers to attract and retain good people.

But employers need to be aware that allowing employees to work remotely from abroad is not without risks. Requests to work overseas (even if on a very short-term basis) potentially give rise to a significant number of legal complexities which include employer’s income tax withholding obligations; corporate tax liability; social security withholding liability; employment rights; immigration and right to work status; regulatory issues; data privacy; insurance and benefits considerations; and health and safety. If you are a regulated business, the considerations are often a little more complex. These issues need to be considered not only in respect of the overseas working location, but also for the home location and the impact the overseas working has on these. 

It is therefore advisable for employers to consider employees’ requests to work remotely overseas on a case-by-case basis, considering in particular the personal circumstances of the employee and the nature of their role, the duration of the proposed arrangement, and the country where they intend to work from. 

In particular, employers need to consider whether the employee requesting to work temporarily overseas has the right to work in the host country. Breach of immigration rules of the host country can have serious consequences for both the employer and the individual. This is particularly relevant post-Brexit, as UK nationals no longer have the automatic right to work from EU countries. Another important consideration is whether, due to the employee’s seniority or the nature of their role, allowing them to work from abroad might risk creating a permanent establishment in the host country, which would trigger corporate tax liabilities. Employers are also generally advised to consider any legal risks of the host country, as well as safety and security considerations.

But how to manage this as an employer?  

‘Remote Overseas Working’ (ROW) policies are a growing global trend. Whether it is as a result of employees taking a broad view to what working from home means (e.g. thinking the employer won’t mind if it is abroad so long as their productivity is not affected) or as a result of countries enforcing tighter control over overseas remote workers, we are seeing many of our clients put in place appropriate policies to deal with remote working requests. 

The formulation of a ROW policy is led by the employer’s strategy for overseas working and their appetite for risk. A ROW policy should be considered as a real additional benefit that is offered to employees and as such, investment should be made to ensure that the policy can be resourced appropriately and that the business understands the risks and obligations as a result of implementing such a policy. 

ROW policies usually set out how these requests are made and handled. The policies will usually set out the maximum time that someone can work overseas in a 12-month period (the trend a couple of years ago was 30 days but this is seemingly reducing to 2 weeks). The policy will usually set out the requirements that need to be satisfied in order for a request to be approved e.g. an employee will need to evidence they have the right to work in the overseas country, the employee will need a certificate of coverage in respect of social security, they may have to agree to have their duties restricted to avoid a permanent establishment risk, to name a few. 

As you will imagine, for a compliant policy to be effective, the employer needs to understand the obligations on them for each overseas country where an employee wants to work. This can either be done proactively, where employers pull together a risk assessment for each of their most common country combinations and rely on this (having it reviewed periodically) as their guidelines for approving requests made, or they seek advice on each request that comes in and build up a library of resources over time. It is this advice that requires a level of investment by an employer. 

Employers should be careful when looking to find solutions in the market as many  solutions providers are not experts in the issues that need to be considered (income tax withholding, social security health and safety, immigration, employment law, corporate tax), and therefore the outcomes of some of these products can be unreliable. 

The benefits of having a ROW policy are that it allows your employees the flexibility and freedom that many have grown accustomed to in a hybrid working home. A change of scenery is normally good for the soul and, after the pandemic and in the midst of a cost-of-living crisis, we shouldn’t forget the importance of employees’ wellbeing and its impact on productivity. It could also be a fantastic opportunity for those employees who live far from home to visit family and friends and not use all their annual leave. 

Crucially, having a ROW policy gives employers greater control and oversight of remote working arrangements, and greater capacity to minimise any legal risks. A ROW policy should therefore not be a blanket policy which allows every employee to jet off whenever or wherever they please, Instead, it should be a controlled case-by-case analysis to allow the employer to manage their risk-based decisions in an informed way. Tracking of requests that have been approved and which employee is where at any given time is also vitally important. 

Finally, ROW policies should be aligned with the employers’ culture and wider policies and initiatives aimed at better work-life balance and employees’ wellness. Such policies need to make clear that their purpose is to give employees greater flexibility, and not to create and expectation that employees need to be thinking about working during holidays. 

Our colleagues have written an excellent guide with a more in-depth analysis of the legal implications of allowing employees to work remotely abroad (be it temporary or more permanently). 

If you want to explore the possibility of implementing a ROW policy, or want a review of your existing policy, please get in touch.