Cross-Border Remote Work: Growth Area to Continue Watching

As countries continue to adapt to the effects of the COVID-19 pandemic and the continued globalization, employers have seen significant growth in domestic and international remote work requests.

During the pandemic, of course, many employees became accustomed to working from home and we began to hear the first rumblings from clients that some employees either needed or wanted to work outside of their regular country of work/residence for some period of time due to COVID border closures, the need to be with sick family members, or the desire to escape to an island nation during the social distance/isolation days of the pandemic. 

As we are now coming into a new normal, we have seen an increase rather than a decrease in employees’ requests – or even demands – to work in another country for short-term periods of time. 

It is important to highlight at the outset that cross-border remote issues can affect all employers, even those that do not have any brick-and-mortar presence or business activity in the remote work country. If you have employees requesting (or demanding) to work from another country, then you would be wise to consider remote work issues and risks. 

Cross-border remote work pre-pandemic

Before the Covid-19 pandemic, many global employers (i) did not have any cross-border remote work requests or (ii) if they had such requests, the employer typically rejected them as a matter of course or allowed such work for at most a week or two while the employee was on a business trip or vacation. 

Therefore, the employer either did not have a cross-border remote work policy or had a policy allowing remote work for a few weeks while an employee was on a business or personal trip. 

The new normal

Cross-border remote work requests have grown at lightning speed. Increasingly, such requests are a normal part of the conversation in candidate recruitment and employee retention.  

The shadow side of growth is that growing pains often come with it. With cross-border remote work, the major growing pain is that the law in many countries is lagging behind the practical reality. As a result, employers may be exposed to unforeseen risks including, but not limited to (i) immigration; (ii) payroll tax; (iii) corporate income tax; (iv) employment; and (v) benefits. 

Reasons employees request to work remotely

The reasons for cross-border remote work requests run the gamut, from personal family reasons to spousal work issues to a simple desire to travel and see the world. Based on our experience, the five most common examples include:

1. The Vacationer/Business Traveler – An employee wanting to work while on vacation or business travel.  
2. The Family Person – An employee needing to work from their home country for family or other personal reasons.
3. The Supportive Spouse – An employee following their spouse assigned or otherwise employed overseas by their employer; going with their spouse for a military or diplomatic assignment; etc.
4. The Forced Remote Worker – An expatriate employee who must leave the regular work country due to lack of work authorization and/or to renew a visa in order to re-enter the regular work country.
5. The Digital Nomad – An employee desiring to travel to, and work from, other countries for adventure; recreation; etc.

Important Policy Considerations

Naturally, employers want to do what is best for their businesses holistically, which includes balancing talent acquisition and retention issues with factors including: 

• whether the employee can do their job in a remote location practically and legally; and 
• whether allowing employees to remotely work internationally will set a precedent and open a floodgate of other international remote work requests.

As the numbers of cross-border remote work requests increase, many employers choose to develop a policy to address those and other considerations, including, but not limited to: 

• What are the threshold criteria for employees to be considered for remote work? (e.g., minimum duration of employment, types of work that can be done remotely, minimum performance criteria, and so on)
• How long will the company allow remote work in a typical situation? (e.g., many employers use six months as an absolute maximum limit largely because individuals often will be subject to income tax on their worldwide income after working in a country for at least 183 days)
• Will the company require the employee be a national of the remote work country or have specific authorization to work remotely? (e.g., a growing list of countries have implemented remote work or digital nomad visas to allow people to legally work remotely from an immigration standpoint).

In addition to helping employers develop policies to establish a standard process and criteria for evaluating and responding to remote work requests, we also regularly help clients create remote work agreements that help set expectations over duration and performance and place responsibility on the employee for legal compliance as much as possible.

Important Legal Considerations

As employers evaluate remote work requests and develop policies and agreements pertaining to remote work, there are many risks to consider, including, but not limited to, the following:

1. Immigration: Can employees seeking to work internationally legally work in their desired jurisdiction? 
2. Payroll Tax: How should payroll tax for international employees be calculated? 
3. Employment: Will the employee gain the benefit of employment protections in the remote location?
4. Corporate Income Tax: Will employers have any increased corporate income tax exposure from the remote work? 
5. Employee Benefits: How should employers discharge their employee benefits obligations for employees while they are outside the regular work country?

We regularly help clients analyze these and other attendant risks.

Takeaways

As companies increasingly field and analyze remote work requests, it is paramount to: 

• have a defined strategy for handling such requests (this can include a specific policy, maximum time periods, specific countries that are a no-go, and so on), and 
• take steps to apply the strategy to each specific situation to determine the risks and make informed and consistent decisions. 

When the remote work is (or becomes) too risky under the circumstances (e.g., the time extends unreasonably or the employee is engaging clients in the remote work country), the employer should consider denying or curtailing the remote work or pivoting to an alternative arrangement based on the totality of the circumstances. 

Alternative arrangements typically include: 

• establishing a legal presence to employ the individual(s) in the remote work country
• using a PEO/EOR to employ the individual(s) on the company’s behalf, or 
• converting the individual to consultant status (if the nature of the work allows this conversion legally and practically)

This article first appeared in L&E Global’s Tech Newsletter October 2024