When it comes to working abroad, the devil is in the details
The so-called Great Resettlement, in which employees seek to work abroad, continues as threats and travel restrictions around the pandemic dramatically eased. It’s putting pressure on companies to bend to those demands to attract and retain talent.
But the devil is in the details when it comes to such programs.
As Jennifer Strauel, chief people and diversity officer of the travel tech company arrivia recently put it, it’s actually one of the single greatest compliance challenges employers face today. “While we’d love to allow our people to truly ‘work from anywhere,’ it’s not that simple,” she said.
Strauel explained that companies are not necessarily licensed or insured to have employees across the globe. Further, it’s difficult to know the tax and employment laws of every country, as well as immigration/visa requirements and banking processes. Simply making these things the responsibility of the employee does not release an employer from liability, she noted.
It is not as easy and glamorous as it sounds for U.S. employees to seek work in other countries, echoed Mark Kluger, an employment attorney and partner in the New Jersey firm Kluger Healey.
Before granting permission for such an arrangement, an employer has to complete homework. The first order of business is to determine whether the country of choice has a tax treaty with the U.S. and what it specifically provides. “Even if an employer has only one employee in a country, it may have certain liabilities for sales and income tax,” Kluger said. Some of that may depend on how long the employee wants to remain in the country.
Another critical inquiry for employers must be the employment laws of the country, as they may likely apply to the overseas employee. The U.S. employee based in another country may be entitled to the benefits required to be provided by employers in that jurisdiction which might include sick, vacation and other forms of paid time off as well as mandatory participation in health insurance and pension plans. Those costs and benefits may exceed what an employee may otherwise be entitled to if they remained working strictly in the U.S.
An employer needs to assess whether it is willing to incur those costs simply because its employee wants to work in a foreign location. That may require a negotiation regarding compensation adjustments to balance out additional costs, Kluger said.
Other issues that employers should work out in advance include who pays the cost of travel to and from the home base if required by the employer and whether the overseas arrangement will have a built-in expiration or a clear agreement that if the employer feels that it is not working out that the employee will return without creating a legal claim.
Employees have their own pain points to consider. For example, most countries will allow visitors to work while on a tourist visa for some period, typically 90 to 180 days. After that period expires, the employee will have to establish some other status that will permit them to work, which likely includes an obligation to pay local taxes, as Kluger explained. It is important for those employees to recognize though that while they remain on a U.S. payroll, they still have tax obligations in their home country.
Finally, a word of caution by way of one of Kluger’s clients, who learned the hard way: “When offering an employee a job, especially in writing, if the employer is fine with the employee working remotely from ‘anywhere’ but they really mean remotely within the U.S., or even the 48 contiguous [states], that should be clearly spelled out,” Kluger said.
Keeping track of people’s movements
Kristina Johnson, chief people and places officer at the identity tech company Okta, said employers have come full circle versus the beginning of the pandemic “when we had people taking off to Timbuktu and we didn’t even know.” Issues around taxes as well as permanent establishment laws can become complicated, as she explained, so it’s not just as easy as setting up shop in some far-flung location.
Her company put parameters around how long an employee can work abroad, depending on the geography but usually limited to just shy of three months.
There are benefits not only to the individual but also to the corporation, she said, noting that it allows companies to expand their geographic footprint. Employees relocating to domestic locations is more popular and also a much easier process for the employer and employee, “but we still need to know about it,” she added.
Johnson believes the nomadic lifestyle will continue far beyond the pandemic, and that includes international relocation. “We have forever changed the way we work, and companies are just going to get better and better with their technology” regarding keeping track of their employees’ movements, she said.
Candace Smith, people operations lead for the Americas at the currency exchange tech company Wise, noted that its own research reveals that half of the U.S. workforce would still work abroad given the opportunity, the main driver being prioritizing flexibility and cultivating a work-life balance. “The pandemic has given many folks the chance to reassess what they’re looking for from their jobs and careers, and that includes more chances to travel or work abroad,” she said.
Wise allows team members to work anywhere in the world for up to 90 days over any 12-month rolling period. As such, it has a system in place to make sure both employees and the company are ensuring this program rooms smoothly.
For employers, a principal responsibility is to create and outline a clear remote work policy that includes working outside of the country of employment. This should include countries that employees are and are not allowed to work from, as well as employee expectations while working abroad.
Next, employers must assess some of the aforementioned risks involved when employees are looking to remote work from. For example, tax concerns, employer insurance requirements, potential problems with data security, and other country-specific factors. “It is critically important for an employer to protect their employees and ensure they are meeting the terms of their employment contract,” Smith said.
Once these pieces are resolved, the next step is properly ensuring that the employee has acknowledged and is clear on their responsibilities to their team while they’re working remotely. This should come from team leads who can work directly with their team member to lay out their duties and plans for navigating any time zone changes.
For employees, she said, the principal responsibility is clearly communicating to their team leads where they plan to go and for what length of time, as well as any additional time off planned. From there, the employee should work closely with their team lead on plans for managing time zones, workload responsibilities, and any security and privacy concerns. Additionally, employees need to determine their need for travel insurance, visas, housing and other costs before deciding to fully commit to their decision to work abroad.
“The pandemic showed us that remote work is not a hindrance to collaboration and productivity, and in many cases, these actually increase,” Smith said. “As employers see this and experience it themselves, expanding work from home to include work from abroad seems like a natural evolution of these policies.”