With Covid restrictions now coming to an end and Governments and employers looking to move back to a sense of ‘normality’ regarding their employees’ activities and work locations, it is a good time for businesses to assess ‘where they are’ from an international social security perspective.
During the various Covid lockdowns over the past 24 months, many employers have, with the growth of home office working, simply allowed their employees to work ‘from anywhere’ during this time. In many cases, this has resulted in many UK-based employees, in particular those with international links either:
- Working from holiday homes abroad; or
- Returning to live and work with the extended family in their country of origin.
What are the social security risks of this approach?
During the last two years, employers with these global remote workers have, at least in many cases, either ‘simply ignored’ the social security risks which might arise or have been genuinely unaware as to where their employees have been living and working from during the Covid lockdowns.
While this approach may have been inevitable – after all, few firms had genuinely planned for anything resembling the Covid lockdowns and can, in some situations, be backed-up by Government rulings (e.g. the published EU easements with regard to international social security) – businesses need to pro-actively understand their obligations going forward as the UK (and most other countries) come out of lockdown. Otherwise, it is clear that they could be in for some substantial (and very expensive) social security liabilities, together with some NIC and tax-related penalties.
For example, do companies know where all of their UK-based employees are actually based when they are working from their home offices? Now clearly British companies don’t have a problem if these individuals have all been based fully in the UK.
But what if my employees have been based overseas?
Where employers are aware that their employees have been working from abroad – or they become aware of it in the coming weeks / months – businesses will need to consider:
- Are there any social security contributions due in the overseas location?
- If so, will it be possible to reclaim NICs in the UK? Or do we have double social security obligations?
- What is the position on a ‘going-forward’ basis if these international working arrangements are due to continue?
The good news is that, in many cases, authorities have confirmed that they will take a ‘common sense’ approach to international social security liabilities where we have ‘Covid-based’ international workers. For example, the EU has called on all of its member states to show ‘common sense’, when it comes to the social security liabilities of individuals who have been impacted by Covid, so that they in practice can continue to pay social security contributions in the location where they would have been working, if it had not been for Covid. This EU-led easement is due to last until 30 June 2022.
There is no problem – we have just made anybody who wants to work overseas a ‘self-employed’ contractor.
Many companies have mistakenly assumed that by just making those workers who wish to work outside the UK freelance / self-employed contractors, they avoid any international social security obligations. Many countries have detailed tests to assess whether a worker is employed or self-employed and simply classifying them as self-employed for internal purposes, will typically be ‘ignored’ by most overseas authorities for social security (and tax) purposes.
Line Managers have authorised certain employees to continue working from non-UK home offices indefinitely – what should I do?
In many respects, such arrangements are the ones which create the most risks and challenges for employers (and specifically the HR and Finance teams of affected businesses).
Central HR and Finance teams, for example, may find that many international home office workers don’t wish to return to the UK – or at least not on a full-time basis – now that Covid is over. Moreover, businesses may well find that line managers have either already unilaterally confirmed that these individuals can continue to work overseas (on a full-time or part-time basis), or that line managers are pushing for the business to show ‘flexibility’, as the individuals involved are key employees and would be difficult to replace, for example.
Where it is clear that employees are now going to be based formally overseas on a long-term or indefinite basis – and not simply because of Covid – it is important for employers to develop robust policies and procedures for such cases including:
- High-level acceptance and recognition of the issue and a realisation that the risks and administrative obligations cannot simply be ‘ignored’.
- Development of a clear framework and policies re such requests, so that there is consistency among business units, for example:
- Organising clear processes for reviewing the costs associated with such requests (e.g., in terms of additional social security liabilities which can arise) and ensuring appropriate line managers etc. understand the implications. For example, countries such as France, Italy and Belgium can have employer social security contribution levels which are more than 200% of the UK employer social security liabilities.
- Development of a formal process for ensuring that any local, legal obligations are correctly accounted for, so that the company, for example, registers for social security withholding where required.
- Ongoing reviews (say at least every 12 months), to assess whether there are any additional issues which arise from the presence of global teleworkers in particular countries. This review shouldn’t just cover the social security position, but wider factors including Corporate Tax (e.g., is a permanent establishment being created, labour law and data privacy issues).
While the development of global remote workers does create many issues for employers, these are all manageable, providing companies have a clear focus and a willingness to address them. Moreover, they do also provide businesses with the opportunity to retain (or recruit) staff, which they could otherwise lose and therefore a potential competitive advantage.
Would you like to know more?
If you would like to discuss any of the above, please get in touch with Robert Salter using the details on this page.
For more information, news, and insights on globally remote working, please visit our Globally Remote Working hub.