What to Do When Your UK-Based Employee Asks to Work in Another Country

What happens when someone on the team wants to relocate to another country, or what should you do if you’ve just discovered an employee has been working abroad for months? Here's what Ashleigh Graham, Global Solutions Manager, UK at Safeguard Global, told us about what's actually at stake before anything gets formalised and what organisations should check first.

During that process, what they were looking into was, as a UK HQ business, how can we support this? What does it look like? Because of the type of work, this particular person was a senior leader in the business development function. There were a lot of things they were going to be doing to help the business grow in the UK without necessarily being there to do it. It was all remote work.

But because of that, there was an exposure there that they found through a tax advisor who came to them and said that the person working in that country as a contractor exposed them to a permanent establishment risk. So they needed to look into how they could reduce that risk.

So, they then looked at Employer of Record solutions. Because it was a new country, we had to do a new kind of contract for them. But in doing so, it reduced their permanent establishment risk to the fullest extent possible in that country. We were also able to support that relocation process by helping them find partners that could also support that relocation.

With an overseas relocation, what's actually at stake before anything gets formalised?

There's a combination of different risks when it comes to overseas relocation.

When it comes to the company, there's the exposure, depending on the role and where that relocation is happening, and there's going to be different regulations and rulings coming into play. As an example, someone moving from the UK to Spain, well that's going to have implications for the business: misclassification, permanent establishment risk, tax risk. All of that constitutes the risk and the exposure the business has, with how they're classifying that employee and whether they're employed compliantly.

From the employee's perspective, every country has different bank holidays, different ways of working and different statutory entitlements. Spain, for example, has 13th and 14th month payments and employer contributions that sit above what the same role costs in the UK. A UK-headquartered business often doesn't know that until they ask, so the employee carries on under the same UK contract with the same UK contributions. That's incorrect for the country they're actually working in, and it puts both sides at risk. The employee isn't being employed on the terms local law gives them, and if something happens to them while they're in the country, their insurance can be at risk too.

If an arrangement isn’t properly formalised, how much time passes before something goes wrong?

It can happen pretty quickly. Now that the UK is no longer part of the European Union, the freedom to work in Europe doesn't automatically apply to us anymore. So for a UK national heading over and working in Spain, as an example, these days that can be found out pretty quickly.

We've had instances where it's been a couple of months, and then an issue arose because of the type of work a person is undertaking, the exposure and the risk that's creating for a business that doesn't have any presence in that country. It can happen pretty quickly from that aspect. And that's why it's really important to understand the risk and the processes attached to overseas relocation.

The most common mistakes UK companies make with overseas relocation

Some of the common mistakes I see include changing employees to contractors and thinking that “contractor” is a universal term, a universal way of working across all different types of countries. That isn't correct. If somebody is working solely for one business, that's a major misclassification warning sign in many countries. The tests vary country by country, but exclusivity is one of the things regulators look at when deciding whether someone is genuinely an independent contractor.

Another thing I find is a company thinking they can go down the road of shadow payrolls, thinking it's a way to still contribute. But that puts the employee at risk, especially if they're living there and have longer-term goals in that country. The legislation in that country won’t match the employment contract they've got, because it's a UK-based contract. So it still puts them at risk, even though they're trying to minimise risk through a shadow payroll.

It also depends on the circumstances. If it's somebody who's worked in the UK going back home to Spain, they don't have to think about immigration. But if it's somebody from the UK who wants to go and live in Spain, they need to think about the immigration status, how they're going to get sponsored, and the different rulings that come with that. So, sometimes it pushes the business to think about how they can support this employee too.

What is a shadow payroll?

Shadow payroll is where a UK business runs an off-cycle payroll in the UK, but for, let’s say, an employee who works in Spain. They run a Spanish contribution, a dummy payroll where they're still paying the contributions in Spain, or what should be the contributions in Spain, but running it through the UK payroll.

It's a way people try to work around it by still contributing and doing the payroll. But you'd need somebody with expertise in Spanish payroll to do this properly, so it's still contributing without the other risks that come from running a payroll without an entity in those countries.

Short term versus permanent, where's the line?

It's more on the exposure side of things. There are cases I've come across where businesses have had workers in African countries or Southeast Asia that have flown under the radar for a bit of time, because the type of work they do isn't a high-exposure role.

So, it's more around the risk and the exposure the role presents when moving into a different country, and what that means for the business. But it's only a matter of time with all of those scenarios before that gets found out. When it comes down to short-term versus long-term, long-term creates more exposure than short-term, but the line depends on the role, the scenario, and the country, because all countries are different. So, it's always advisable to reach out and seek advice and understand the exposure on a case-by-case basis, because that's the only way to really understand if the exposure, even short-term, is worth the risk.

What HR should check first

1. Do you have a presence in the country the employee wants to relocate to? Which country is it?
2. What is the work that's going to be done in that particular country?
3. Is this role indefinite? Is this a fixed-term role?
4. Do you have any knowledge, expertise, or research resources internally that can support that country specifically? Or do you need to find that externally, and what does that look like?
5. Does the employee have the right to work there? If they're wanting to relocate to a country where they don't have the right to work, that adds a layer of complexity, and in my experience, sponsorship almost always sits with an employment relationship in that county.

So, there are a few variables to take into consideration. But definitely seeking advice — if they don't have that knowledge internally or the resources to really understand that particular country, the exposure, the HR and payroll elements — is what helps them make an informed decision on what's going to work best for them as an organisation moving forward.

The bottom line

Overseas relocation is a great thing to be able to offer your employees. If you've got staff members who want to relocate because they want to live somewhere else, or as an organisation you want to expand into a different market and move talent internally to support that expansion, that's great.

It’s important to have a clear indication of the scope of work that's going to be happening there, so you can understand whether that's going to create increased permanent establishment risk or reduce it. Where they're working and what their working arrangement is matters. Then layering in the comparison against the different terms, rules, and regulations in that country, along with immigration, will help. So, having a third party like Safeguard Global that can give you that consultation without any hard commitment means you're able to get the guidance on what you could move forward with.

If someone on your team has asked to relocate, or you’ve found out they already have, permission to work remotely isn't a compliant employment arrangement on its own. Safeguard Global's Employer of Record solution local employment, payroll and compliance in 187 countries, so the move can be formalised properly without you opening a new entity.

Talk through overseas relocation