The hidden risks of working abroad – Daily Business Magazine

Remote working creates legal, regulatory and other challenges for employees and employers, writes MARIANNE MCJANNETT

Flexible and remote working have become a permanent feature of Scotland’s employment landscape. From professional services firms in Glasgow and Edinburgh to energy businesses in Aberdeen, employers increasingly recognise that flexible working helps attract and retain talent, improves employee wellbeing and supports productivity.

However, a recent employment tribunal decision involving an employee who relocated to France without her employer’s approval, demonstrates that while remote working may offer greater freedom, it does not necessarily mean employees can work from anywhere in the world, although it would be nice to be writing this article from a beach in Majorca!

The case serves as an important reminder for Scottish employers and employees of the legal and tax risks associated with working abroad.

There is little doubt that flexible working has delivered significant advantages for Scottish workplaces. For employees, remote and hybrid arrangements can provide a better work-life balance, reduce commuting costs and travel time and offer greater flexibility around caring responsibilities and personal commitments. For employers, these arrangements can widen access to talent, improve staff retention and support employee engagement.

Scottish employers have particularly benefited from being able to recruit talent from across the country rather than limiting recruitment to those within commuting distance of a physical office. This is especially valuable in sectors experiencing skills shortages or operating across multiple locations.

The recent tribunal case involved a finance professional employed under a UK contract who informed her employer that she intended to relocate permanently to France while continuing to work remotely. Her employer refused the request, explaining that working from France under a UK contract would create legal and tax complications and that there was no suitable France-based role available.

Despite this, the employee moved to France and continued working remotely. She was subsequently dismissed, and the tribunal found the dismissal to be fair.

The tribunal determined that her contract required her to work from a home office in the UK and accepted the employer’s concerns regarding compliance with French legal and tax requirements as a legitimate reason for refusing the arrangement. Although employment law is largely reserved and applies across Great Britain, Scottish employers face many of the same challenges when employees request permission to work overseas.

Many employees assume that if they can effectively perform their role from home in Glasgow, Aberdeen, or Inverness, there should be no issue performing the same role from Paris, Rome, Lisbon, or elsewhere. In practice, however, international remote working creates a range of additional legal, regulatory and financial obligations.

Even where an employee remains on a UK contract and continues to be paid through a UK payroll, an employer may still become subject to obligations in the country where the employee is physically working.

One of the most significant concerns for employers is tax. Employees who spend significant periods overseas may become tax resident in another country. This can create personal tax liabilities and reporting obligations that differ from those in the UK.

Employers may also be required to register for payroll purposes in the host country, deduct local income tax, and make social security contributions. These requirements can be complex, costly and administratively burdensome, particularly for smaller businesses.

In the tribunal case, the employer specifically cited concerns about the legal and tax consequences of allowing an employee to work permanently from France, and the tribunal accepted these concerns as a substantial and legitimate business reason.

The lessons from this case are not that employers should resist flexible working. On the contrary, flexibility continues to deliver enormous benefits for both organisations and employees.

However, Scottish employers should ensure they have clear policies governing overseas working, robust approval processes and access to specialist tax and legal advice where employees wish to relocate abroad. Employees, meanwhile, should seek formal approval before moving overseas and understand that “working remotely” does not automatically mean “working from anywhere”.

Marianne McJannett is a partner in employment law at Aberdein Considine

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