Developments in modern technology, not to mention the significant shift to home-working brought about by the COVID-19 pandemic, has led to more and more UK employers being open to flexible overseas working arrangements. This could include employers allowing existing migrant workers to return to their home countries whilst continuing to work for them virtually, or allowing domestic workers to work remotely from an overseas location.
However, there are a whole range of legal considerations to be taken into account when employees are located outside the UK. The following overview for employers highlights the key legal issues when employing digital nomads.
What is a digital nomad?
Digital nomads are workers who are not bound by geographical borders, but instead use online technology to earn a living and conduct their lives in a nomadic way. These individuals can be employed or self-employed, working remotely from their homes, coffee shops, public libraries or co-working spaces, either in their country of residence or a foreign country. A digital nomad is essentially someone who can perform their job remotely, without the need to go into the office or any other physical workplace.
In the context of employment, this could include a migrant worker employed by a UK-based organisation, but working virtually from their home country. It could also include domestic workers travelling overseas for either short or extended periods of time, but continuing to work under their existing contract of employment, albeit on a remote basis.
Benefits of employing digital nomads
Employing digital nomads can bring with it a number of different benefits, especially when it comes to keeping employees safe from the spread of coronavirus at work, as well as providing greater flexibility for employees to work remotely from anywhere in the world.
For organisations with migrant workers looking to spend time with friends and family back home, or domestic workers looking to swap their home-working arrangements for sunnier climes, the provision of flexible working can create a much better work-life balance for staff. In turn, this can often result in increased employee engagement, improved productivity, higher staff retention rates, and a stronger employer brand to help attract talent.
Where employers are open to employing staff on a virtual basis, whether in the UK or in another country, this can also result in significantly reduced overheads. Undoubtedly, the pandemic has demonstrated the efficiency and effectiveness of working remotely, which has led to many companies reconsidering their office requirements.
Legal issues when employing digital nomads
In theory, as many modern job roles can now be conducted on a remote basis, employees can work for a UK-based employer from almost anywhere, either home or abroad. However, the reality of employing digital nomads is more than staff simply having good wireless internet connection. By agreeing to virtual working from an overseas location, this can trigger all sorts of legal issues, for both the employer and employee:
When employing either a migrant or domestic worker from an overseas location, careful consideration must be given to their employment rights. Typically, foreign nationals employed in the UK would have the same statutory employment rights as their British counterparts, although they may be afforded additional protection under local employment laws if allowed to return to their country of residence to work on a remote basis.
Equally, a domestic worker physically based in an overseas location may mean that both they and their UK-based employer fall within the scope of foreign labour laws. In some cases this could provide the employee with enhanced employment rights relating to minimum wage, annual leave, holiday pay, maternity leave and pay, and even rights on termination.
It’s therefore crucial that careful consideration is given to the applicable laws prior to agreeing to a digital nomad working arrangement. In this way, both parties can establish their respective rights and responsibilities when it comes to managing the employment contract.
When permitting migrant workers to work from their home country, even for relatively short periods of time, consideration must be given as to how this could impact their ability to return to the UK. Sponsored migrants can travel abroad for short business trips which are required as part of their role, although carrying out their role from overseas on a longer term basis may invalidate their UK sponsorship and jeopardise the individual’s ability to work in the UK.
Consideration must also be given as to whether time spent outside the UK will affect any future immigration plans that the migrant worker may have. For example, an EEA worker with pre-settled status under the EU Settlement Scheme can spend up to 2 years outside the UK without losing this status, but if they’re wanting to apply for settled status they will need to satisfy a 5-year continuous residence requirement. This usually means that they must have been in the UK for at least 6 months in any 12-month period for each of those 5 years.
Similarly, a migrant worker with permission under the Skilled Worker route must not be absent from the UK for in excess of 180 days in any 12 month period to be able to prove a 5-year period of lawful continuous residence. Even for migrants who already hold indefinite leave to remain, they must not leave the UK for more than 2 years, or 5 years for those with settled status under the EU Settlement Scheme, otherwise risk losing their immigration status.
Different immigration considerations will, of course, apply to British nationals. They will be allowed to return to the UK without restriction, but may not be permitted to work in an overseas location without a visa from that country. Following the end of free movement between the UK and EU on 31 December 2020, British nationals may now need a visa to work in an EEA country. A visa will also usually be required to work outside the EEA.
Potential income tax and social security liabilities, both for the employee and employer, can be extremely complex when allowing an employee to work from abroad. How the UK employer calculates and pays PAYE tax and NI contributions for employees who work overseas depends on where they’re working and how long they expect them to be there.
It’s possible that the tax authorities within the host country will want to make tax deductions from the employee’s income, although employees who spend most of their time abroad over a period of more than a year may be able to obtain full UK tax relief on their earnings. Still, both the employer and employee must be clear about their tax liabilities and reporting obligations.
The fact that an employee might work for a UK employer under a UK contract of employment, where their salary is paid into a UK bank account, doesn’t generally change the applicable tax and social security rules of the country concerned. Even if an employee is not taxed overseas, they may still be liable to pay social security contributions there. It’s also possible to continue to be liable to UK NI contributions, even where they’re taxed overseas and not in the UK.
Data protection and security
Various data protection and security issues can arise when an employee works remotely from overseas. This could relate to the personal data of clients transferred between the employee and employer, or even personal data relating to the employee themselves. Employers must ensure that appropriate safeguards are put in place in respect of the transfer of any employee or client personal data, and should also ensure compliance with GDPR where this applies.
Employees working remotely may often face additional data security challenges, including increased risks of online hacking and cyber fraud, especially where employees connect to public wifi networks and hotspots. Employers may therefore need to review their security practices to assess whether these are adequate to mitigate such risks.
Health and safety matters
UK employers have a statutory duty to take reasonable care of the health and safety of employees, and to take reasonable steps to provide them with a safe workplace and system of work. These duties extend to any employees working remotely, including from overseas.
This means an employer should conduct a risk assessment in relation to any employee who is proposing to work remotely from abroad in order to identify any particular risks or hazards presented in their overseas working environment. Employers must also consider any additional health and safety obligations imposed under local legislation.
Typically, any insurance policy taken out in the UK for either a UK-based employer or employee will have what’s known as territorial limits. This means that the policy may limit the cover provided to the policyholder to acts, incidents or wrongdoing in the UK.
A territorial limit is a geographical limit which can be used to exclude claims relating to work carried out in certain locations or outside of the UK generally. For example, in the context of professional indemnity insurance, there are often two available policy options: ‘UK only’ or ‘Worldwide, excluding the USA and Canada’. Standard policies will often exclude any work undertaken for clients in the USA or Canada because professional negligence claims in these countries can be significantly larger and more costly to defend than elsewhere.
Equally, any employer’s liability or public liability insurance may not cover any legal liability on the part of the employer to pay compensation for physical injury, or loss or damage to property, occurring outside the UK. This means that if an employee will be working overseas, tailored insurance cover may need to be taken out to cover any potential financial risks.
Similarly, where medical insurance is provided to an employee, the employer must ensure that the terms of any policy continue to apply if the individual is living and working abroad.
Do you need a digital nomad policy
In principle, employers may be open to all kinds of flexible working arrangements, from home-working to temporarily working overseas. However, every case is likely to be different, especially when it comes to a fully flexible digital nomad arrangement.
Given the number of legal issues that can arise in this context, it’s important for employers to set out their approach and procedure for overseas remote working requests. This can be incorporated into any general flexible or home-working policy or, where overseas requests are likely to be commonplace, by way of a specific digital nomad policy. In this way, employers can not only help to manage the overall process, but help to manage employee expectations.
There is no standard format for a digital nomad policy, although key to any policy is ensuring that employees are aware that written permission ‘must’ be sought before undertaking work from abroad. It’s not uncommon for employees already working remotely in the UK to return to their home country, or decamp to a second home overseas, without letting their employer know. It’s also important to set out the various factors that may need to be considered, whilst making it clear that each request will be dealt with on a case-by-case basis.
By seeking specialist advice from an employment and immigration expert, employers can ensure that each request is dealt with fairly and consistently, with a suitable assessment to help identify and mitigate any risk based on the particular circumstances involved.
As employer solutions lawyers, DavidsonMorris supports employers with all aspects of employment and immigration law. If you employ workers who are based or relocating overseas, contact us for guidance on what this means for you as an employer and to ensure you have considered all of the implications for your organisation.
Employing digital nomads FAQs
What are the downfalls or problems with being a digital nomad?
Being a digital nomad means not being bound by geographical borders, but with this comes certain downfalls, such as meeting the immigration requirements, tax rules and other laws of the host country.
Is digital nomad legal?
There is nothing illegal about being a digital nomad, although there are various legal issues that must be considered when working remotely from different overseas locations. These can include immigration requirements and taxation rules.
Do digital nomads need a work visa?
Whether a digital nomad needs a work visa will depend on where they’re working and in what capacity. Under the UK’s immigration system, most migrant workers undertaking employment in the UK, even if working remotely, will need a visa.
Last updated: 31 October 2021