Welcome to our two-part blog series where we will delve into the exciting and ever-changing world of remote and hybrid work. In Part 1, we explored how the future of work is driving regulatory changes and challenges that companies are facing as they navigate this new landscape.
In Part 2, we discuss statutes regulating the creation of a safe work environment and others impacting visa and tax laws.
International Labor Laws and People Protection Measures
The right to disconnect is a legislative measure that provides workers with the ability to disconnect from work-related communications outside of normal working hours. This legislation establishes clear boundaries between work and personal life, safeguarding employees from the negative effects of continuous work, such as stress and burnout.
Although there is no EU-wide framework for the right to disconnect, many European countries have implemented their own legislation. For instance, France, Italy, Spain, Belgium, Ireland, and Portugal have all introduced the right to disconnect laws. While these measures vary, they all aim to create a better balance between work and personal life, protect employees from burnout, and ensure their mental health and well-being.
For e.g: An Indian business with a remote worker in France must negotiate agreements with the worker’s union to enable the right to disconnect from technology after working hours, as required by French legislation.
Border Controls for Remote Work
Working remotely abroad has become increasingly popular, but it is important to ensure that the people hired are legally able to do so. Visa requirements differ depending on the country.
Some countries require work permits or have restrictions on the type of economic labor allowed. Other countries have created customized digital nomad visas to accommodate remote workers. It is necessary to research and submit the necessary paperwork before travelling to the country to avoid any legal issues.
Using services of personnel that are not compliant with border control regulations will likely come back to bite the employers. For e.g.: The digital nomad visa in Portugal (D7 visa) is for remote workers who earn at least €2,800 per month. It lasts for one year and can be extended up to four times. The visa offers a reduced tax rate of 15% as compared to the standard 25% Portuguese tax rate. However, on the flip side, hiring a person in Portugal who resides there without holding the relevant visa may loosely be viewed as the legal equivalent of hiring illegal immigrants.
Tax Laws for Remote Work Abroad
Tax laws vary in every country, and in most cases, this involves declaring all income within the home country.
However, in some cases, remote workers may have to observe residence-based or territorial-based taxation laws, which in turn impact the employers obligations to deduct and/or pay in the tax. Depending on the number of days spent outside of the home location, some countries may see the remote worker as a taxable resident, requiring them to pay tax on any local economic activity. Tax treaties can help reduce cases of double taxation, and it is essential to research the specific tax restrictions of the country where the remote worker wishes to spend an extended period of time working.
Furthermore, using fully remote workers may be viewed as the employer operating in the country where the remote worker is located, something may may attract taxation. This, of course, depends on the role being performed by the remote worker.
Remote Workers and Business Licensing
Different businesses need licenses to operate in different jurisdictions. When operating through a remote employee, interpretations may be taken that the entity is operating without a license to do so in the jurisdiction where the remote employee works.
For eg, can an entity with a credit lending license in the home country source clientele or leads in another country through a remote employee? Can a pharma company holding regulatory accreditation for a drug in the home country source sales in another country for export purposes?
Remote Workers’ Individual Licenses
Similarly, individual level licensing also applies in several cases. When hiring a person across borders to perform a role, it is critical to verify whether that role requires a license to be performed in the market that it serves.
For e.g., can a medical pharmacist accredited in his home country provide advise to customers of an employer in another country when working remotely? Can an insurance sales rep. governed by the Code of Conduct of his/her home country sell insurance to clients of an insurance firm in another country?
As humans, we have spent decades putting in laws and regulations that serve mostly within a national border. Many of these are now being challenged by the advent of remote work. Remote work and remote workers crossing national borders and boundaries are blurring visibility of the lines that can and cannot be crossed. Employers need to be ready to ask these questions, even if they are unsure about the answers. That, ultimately, is how you risk manage your business.
