5 minute read 10 Mar 2022

Is telework breaking through international borders?

EY Belgium
By EY Belgium

Multidisciplinary professional services organization

5 minute read 10 Mar 2022
Related topics Workforce
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Given the flexibility in the new hybrid work model employees might also perform their duties from a country other than the country where their employer is located.

In brief:

  • Remote working is not limited to working from home and could also include teleworking in an international context.
  • This flexibility also provides opportunities for labor market organizations to attract new talent in the current war for talent.
  • Both employers and employees must be aware of the opportunities and additional requirements of this way of working.

While working remotely is not a new concept, the Covid-19 pandemic and legislative measures have made teleworking the norm, and both employees and employers have had to adapt to this new way of working at a rapid pace. With the elimination of the teleworking requirement, organizations are increasingly implementing a hybrid model that balances remote work with office-based work. A balance driven by a number of factors including employee demand for flexibility in their work schedule, practicality for the organization, creating efficiencies for all and maintaining connectivity between employees.

Telework Policy

Flexibility often has different meanings within an organization. Whereas for some employees this might mean being able to work from home rather than the office several days a week, for others it might mean performing their duties from a country other than the country where the employer is located. This flexibility also provides opportunities for labor market organizations to attract new talent in the current war for talent.

The challenge for organizations is to create policies that ensure that employees and teams can continue to work together efficiently while reducing the administrative burden and compliance issues for the organization. In practice, we are currently seeing a variety of strategies and policies ranging from working from home a few days a week to complete flexibility with respect to remote working within national borders to a policy of allowing remote working across national borders as well.

Teleworking in an international context

A higher degree of flexibility in an international context also creates more challenges and potential risks, as different national and international laws must also be taken into account. This can have unforeseen consequences for both employees and employers in areas such as taxation, social security, immigration, labor law and implementation of additional legal benefits and insurance.

  • Employee taxation

    As a general principle, taxes are due in the country where the work is performed. However, exceptions to this are provided for in double taxation treaties in the event that residence, place of performance, and employer are located in different countries. On this basis, employees could become taxable in their state of residence rather than in the state where their employer is established or where the employee is normally employed, which could have an impact on the employee's net salary. In addition, there is a risk of double taxation if there is no double tax treaty between the countries involved.

  • Employer taxation

    With long-term and regular teleworking of employees in a particular country, an organization runs the risk of creating a "permanent establishment" in the country from which employees telework.  In that case, the company will be subject to corporate tax in the state of employment on the portion of profits attributable to such permanent establishment. In other words, this potentially entails additional costs and declaration and other formalities for the organization.

    During the Covid-19 pandemic, the OECD stated in their recommendations that unforeseen and temporary changes resulting from Covid-19, including teleworking, should not impact the taxability of employees and organizations. Given that telework has become an integral part of working life even after the pandemic, a more permanent position on the impact of telework on the workload capacity of employees and organizations is awaited.

  • Social security

    When teleworking within Europe, an employee is in principle subject to the social security of one member state, being the state where the employment is carried out. An exception to this are the situations of secondment and simultaneous employment in several member states. Based on these rules, it is possible that the social security legislation of the country of teleworking remains applicable, and not the legislation of the country where the employer and the employment relationship is located. Such a situation can lead on the one hand to additional costs and administrative formalities for the employer - e.g. the need to register as an employer in the country of telework - and on the other hand to undesirable consequences for the employee's social protection (e.g. pension, sickness benefits, unemployment, etc.).

    In the case of teleworking outside Europe, it is necessary to check whether there is an agreement between the two countries concerned in a bilateral treaty determining the social security regime that would apply, and in the absence of such a treaty, the regulations of both countries must be respected with the risk of a double cost for the employer or an absence of social protection for the employee.

    Also in this area, it is expected that the temporary Covid-19 measures that were provided for telework will not be renewed in the post-Covid-19 era.

  • Labor Law

    The fact that an employee works in a country other than the country whose labor law is agreed upon in the employment contract may pose risks in the labor law field. It could imply that employees are entitled to the best of both worlds (labor law of country of telework and of the country where the employer is located) for example in terms of end of employment contract, vacation law, work interruption, working hours, ...

  • Immigration

    It should be checked whether the employee needs a work or residence permit in the country from which he or she is teleworking, rather than the country of normal employment. In addition, certain applications and formalities may apply, such as those applicable under the law on secondment.

  • Extra-legal benefits and insurance

    A question that often arises is whether the country of teleworking is covered by the insurance policies taken out by the employer in terms of accidents at work, accidents in private life, insurance of the company car. Moreover, many extra-legal benefits (company car, second pillar pension) have a specific - advantageous - tax regime in the country of normal employment. If the power to levy taxes due to telework shifts to the country from which an employee is teleworking, this may have unexpected consequences on the tax treatment of these benefits.

What's Next?

It is clear that a well thought-out strategy and approach is required to implement an optimal telework policy within a Belgian context. For employees who can or already do carry out their job in a country other than that in which the employer is based, the option or flexibility of teleworking creates additional challenges for both employee and employer. As a result, it is recommended to proceed with caution.

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Summary

With the elimination of the teleworking requirement, organizations are increasingly implementing a hybrid model that balances remote work with office-based work. Whereas for some employees this flexibility might mean being able to work from home rather than the office several days a week, for others it might mean performing their duties from a country other than the country where the employer is located. This flexibility also provides opportunities for labor market organizations to attract new talent in the current war for talent.

About this article

EY Belgium
By EY Belgium

Multidisciplinary professional services organization

Related topics Workforce
Upvote