Working from Abroad: Legal Risks for UK Employers When Employees Move Country

One of the most significant, and least discussed, risks facing UK employers in the current remote working landscape is the legal and financial complexity that arises when an employee works from another country. This issue affects any UK business that has agreed, or is considering agreeing, to a request for overseas remote working, and the consequences of non-compliance can be substantial. This article explains how the relevant legal framework operates in practice, what obligations are placed on employers, and what the consequences are for businesses that fail to act.

What This Means for UK Employers

The rise of remote work has led many employees to ask whether they can perform their role from abroad. While working from anywhere may sound straightforward, it can create a complex web of legal and financial obligations for UK employers, spanning tax, immigration, and employment law. Business owners and HR managers must understand the risks before agreeing to any such arrangement.

1. Tax and Social Security Obligations for Overseas Remote Workers

The most immediate risk is financial. Even where an employee works for a UK company and is paid into a UK bank account, their physical presence in another country can create a permanent establishment for the business, with significant tax consequences.

• Corporation Tax: the company may inadvertently become liable for local corporation tax in the host country if a taxable presence is established in that jurisdiction.
• Income Tax: local payroll obligations may arise, requiring the employer to deduct income tax in accordance with the host country's rules.
• Social Security: social security contributions are generally payable where the work is physically performed. Specific advice is required to avoid double liability or fines for non-compliance with local social security regimes.

Specialist advice should be obtained before any overseas arrangement is approved.

2. Immigration and the Right to Work Abroad

A UK right to work does not confer the right to work in another country. Post-Brexit, UK citizens no longer have the automatic right to live and work in the EU, and the position varies significantly by jurisdiction and duration of stay.

• If an employee relocates without the correct visa, both the employee and the employer could be in breach of local immigration laws.
• Consequences for the individual can include deportation, and for the firm, significant reputational and financial penalties.
• The duration of the overseas stay may determine which visa category applies, and legal advice should be sought on a jurisdiction-by-jurisdiction basis.

3. Local Employment Law: Mandatory Override Rules

Even where an employment contract is expressly governed by English law, mandatory override rules in the host country frequently apply. If an employee becomes habitually resident in another country, they may automatically acquire local employment rights that cannot be contracted out of.

• Minimum wage and maximum working hours under local law.
• Local public holidays and enhanced annual leave entitlements.
• Enhanced dismissal protections and higher redundancy pay requirements.
• Local health and safety regulations.

Where local laws are more beneficial than those in the employee's contract, the employee may be entitled to pick and choose the terms most advantageous to them.

4. When a Request to Work Abroad Should Be Refused

Whilst flexibility is a valuable retention tool, there are circumstances in which a request to work abroad is not viable. Employers should consider refusing where:

• The cost of local tax compliance outweighs the commercial value of the role.
• There are material data security or UK GDPR risks, particularly where the employee is moving outside the European Economic Area.
• The time zone difference makes effective collaboration impossible.
• The employee does not hold a valid work visa for the destination country.
• The employee's physical presence in the UK is required for specific business events, tasks, or projects.

5. Formalising Overseas Working Arrangements

If the arrangement is approved, it must be formalised in writing. Verbal agreements or informal email exchanges are insufficient and carry significant legal risk. A Remote Working Agreement or formal contract amendment should be prepared and should specify:

• The duration of the overseas arrangement, whether temporary or permanent.
• Responsibility for any additional tax compliance costs or professional advice fees.
• The employee's obligation to maintain a valid right to work in the host country throughout the arrangement.
• The employer's right to require the employee to return to the UK on reasonable notice.

Why This Matters in Practice

• Permanent establishment liability, an employee working abroad can inadvertently create local corporation tax exposure for the UK business.
• Immigration breach, an employee working without the correct visa exposes both the individual and the employer to legal penalties in the host country.
• Mandatory local rights, habitually resident employees may acquire local employment protections that override the terms of their English law contract.
• GDPR risk, data processed outside the EEA without appropriate safeguards can constitute a breach of UK GDPR.
• Unenforceable arrangements, verbal or informal agreements for overseas working provide no legal protection if a dispute arises.

Why Work with a Specialist Employment Lawyer

Navigating overseas working requests requires careful, jurisdiction-specific legal planning.

• Advise on the tax, social security, and permanent establishment implications of a proposed overseas arrangement.
• Confirm the immigration position for the relevant jurisdiction and duration of stay.
• Identify the mandatory local employment law provisions that may override the English law contract.
• Draft a compliant Remote Working Agreement or contract amendment that protects the business.

Managing Overseas Working Requests Safely and Legally

Businesses should be aware of the legal and financial complexity that arises when employees work abroad and begin reviewing any existing or proposed arrangements now. Ensuring you have formalised overseas working in a legally compliant agreement is not optional, it is a commercial and legal necessity that applies from the moment an employee crosses the border.