Employees Working Abroad - Guide for Employers
Any of your employees who work in a foreign country are under the responsibility of their employer. This duty of care applies to short-term as well as long-term assignments. While your employees are performing their duties in a foreign country, it is your responsibility to ensure that the income tax and social security contributions are deducted from their earnings.
For more information about employees working abroad, including what UK employers need to do, how to prepare, employment law, data protection, and expert advice, reach out to us today on 0333 305 9375 or contact us online.
Page Contents
- Understanding Immigration and Visas for Employees Working Abroad
- Business Visa
- Calculating Taxes and National Insurance Contributions
- Duty of Care Towards Employees Working Abroad
- Developing a Risk-Management Strategy
- Pension Entitlement for Employees Working Abroad
- Business Travel and Short-Term Assignments
- Long-Term Assignments for Employees Working Abroad
- How Can IAS Help?
- Frequently Asked Questions
Understanding Immigration and Visas for Employees Working Abroad
Before an employee can begin working overseas, it is important to thoroughly research any potential visa requirements in the nation they wish to work in. Additionally, there may be limitations on the kinds of activities that can be engaged in, even for a short period of time, whether a business visitor visa is required.
Following the UK’s departure from the EU, there is no longer a default right to work in areas that are part of the EEA, so the employee must seek particular guidance regarding the nation they want to work in. If your employee violates the laws of the overseas contract while working, both your employee and your company may become liable.
Assuming the UK remains the employee’s contractual place of employment, UK employers should be most concerned, from a right-to-work perspective and employment law, that the employee has the appropriate immigration status in the UK.
UK employers would be wise to ensure that relevant employees who are temporarily permitted to work abroad are authorised to do so and do not require any special authorizations, such as a work visa, to do so.
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Business Visa
Visa processing in some countries may require several months, while others have quarterly or annual limits on the number of visas they will issue.
Generally (but verify with each country), business visas permit employees to:
- Attend business meetings and interviews.
- Attend seminars and conferences.
- Attend trade exhibitions for marketing purposes.
- Discussion and contract negotiating with prospective clients
- Conduct fact-finding missions to determine project dimensions and requirements
Visas are typically available from the country’s consulate in the United Kingdom; however, some countries require you to obtain visas upon arrival. Immigration requirements and penalties vary from country to country, and ignorance is not an acceptable excuse.
Calculating Taxes and National Insurance Contributions
PAYE Tax (Pay As You Earn)
You must continue to calculate and collect PAYE tax from every payment made to foreign-based employees. When your employee travels abroad, provide them with a letter that reads:
- The date they left for employment in another country.
- Their total salary from the commencement of the tax year to the date they travelled overseas.
- The tax taken from the start of the tax year to the date they travelled overseas.
Employees who spend the majority of their time abroad for at least a year may be eligible for full UK tax relief on their earnings. Request that your employee complete form P85 and submit it to HMRC, who will affirm the appropriate tax code.
If your employee has a contract in a foreign country, it is conceivable that the foreign country’s tax authorities will deduct taxes from the employee’s income. Contact the Employer Helpline and the foreign authority to clarify your responsibilities in both countries.
You must notify the Employer Helpline if an employee will be working in an offshore location. With a few exceptions, you will continue to administer PAYE tax as usual for these employees.
National Insurance or Social Security Contributions
The guidelines for National Insurance payments vary depending on your employee’s situation and the nation in which they will be employed. There are 3 differences:
- Employees working in the EU, Iceland, Liechtenstein, Norway, or Switzerland National Insurance explains what to do if your employee travels to work in one or more EU, Iceland, Liechtenstein, Norway, or Switzerland countries and when UK National Insurance contributions are due.
- Employees employed by a nation with which the UK has a social security deal but which is not the European Union, Iceland, Norway, Liechtenstein, or Switzerland. Your employee will typically make social security payments in their country of employment rather than UK National Insurance contributions if they work in a country with which the UK has a social security agreement, also known as mutual agreements or double contribution protocols.
The nations are Barbados, Bermuda, Canada, Chile, Croatia, Isle of Man and Guernsey, Israel, Jamaica, Japan, Jersey, Mauritius, In New Zealand, Philippines, Republic of Korea (South Korea), Turkey, and the former Yugoslav republics of Bosnia-Herzegovina, North Macedonia, Serbia, Montenegro, Kosovo, and USA.
Employees who are briefly transferred from the UK to one of these nations may be able to continue making payments to the UK rather than the nation you are transferring them to. - Employees that are working overseas, other than those nationalities. If the following conditions are met, you and your employee will continue paying National Insurance for the first 52 weeks the employee is abroad:
- You have a business located in the United Kingdom
- Your employees are ordinarily based in the United Kingdom.
- Your employee resided in the United Kingdom prior to beginning work abroad.
- You must verify with the social security institution in the country where you will be working to determine if you are required to make social security contributions.
Duty of Care Towards Employees Working Abroad
Legally, UK employers must provide adequate care for UK citizens working for them abroad. Just as you would for workers on assignments in the UK, you must try to assess and minimise any dangers to your employee’s health, safety, and security related to transport plans, area, accommodations, and work.
Additionally, your duty of care expands to encompass more minor risks to your employee’s physical, mental, and social health that might materialise while they are working in an overseas country. For illustration:
- Will they have quick access to the required amenities locally? Will they have reliable local health and safety?
- Will they be expected to work in a society that is significantly different from that of the United Kingdom?
- Will they encounter any linguistic barriers in the host country?
Developing a Risk-Management Strategy
The first step in developing a successful risk management strategy is to determine the precise actions that must be done to protect workers who work in an overseas country. These duties may be delegated to one individual or overseen by an entire team, depending on the size of your organisation and the proportion of your staff that travels abroad.
Depending on the situation, the crucial duties you should think about might include:
- completing a comprehensive evaluation of all the assignment’s risks.
- determining whether the worker needs training for their job and setting up that training.
- establishing a system in which the employee can notify you of shifting dangers in their international working environment and obtain round-the-clock assistance in an emergency.
Pension Entitlement for Employees Working Abroad
If you reside or work in another country, you may be eligible to contribute to its State Pension scheme. If you have previously resided or worked in another country, you may be eligible for that country’s state pension in addition to the UK State Pension.
Your State Pension in the United Kingdom will be based on your National Insurance record. To qualify for the new State Pension, you must have ten years of National Insurance contributions.
You may be eligible to use the period spent abroad to fulfil the 10-year requirement. This is certainly the case if you have resided or worked in: EEA, Switzerland, Gibraltar, and other countries with a social security agreement with the United Kingdom.
Business Travel and Short-Term Assignments
UK employers should assist employees working abroad on business, such as those who go for short periods to attend a convention or business gathering or to look at potential commercial properties. Business travellers pose a unique set of dangers, which have multiplied since the epidemic because different nations now have varying and shifting travel regulations.
Factors like obtaining trip authorizations and permits and adhering to COVID regulations.
Long-Term Assignments for Employees Working Abroad
When sending a staff member to work overseas on a long-term assignment that would require partial or complete relocation, there is an additional duty of care responsibilities that need to be taken into consideration.
You can safeguard the business outcomes of your organisation and ensure that your employee’s appointment is successful by implementing a comprehensive relocation plan that ensures your employee’s happiness, health and safety in the other country. Your approach must involve making preparations for the relocation itself, as well as taking measures to assist employees in adapting to their new communities and places of employment after they relocate.
UK employers should also consider the financial consequences that may result from an employee moving overseas. This will involve researching the expense of living in the new country, providing assistance with budgeting, and determining whether or not the transfer will impact your employee’s tax or tax resident and National Insurance responsibilities.
How Can IAS Help?
Preparing an employee to work abroad can be a complicated task, particularly when you’re just getting started. A number of documentation submissions must be completed, which may become time-consuming as you progress.
If you require any assistance with your employees working abroad, such as if you’re unsure or uncertain about the visa, deduct income tax, immigration law and what you need to do in order to be authorised, IAS can help.
We are a formidable team of professional and knowledgeable immigration lawyers with years’ experience working in UK immigration law. We have helped countless people overcome hurdles to send workers overseas and can help you do the same.
The tax and immigration law must first be acknowledged, and UK employers will not consent to longer-term agreements that take these dangers into consideration. If corporate tax is the main risk, companies might only be open to longer-term contracts if the employee is prepared to cover the employer against any unforeseen tax obligations. Employers must also be aware of any legal job risks in the other country.
For more information about sending your employees to work abroad, including what you need to do to be eligible for it, how to apply, and expert advice for your application, reach out to us today on 0333 305 9375 or contact us online.
Last modified on June 22nd, 2023 at 1:26 pm
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Frequently Asked Questions
Employers in the United Kingdom will have continued to deduct income tax and employee National Insurance Contributions (NICs), as well as pay employer NICs, despite the fact that the employee was intermittently employed abroad. If the employee has remained a tax resident of the United Kingdom, this is the correct approach.
Employees working abroad may be subject to income tax in the country in which they are employed, depending on the country’s rules and a Double Tax Treaty between the United Kingdom and that country. Employers in the United Kingdom can avoid the tax risk of inadvertently establishing a “permanent establishment” in another country, thereby becoming liable for corporation tax in that country.