What a difference 12 months can make! Last year, we set off to write a ten-point guide on being a remote compliant company and couldn’t even imagine just how key distributed work compliance was about to become. Many workers were sent home in March 2020, and the workplace as we know it has changed forever. Employers worldwide have come to realise that their obligations extend beyond the office and that the physical place of work can be people’s homes or local co-working spaces. Many countries have updated their laws and regulations (e.g., introducing the right to disconnect, increasing health and safety obligations, and implementing various tax breaks and allowances).
Laws had started to govern work-from-home workplace safety even before remote work became so ubiquitous. Increasingly, the aim has been to avoid the same chiropractic, muscular, degenerative, visual, and auditory problems that were caused by unregulated office spaces in the 1960s. However, no one could have expected the sort of leap we have been witnessing.
The updated remote complaint in 2021 guide does not list some of the points from last year, as they haven't changed much or have become somewhat less relevant. Instead, we have added new topics such as time-tracking and the right to disconnect. To illustrate some other points mentioned last year, we have added examples from various countries.
Every country has regulations regarding what constitutes a healthy workplace. Those determine optimal office temperature, desk ergonomics, tripping hazards, dangerous equipment storage, etc. In this past year, employers have had to very quickly re-assess those in the home office context. Many countries have already had some regulations to guide them, while others have scrambled to update them.
Some countries, such as Australia and the Netherlands, put a big responsibility on the employer to minimise risk of physical accidents and psychological trauma (e.g., three pieces of legislation govern the employment relationship between Dutch employers and their remote workers). Other countries, such as Estonia and Singapore, put a limited responsibility on employers who have remote workers, since asking for full responsibility doesn’t seem feasible. Instead, those countries' authorities focus on encouraging establishing good practices.
And then, there are countries such as Poland, where remote work legislation is in flux, as major changes are yet to happen and in the meantime employers need to decide the measures necessary depending on the specific roles and occupation of employees.
In every country, employees have certain rights regarding their break times during work hours and between consecutive workdays. Specifics often vary — such as whether lunch breaks are included in calculating weekly hours (New Zealand, Australia, Germany) or not (Denmark, the Netherlands) — but break rights are statutory nevertheless. Employees working from their homes retain their break rights, and employers have to make sure those breaks are taken and respected. While logistically breaks are more challenging to monitor in a work from home context, break rights are increasingly safeguarded by various forms of the right to disconnect regulations.
Championed first by France in 2016, the right to disconnect very explicitly outlines when employees can be contacted and when they shouldn't be. Even before the pandemic, more countries (e.g., Italy, Spain, and Belgium) had been inspired by France and had implemented their own versions of the right to disconnect. Since the onset of the pandemic, Chile and Argentina have passed such laws, while active discussions are currently happening in the European Parliament and in many other countries.
In many countries, employers must keep complete and accurate records of employee work hours, rest time, time off and different leaves, make these records available to employees, and also provide them to authorities if requested. The objective is (1) to monitor employees' overtime (2) to make sure they are paid accordingly and do not work beyond statutory maximum hours. This is done to protect the state of their physical and mental health.
Authorities responsible for workplace inspections fully expect to see the same record-keeping level for both home-based and office-based employees. Many countries have non-compliance penalties for companies that don’t keep track of employee work, ranging from anywhere between €3,200 in Estonia and AU$6,300 in Australia to upper limits of €45,000 in the Netherlands and NZ$100,000 in New Zealand.
Each jurisdiction has precise employment laws that stipulate exactly what the rules are for employing somebody in that area. They cover both employer obligations and employee rights and extend to every employment element from various protections (through time off, work hours, and minimum wage) to redundancy and employment terminations. A distributed company with internationally remote workers needs to have a grasp on the specifics in each country.
Ending employment is an area that is incredibly complex and where extreme caution and care are not just recommended but necessary. In most EU countries, a rigorous procedure needs to be followed. Not only is at-will employment termination impossible, but so also are dismissals based on reasons such as inadequate performance (requires a performance improvement plan), business transfer, etc. In the Netherlands, employers need to obtain permission from the Employee Insurance Agency, which, as Uber recently found out, is hard to get.
The purpose of an employment contract is to very specifically outline everything an employee does, including the working environment, expectations, and job regulations. Due to the fact that the place of work is included in employment contracts, when that place changes to being one’s home, all that information must be included. Implementation varies, depending on a jurisdiction. In Portugal, it warrants an additional agreement, which is valid for only three years and needs to be renewed afterwards. On the other hand, in Estonia, while there needs to be only an amendment to the contract that the employee will be working remotely, employees may work remotely within the agreed workplace region (e.g., anywhere in Tallinn).
However, besides the address change, other things — such as performance expectations, reporting expectations, hours and many other structural aspects of the job description — may change as well. Hence, they may need to be reflected in the contracts. If an employment contract is not updated accordingly, it could be deemed void, which would mean the employee could be seen as working illegally. Arrangements need to be compliant with local regulations.
Anyone who has ever tried to employ a worker from a new country or jurisdiction knows just how difficult and complicated it is to comply with local rules and regulations. Therefore, many distributed companies opt to hire people as independent contractors, which solves many hurdles with international employment. However, in most countries, long-term full-time independent contractors are rarely a viable or legal solution. Governments around the world have different ways of classifying what constitutes a full-time employee. Still, they all boil down to the same idea — if a person works full time, within certain hours of the day, reports on their work throughout projects, receives a computer and other technology, they are an employee and cannot be treated as a contractor. Breaching that could have severe financial and fiduciary implications.
In France, employers that misclassify employees face a fine of up to €45,000 for the company's legal representative (president or managing directors) and up to €225,000 for the company as a legal entity. Also, the employer can be imprisoned for up to three years. In Germany, employers face fines of €30,000 for each hidden personnel leasing and up to €500,000 if the company is found to have done it intentionally. (Professional employer organisations such as Boundless can help you employ your distributed workers compliantly without needing to set up anything yourself.)
Each country has a diverse set of anti-discrimination laws that employers have to abide by. Fairly common characteristics that fall under anti-discrimination laws could include race, colour, sex, sexual orientation, age, physical or mental disability, marital or relationship status, family or carer's responsibilities, pregnancy, religion, political opinion, national extraction, social origin, gender identity, intersex status or trade union membership.
However, when it comes to remote work, understanding instances of discrimination is more difficult to grasp. There is a possible exposure to discrimination claims when some employees are granted requests to work remotely, while others are not. Cases of discrimination on promotion and career development are also possible. It’s important to proactively address criteria on how you make decisions on these themes in a work from home context as a way to minimise any risks.
Taxes are one of the more complex areas of international employment and distributed teams. Companies must ensure compliance with the local tax regulations for every state or country where they have employees. That starts with registering for (and paying) employer taxes in every country where an employee resides. Further, each employee must be registered with the relevant tax authorities to have their local taxes deducted. This is crucial during the pandemic, as many employees have returned to their home countries for extended periods. If that period is for less than six months, no tax implications occur; however, any relocation for longer than that triggers a host of tax residency complications.
While income tax and social security taxes are present almost everywhere, many countries have very specific taxes. In Germany and Denmark, employees may have to pay the church tax; in Portugal, employees earning more than €80,882 pay the progressive solidarity tax; in Italy, employees pay a regional tax and a town tax. If companies do not take care of all that, they could be charged with tax evasion or tax fraud.
Local benefits are derived directly from local employment law, loosely grouped into government-provided and government-mandated categories. Each local government clearly differentiates between its benefits and the ones an employer is obliged to provide. For example, in the UK and Australia, providing employer contributions to a pension scheme is mandatory. In Ireland, on the other hand, all employers with more than five employees must offer access to a pension scheme, but they don't have to make contributions. Paid time-off benefits — such as vacations, holidays, maternity/paternity leave and medical leave — are treated very differently by the U.S. compared to European countries.
What further complicates this field is the area of benefits in kind, which employers offer at their own discretion. In Australia and New Zealand, employers fully cover the tax that is due on benefits in kind. In Ireland, employees have to pay that tax but do have an initial €500 tax free allowance. Finally, in Estonia the tax is progressive and could be as high as 60%–70%, making benefits in kind to be too expensive.
Security of information needs to be maintained, even though employees work from home. Using a non-secure broadband connection at home makes remote employees an easy target to hackers looking to harvest sensitive and valuable client information. This is particularly important in EU countries governed by the General Data Protection Regulation (GDPR) and where a leak of employee or customer personal data can be a serious problem. In such instances, the company could get fined.
At a minimum, all remote employees should be using a VPN connection when connecting to unsecured networks. In addition, to be compliant and avoid any risks, employers should (1) have data policies in place, (2) review access to internal systems, and (3) advise employees on essential updates and protections on all of their devices.
We hope this updated list has helped you to further understand why being as compliant as possible will make remote work feel better for employers and employees. Becoming an effective compliant remote company may not be a unicorn kind of narrative, but it's good for business, especially in a time of a pandemic, as it puts people's well-being and safety first.
At Boundless, we aim to help you to employ anyone anywhere in a legal and compliant way. Learn more about how we do that and which countries we can support you in.
In some countries, the Employer of Record model is not aligned with local employment legislation, which may restrict outsourcing of employment. To understand why Spain is a country we cannot currently support, it’s worth understanding how we operate in other countries.
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