The Compliance Risks of International Remote Working and Hush Trips

From a European HR perspective, many multinational companies have introduced remote-working or “work-from-anywhere” policies, designed to accommodate employees’ desire for greater flexibility while enabling employers to manage the associated legal and compliance risks.

HR teams receive requests to work temporarily from abroad for many legitimate reasons. Employees with family overseas may wish to spend longer periods in their home country during holiday periods, particularly where they do not have sufficient annual leave, prefer not to use all their entitlement, or cannot take extended leave because of business continuity requirements.

Other common examples include employees accompanying a partner on a temporary assignment or business trip, or combining a period of remote work with a holiday. Some may wish to work for several days before or after their holiday because of school holidays, family circumstances, flight costs, or simply because they would like to spend more time at their destination.

While these arrangements can offer benefits for both employees and employers, they can also create significant compliance risks. The issue with a “hush trip” is not necessarily where someone is working, but rather that the employer does not know where they are working. Without that visibility, the employer cannot properly assess or manage the legal and compliance risks that may arise.

Immigration and Right-to-Work Considerations

Many employees assume that because they can legally live in or travel to a country, they can also legally work there. From an immigration perspective, however, those are often two very different questions. The first consideration is whether the employee has the legal right to stay and work in the country concerned.

• • • For EU/EEA nationals staying and working elsewhere within the EU/EEA, freedom of movement makes this relatively straightforward. For third-country nationals, however, the position is often more complex. Firstly, third-country nationals may remain in the Schengen Area for a maximum of 90 days in any 180-day period, although the permitted stay may be shorter depending on the validity of their visa. Even if they hold a valid residence permit issued by one Schengen country, the 90/180-day limit still applies when they travel to other Schengen countries. Moreover, being lawfully employed and a resident, or even a permanent resident, in one EU Member State does not necessarily give them a right to work in another EU Member State.
    • Remote work is still work, and crossing a border does not remove the need to comply with immigration rules. Non-compliance can expose employers to sanctions for illegal employment which, depending on the jurisdiction and circumstances, may include significant administrative fines, criminal sanctions and retroactive employment-related liabilities.
    • Obtaining appropriate work authorization may also prove difficult where the employer has no local entity capable of sponsoring the employee. Although some countries have introduced remote-worker or “digital nomad” visas, these often involve eligibility requirements, processing times, administrative burdens and additional costs.

For these reasons, many company policies permit international remote work only in countries where the employee already has the appropriate right to work.

Social Security Compliance Risk

Social security is another important consideration as people are often surprised to learn that social security obligations can follow where the work is performed, not where the employer is located. As a result, an employer may become liable for social security contributions in the jurisdiction from which the employee is working remotely.

Failure to pay the required contributions can result in retroactive regularization, late-payment interest and penalties, while in some jurisdictions employers may be unable to recover the employee's share of contributions retrospectively.

Important exceptions exist, particularly within the EU/EEA and Switzerland. For temporary remote working within Europe, EU guidance confirms employees may remain covered by the home-country social security system, rather than becoming subject to social security in the country of remote work, provided that the arrangement is temporary and agreed between the employer and employee. This continued coverage is evidenced by an A1 certificate.

A hush trip prevents the employer from determining whether registrations, exemptions, or certificates are required and, by the time the arrangement comes to list, a compliance problem may already have arisen. Even within the EU framework, the position can remain complex and will depend on factors such as the countries involved and the duration, frequency and pattern of remote work.

Outside the European social security coordination framework, matters can be even more complicated. The position may depend on whether a bilateral social security agreement exists between the countries concerned and whether that agreement applies to the particular remote-working arrangement. In the absence of an applicable exemption, employers may face local registration and contribution obligations, potentially resulting in additional social security costs.

Insurance Coverage for Employees Working Abroad

A related but separate consideration is whether the employer's insurance policies adequately cover employees working remotely from another jurisdiction.

Many employees assume they're covered simply because they are working remotely, but that is not always the case. Insurance providers may treat an employee working from abroad very differently from an employee on an approved business trip.

Employers cannot necessarily assume that their existing health, accident, occupational injury, workers' compensation or business travel insurance policies will extend to an employee who independently chooses to work temporarily from abroad. Policies may contain territorial restrictions or distinguish between authorized business travel and employee-initiated remote work.

Where coverage is unavailable or insufficient, potentially significant medical, repatriation or other costs may fall on the employee, the employer, or both. This issue is separate from the employer's statutory social security and occupational injury obligations.

Advance disclosure therefore enables the company to establish whether appropriate insurance coverage is in place and, where necessary, arrange additional coverage. With a hush trip, companies often discover the insurance gap only after something has gone wrong.

Employment Law and Posted-Worker Requirements

Crossing a border can also mean becoming subject to an entirely different set of employment-law obligations.

Within the EU, one consideration is whether the arrangement falls within national rules implementing the Posted Workers Directive. Not every employee who independently chooses to work remotely from another EU Member State will qualify as a posted worker. However, where posting rules do apply, employers may have notification or registration obligations and may be required to comply with specified host-country employment conditions.

More generally, employers may need to consider mandatory local employment protections, including health and safety, working time, remuneration and equal-treatment requirements. The applicable obligations vary according to jurisdiction, the circumstances and the duration of the arrangement.

Ultimately, an employer cannot comply with obligations it does not know have been triggered.

Tax Risks of International Remote Working

Tax is often one of the first issues that comes to mind for employers when employees work abroad, although it is rarely the only consideration.

Performing employment duties in another country can potentially trigger host-country personal income tax, payroll or withholding obligations. Whether such obligations arise will depend on local legislation, any applicable double-tax treaty, the duration of the employee's presence and the specific circumstances of the arrangement.

From a corporate perspective, a few days abroad will not automatically create a taxable presence or permanent establishment for the employer. Nevertheless, employers should avoid assuming the risk is negligible simply because the arrangement is temporary. The assessment is fact-specific and depends on factors such as the nature, duration and regularity of the employee's activities, their role and authority, and the provisions of the applicable tax treaty.

Why Employers Need International Remote-Working Policies

Given these complexities, multinational companies increasingly regulate temporary international remote work through formal policies.

In most cases, employees must obtain prior approval before working remotely from abroad and must have the appropriate right to work in the host country. Companies also frequently impose geographical restrictions, such as limiting remote work to specified EU/EEA countries, or establish a maximum number of remote-working days within a calendar year or another defined reference period.

Most employers adopt a risk-based approach. The objective is not to prevent flexibility, but to enable it while ensuring the risks remain at an acceptable level. It may not be proportionate or practical for an employer to undertake an exhaustive immigration, social security, insurance, employment-law and tax analysis every time an employee wishes to work abroad for a few days. Instead, companies should establish parameters designed to exclude higher-risk situations while permitting flexibility where the risks are considered manageable.

This is also why a “hush trip” is fundamentally different from authorized international remote working. The issue is not necessarily that an employee wishes to work from another location, as many employers are willing to offer that flexibility and recognize what it can bring in terms of employee satisfaction, retention and work-life balance.

Rather, the fundamental problem is the lack of transparency. When employees do not disclose where they are physically working, they prevent their employer from assessing its immigration, social security, insurance, employment law and tax obligations and from making an informed decision about the level of risk it is prepared to accept. Many employers are willing to accommodate international remote work, but only where they have visibility of the employee’s plans. Without that visibility, they cannot fully assess their obligations or ensure compliance.

Need to Know More?

For more information about international remote working arrangements, including the immigration, social security, employment-law and tax considerations discussed in this article, please contact Senior Counsel Jo Antoons at [email protected].   

This blog was published on DATE and reflects information available at that time. Updates may occur as policies evolve. To stay informed on the latest immigration news and analysis, please subscribe to our alerts and follow Fragomen on  LinkedIn, Facebook and Instagram.