Can UK Employees Work Abroad: Considerations For Employers

emily gordon brown
Emily Gordon BrownLegal Assessment Specialist @ Lawhive
Updated on 7th December 2023

In a world where remote work is the new norm, the question of whether your UK employees can clock in overseas carries more weight than ever. In this article, we’ll help you understand all of the twists and turns that come with global work arrangements from tax implications to potential risks.

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PAYE and working abroad

PAYE, or Pay As You Earn, is the system for deducting UK income tax from employee earnings. Employers based in the UK with staff must use PAYE. Even if an employee works abroad, they still need to calculate and deduct PAYE tax from their pay. 

For employees on overseas contracts, employers should be aware that the country they’re working in may have similar tax requirements. Therefore, the employer must coordinate with the overseas tax authority to meet their obligations in both the UK and the host country. 

Employees claiming Overseas Workday Relief (OWR) may require additional attention. Employees must collaborate with HMRC to determine the appropriate income tax deductions, considering not all earnings may be taxable in the UK. 

National Insurance Contributions and working abroad

National Insurance Contributions (NICs) for employees working abroad depends on each employee’s situation and where they work. 

For those in the EU, including Iceland, Norway, or Switzerland, the general rule is paying into the social security (National Insurance) scheme of either the host country or the UK, not both. However, keep in mind that for employment gigs starting after December 31st 202, there are changes for postings to Iceland, Norway, Switzerland, and Lichtenstein. A temporary presence in one of these countries might still mean UK NICs apply. 

If the employee is outside the EU, Iceland, Norway or Switzerland but the UK has a social security agreement with that country, contributions usually happen in the foreign country, not the UK. In some cases, the employee might need a certificate to make sure NICs are paid when they’re due, or they might consider voluntary contributions in the UK. Employers, when in doubt, should seek advice as needed. 

Creating a permanent business presence outside the UK

Employers need to be cautious about employees creating a permanent business presence outside the UK. While it’s not a big concern if employees are just doing their usual tasks from a foreign country, the risk increases if they frequently handle contract negotiations or make important decisions for the business there. 

This risk becomes more significant over time. If a permanent establishment is unintentionally set up in another country, it could lead to major corporation tax consequences for the employer in both the UK and the foreign country where the employee works. Employers must make sure that their employee’s work abroad doesn’t accidentally trigger tax obligations in that jurisdiction. 

Other considerations for employers and employees 

Both employers and employees should be mindful of the legal permissions required to work in a foreign country, as well as this tax implications both home and away. Some nations might necessitate the employer to sponsor the employee for their work. It’s very important for employers to seek local employment and immigration advice to ensure compliance with the laws in that territory. 

For help and advice with either (or both) immigration and employment law, please contact our legal assessment team today. We can give you a free, no-obligation fixed-fee quote for the services of our expert solicitors and provide all the legal advice and support you need to ensure compliance in any cross-border working arrangements you may be considering. 

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