In today's business world, it is not so unique for people to relocate across international borders while keeping their jobs as remote working becomes more common. This flexibility can be beneficial for both employees and employers, but it can also be a complicated process when it comes to taxes, labor laws and compliance. If an employee decides to move to another country in the middle of their employment contract, it is very important for companies to follow the rules in order to avoid legal exposure or business disruption.

Below we will break down the key factors that businesses should take into consideration when their employees move to another country mid contract and how EOR can help smoothen the process.

Consider the Legal and Tax Aspects

It is important to know that labor law and tax regulations are based on the location of the employee's physical workplace and not on the location of the company. This means that if your employee moves abroad, they may be subject to the local labor laws of the country in which he or she has relocated. These regulations may include dismissal procedures, sick leave rights and minimum benefits.

Tax compliance is another important issue. Depending on the country, your company may be required to register with the local authorities, pay income tax and social security contributions. Depending on the length of an employee's stay and the nature of their work,your company may be classified as a "permanent establishment" in the country concerned and thus be subject to the tax obligations prescribed by the government.

Give a Consideration to Benefits, Insurance, and Equity Plans

It is possible that an employee's benefits package will have to be completely redesigned when they move to another country. It is possible that the health insurance offered by the company will no longer provide cover in countries other than the country of residence. Similarly, pension plans and pension contributions are not easily transferred across international borders. You may therefore need to introduce alternatives that comply with local regulations.

Share schemes, such as share options, can also be problematic as they are treated differently for tax purposes in many countries and are subject to different reporting requirements. The employee may be exposed to unforeseen tax liabilities if the appropriate adjustments are not made, or worse, you could be penalized for offering benefits that do not comply with another country's regulations.

Take Care of Immigration & Work Visa Requirements

Compliance with immigration and work permit regulations is crucial when an employee travels to another country during the term of their contract. Foreign nationals are prohibited from working remotely in many countries without the required visa or permit. Before the move, you need to make sure whether the candidate requires a work visa, digital nomad visa or residence permit, depending on the requirements of the destination country. Failure to obtain the required documentation may result in fines, deportation or a ban on future business activities in that country.

Ensure Data Privacy & Security Compliance

When an employee relocates to another country, compliance with data protection and security regulations becomes a major challenge, especially if they have to handle sensitive company or customer data. In various locations, there are strict regulations on how data may be stored, moved and processed. For example, the GDPR in Europe, the CCPA in California and the PIPL in China all have corresponding regulations. Employers need to check whether cross-border data transfers are legal, and if so, they need to put in place safeguards such as Standard Contractual Clauses (SCC) or Binding Corporate Rules (BCR).

Establish A Policy For International Moves

With more and more employees wanting to travel around the world, establishing a remote working abroad policy will help your company stay ahead of the curve and comply with the rules. This policy should clarify how to get approval, which countries are eligible, the legal and tax obligations associated with the move, and when the move should take place. Setting these boundaries in advance will reduce the risk of compliance issues, avoid last-minute legal problems and ensure that both the company and the employee know what is expected of them.

Monitor and Review the Arrangement Regularly

Compliance is not a one-time thing, but needs to be constantly reviewed to keep up with changing legislation, tax revisions and changes in the workforce. Review your employees' employment status, visa requirements and local laws every three months. Stay ahead of the game by keeping an eye on legal changes in both countries and amending policies as necessary. Regular discussions with employees and the EOR will help to mitigate risk and ensure that the company remains compliant in the long term

Communicate Clearly with Employees

When an employee relocates abroad, clear and proactive communication is very important to ensure that everyone follows the rules and everything runs smoothly. Be clear about how the move will affect things like work status, taxes, benefits and the need for a work permit in the new country. Make sure you put any changes to contracts, payroll or policies in writing and encourage employees to talk to each other about any issues they have.

How an Employer of Record ( EOR ) Can Help ?

An EOR (employer of record) can ensure that everything goes well when an employee moves to another country while their contract is still in force. In the host country, an EOR can become your legal employer and will  take care of administrative related tasks like payroll processing, tax declarations, benefits administration and makes sure you comply with labor laws. 

Below are some of the key benefits of using an EOR:

Compliance: An EOR ensures compliance with all applicable labor , employment and immigration laws that ensures that the appropriate permissions, work visas and permits are obtained before the employee moves to another country.

Risk mitigation: An EOR protects your company from fines or other penalties that could arise due to misclassification or errors in the tax declarations.

HR Management: An EOR handles HR-related and administrative tasks such as contracts and payroll in accordance with local legislation, which can help streamline operations and give you time to focus on your core business.

The Bottom Line

Moving abroad while you are still working is no longer unusual;  it is simply part of the evolving global workforce. But if the legal, tax and operational issues involved are not taken into account, this can have very negative consequences.

By using EOR such as Swapp Agency and modifying contracts, adjusting compensation and benefits, companies can ensure that their employees play by the rules while still giving them the freedom to move across global borders. If you have the right plan in place, compliance doesn't have to be a pain when it comes to relocating employees around the world.