Four Issues to Take into account Earlier than Letting Your Staff Work Overseas
Traditionally, the term digital nomad has been associated with travel bloggers, copywriters, and other tech-savvy entrepreneurs who traversed the globe while working virtually. After the pandemic, that stereotype is likely to fade as a wide range of professionals attempt to combine remote work with international travel.
This trend towards remote working without borders presents opportunities and challenges for employers. On the one hand, employers abroad are likely to find happier and more productive workers. On the other hand, companies can face legal challenges and wage complications.
Before your employees embrace the digital nomad lifestyle, consider how to handle the nuances of international remote working.
1. Confirm whether health care and benefits can be continued overseas
As long as digital nomads work for a U.S. company, they can continue to participate in U.S. retirement plans such as 401 (k), retirement, and stock option plans. However, in order to contribute to a 401 (k) or IRA – Roth or regular – employees must have an income.
Many Americans living abroad are eligible for the Foreign Earned Income Exclusion (FEIE), which allows them to exclude up to $ 107,600 of their foreign income from US taxation for the 2020 tax year. If an employee qualifies for the FEIE and excludes all of their income from taxation, they will not be able to contribute to these plans.
Employees who move their home office to a foreign country may also find that they are no longer covered by the company’s group insurance. In this case you need to determine who – the employer or the employee – is responsible for finding an alternative or complementary solution, e.g. B. local insurance or travel insurance.
2. Local labor laws may differ
In general, labor law applies where the work is carried out. If your American employee moves to France, French labor laws may apply to your relationship with that person. In many countries, you may find that these laws favor employees more than their counterparts in the United States. For example, foreign laws might mandate minimum paid leave or limit the employer’s ability to terminate an employment relationship.
As a rule, the longer an employee works in that country, the more local laws apply. Employers should consider the specific laws of each country and the length of time the employee intends to work from that location when discussing the possibility of international remote work.
3. Payroll can get complicated
US companies are required to report and withhold income tax for their US employees, whether they live in the US or abroad. For those working overseas, companies may also be required to report employee income to their overseas host countries.
For workers, working overseas can offer tax benefits that can help them reduce or even eliminate their US tax liability. Filing Form 673 exempts eligible expatriates from US federal tax deduction. If employees from abroad are allowed to work, employers should be prepared to deal with these requests.
4. Set expectations for when the job will be done
Since digital nomads cross borders into new time zones and countries with different holidays, employers should set clear expectations for working hours and vacation policy. Again, local laws regarding paid leisure may come into effect. So make sure you are aware of the requirements. On the other hand, employers can take advantage of this opportunity to extend their working hours across multiple time zones.
The ability for employees to work as digital nomads can deliver multiple benefits to organizations, including improved retention, increased productivity, and access to the world’s best talent. However, employers should carefully weigh the legal and financial implications. If you think international remote working is right for your business, set expectations with digital nomad workers in advance to ensure success.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.
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