Employers warned of risks of expat home working

Employers in the UK have been warned of the implications that remote working by staff outside of the country might have on employee benefits and tax.

Image of happy remote worker on sunny patio

David Sapsted

17 November 2021

A report from global professional services firm Aon says that changes in working patterns prompted by the pandemic have resulted in many employees not just working remotely from home, but from outside the UK.

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Flexibility, and compliance

Aon said that although such flexibility "supports an employer value proposition" and can build more resilient workforces by encouraging employee engagement and retention, it can also have ramifications for company policies and benefit provisions.Policies that could be affected, says the report, include pensions, medical benefits and group risk policies.

A complex picture

Adam Burn, Workplace Pensions Technical Lead at Aon, said: “Whilst there may be an understandable desire to accommodate employees’ wishes in respect of where they are located, there could be potential employee benefit issues if the employee’s work and living location is outside of the UK.“The exact impact depends on various aspects. This includes the benefits provided, the insurer or provider of the benefit, where the employee will be based, including places such as the Republic of Ireland, Channel Islands and the Isle of Man, whether the relocation is temporary or permanent and potentially local legislation in relation to taxation and residency.“With pensions, for example, employers need to establish if staff will continue to be paid under a UK contract in sterling, and if they are subject to UK taxation. If the contract is changed and the employee is no longer subject to UK income tax, this could affect their tax relievable contributions.”Aon pointed out that many UK workplace pension schemes also needed employees to have a UK address in order to enrol them, meaning absent staff could be excluded from joining any new scheme."For medical benefits, providers often do not cover treatment received outside of the UK. Employers with colleagues abroad may therefore need to consider international-based coverage – which can be expensive," said Aon."But, if medical benefits are offered as a contractual right, then there could be an expectation that the employer will still offer this benefit at an appropriate level whilst overseas."

Balancing risk

From a group-risk insurance perspective, Aon warns that employees based outside the UK, even temporarily, could affect the perceived risk of the scheme. Additionally, if locations of employees are not declared, then the provision of cover could also be impacted.Because of such considerations, Aon is advising companies to continually track and assess non-UK locations and the implications for each benefit - and to communicate the impact with employees before a new location is agreed.Catherine Stait, Risk Technical Lead at Aon, commented: “Fundamentally, the first action for any employer is to ensure that they have a clear understanding of the intended location of all employees who work from outside the UK to ensure that they have the relevant information that a benefit provider may require."Once this information is obtained, employers can talk to their professional advisors and benefit providers to understand the impact for each benefit offered, enabling clarity and confidence to make better decisions.“Additionally, it’s paramount to ensure employees understand the impact of being based overseas on their benefits packages. This communication not only protects individuals but also helps clarify why an employer may place some restrictions on the scope of a remote working policy.”