Remote Work Law: What Companies and Employees Need to Know

We’ve been talking a lot in our latest interviews about remote work, the pros and cons, the best case practices and so on.

Now, it’s time to get on the legal side of things, and talk about company and employee responsibilities when working remotely, about taxes and more. 

And we brought you the perfect guest: meet Gonzalo Corrales Cortés, Senior Associate Tax & Legal at WorkFlex. WorkFlex has developed easy-to-use software for companies to manage travel compliance: business travel, work-from-abroad, commuters and visa. They partner with big brands such as Volvo, Flix, Erste, Vodafone, and more.

 The Difference between Remote Work and Work-from-home

1. Alina from Tidaro: Hola, Gonzalo! Thank you for accepting the interview invite :).

First, I want us to start with some definitions. Legally, what’s the difference between remote work and work-from-home?

Gonzalo: While many people use the terms interchangeably, they are not the same. Working from home typically involves a certain level of flexibility and it is the model adopted by hybrid companies, where employees split their time between the office and their homes. 

On the other hand, remote work generally implies working from anywhere in the world. While digital nomads are a well-known example, they are not the only case. Employees can also be granted  “work-from-anywhere” benefits. At WorkFlex, we specialize in helping companies to take this extra step, creating an even more flexible work environment that often enhances employee well-being and engagement.

Remote Work Law When Hiring

2. Alina from Tidaro: Which are the main challenges when it comes to compliance when dealing with hiring remotely?

Gonzalo: Well, WorkFlex is not an EOR (Employer of Record) company, but I personally believe the main challenges are related to taxes, particularly Permanent Establishment (PE), work permits and local labor laws. While hiring in foreign countries is now easier than ever, obtaining expert advice and staying informed about each country’s specific regulations is important to avoiding compliance issues, which can escalate into serious fines or even criminal liability in severe cases.

3. Alina from Tidaro: Which are the legal and financial consequences for both employers and employees when facing non-compliance with remote work labor law?

Gonzalo: As mentioned before, both fines and criminal liability can be consequences for employers not complying with local rules. Employees may also face some nasty implications, they could be required to pay unexpected taxes and in some cases, they might lose access to their current social security scheme or face challenges related to residency and immigration status in the destination country. 

Additionally, misunderstandings about local labor protections could lead to disputes over wages, working hours, or even termination rights. This is why ensuring compliance on both sides is essential to avoiding these risks.

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4. Alina from Tidaro: You previously mentioned the fact that employees can also be granted  “work-from-anywhere” benefits. Care to share with us some best practices when designing work-from-anywhere policies?

Gonzalo: I reckon being properly informed is key. Obtaining professional legal advice or using a software like WorkFlex can certainly help. Honestly, I’m quite open-minded about remote work, and I believe it’s possible to implement work-from-anywhere policies with minimal or no risk if approached strategically.

Some best practices include conducting a thorough risk assessment for each jurisdiction where employees may be allowed to work. Regular communication and training for both HR teams and employees have been proven effective in ensuring everyone understands their responsibilities and avoids unnecessary risks or poor decisions. Lastly, using technology to simplify compliance and streamline processes can make it much easier and safer for companies to expand remote work.

Workations: Taxes, Compliance, Risks

5. Alina from Tidaro: Another cool benefit I’m starting to see more and more is “workations”. To make it clear to our readers, a workation is the situation when an employee continues to work while temporarily abroad for private purposes. Now, which are the compliance risks, tax and legal responsibilities related to workations? 

Gonzalo: Assessing tax, local labor law, social security, visa/immigration, data protection, and safety and health in the destination country is essential to ensure a hassle-free workation.

From a tax perspective, it’s important to evaluate whether the employee’s presence abroad could trigger a double tax residency or PE risks for the company. Some people ignore that even a short-term stay can create unexpected tax liabilities for both the employee and the employer.

For labor law and social security, the key is understanding if local employment laws might apply. For example, a social security certificate should be issued when travelling abroad, as it would be the only way to prove the employee is paying contributions in the residence state.

On the immigration side, verifying visa requirements is critical. Even if the employee isn’t formally working for a local company in the destination country, some states require a specific visa for remote work, and violations could lead to fines for the employer or entry bans for the employees…

Data protection is another crucial consideration. Sensitive data must be handled securely, so even when working from abroad, the employees need to comply with regulations like GDPR.

Lastly, the company should ensure that the destination country meets health and safety basic standards and that the employee is aware of any risks before travelling, such as security concerns in the region.

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6. Alina from Tidaro: Workation, working remotely…What’s the place for digital nomads in this story? And which are the compliance risks they might be facing?

Gonzalo: Digital nomads are often working as freelancers, but some of them are employed, so for them their employer should be aware of the risks mentioned above and tackle them accordingly. Freelancers also have to deal with many issues. For instance, while they shouldn’t care about PE risk, tax residency can become a big problem. Navigating immigration rules is another major concern, as these regulations often influence digital nomads travel decisions.

7. Alina from Tidaro: Speaking of concerns…My next question is actually a question you asked in your newsletter: What can be wrong if you work from abroad without letting your employer know? 

Gonzalo: What some people seem to ignore is that working from abroad without informing your employer comes with risks not only for you but also your employer. These include potential tax liabilities, social security gaps, invalidated travel insurance, and even immigration issues like fines or entry bans. 

To avoid complications,  I always recommend seeking professional advice and ensuring compliance with local laws before making the move, even if initially it doesn’t seem that risky.

8. Alina from Tidaro: Yeah, better safe than sorry. And a personal question, Gonzalo. If you were to choose a country to live in and work from, in the next 3 months, which would it be?

Gonzalo: With summer starting in the Southern Hemisphere, I’d recommend Argentina or Brazil. While these countries aren’t particularly cheap by South American standards, they offer a unique combination of stunning natural landscapes and rich cultural experiences that few places can match. Plus, the food and people are simply terrific and this makes these countries even more appealing :).

Alina from Tidaro:  This makes me dream of a “workation”! 

Thank you so much, Gonzalo, for taking the time to chat with us. The topic isn’t an easy one, but it’s of utter importance, with significant consequences if people aren’t aware of the problems that might arise when working remotely, freelancing, etc.

Conclusions

Here are the key summary ideas from the interview with Gonzalo Corrales Cortés about remote work law and compliance:

1. Main compliance challenges for remote work:
   • Taxes, Permanent Establishment (PE), work permits, and local labor laws when hiring remotely.
   • Legal and financial consequences of non-compliance can include fines, criminal liability, unexpected taxes, loss of social security benefits, and disputes over wages/working hours.
2. Best practices for work-from-anywhere policies:
   • Conduct thorough risk assessments for each jurisdiction where employees may work.
   • Provide regular communication and training for HR teams and employees.
   • Use technology to simplify compliance and streamline processes.
3. Main compliance risks for digital nomads:
   • Tax residency issues
   • Immigration rule violations
   • Social security gaps
   • Potential loss of health insurance coverage
4. Legal consequences of working abroad without employer knowledge:
   • Potential tax liabilities
   • Social security gaps
   • Invalidated travel insurance
   • Immigration issues like fines or entry bans
5. Visa requirements
   • Many countries offer special digital nomad visas for remote workers
   • Visa requirements vary by country and duration of stay
6. Tax considerations
   • Evaluate potential double tax residency risks
   • Understand social security obligations in different countries 

That is quite a lot to take in, isn’t it? But, at the end of the day, employers and employees need to be aware of remote work law, tax, visa requirements, and other regulations when working across borders. Else, the consequences can be harsh.

Want to read more inspiring stories on how to make remote and hybrid work, actually work? Check out the AirBnb remote work policy, the GitLab remote-work experiment, and the Quora remote-first story. 

Now, if you want to find out more about how to manage hybrid workplaces, we’ve created a very thorough guide for you. So, make sure to check Hybrid Work Strategy Guide out!