Allowing staff to have a Christmas 'Workation'

With the growth of hybrid and remote working (and the increasingly international workforce of many companies), many employers may be getting requests from their staff to have a ‘workation’ this festive period. That is, for example, allowing them to go to another country for say 4-5 weeks over Christmas that will include some holiday – with the rest of the time being spent working from that foreign location.

Whilst many employers may be keen to accept such requests – especially for key employees or where they are struggling to find staff with the appropriate skills and experiences – businesses need to take care in accepting such requests.

This is a particular ‘risk’, for example, for businesses in the insurance and wider financial services environment, who often undertake their international business via a ‘branch’ structure. That is, the operations in other locations may legally be simply a branch of the ‘parent entity’ rather than a separate legal entity.

Associate Director Robert Salter says

Whilst this branch structure may not ‘sound like an issue’, the reality is that it can be. For example, employees (and the company) are not provided with any protection from withholding taxes under Double Tax Treaties. As such, by allowing workations on an open, largely automatic basis, firms could be exposing themselves to additional costs (e.g., fines / penalties) as well as potentially negative PR, if they are not careful.

In many cases, similar risks may also arise from a Social Security (National Insurance) perspective in many cases – in particular, if you have UK-based employees going back to EU states. Of course, all of this doesn’t mean that businesses should automatically ignore workation request, as they can help maintain moral and retain staff in what is currently a challenging time for businesses.

Similar issues can also arise for the self-employed.  For example, partners in law firms or other partnership structures.  This is on the basis that the self-employed can establish a formal ‘taxable presence’ in other jurisdictions based on quite a low level of activity / presence in that country.

What should you do next?

With all of this in mind, it does mean that organisations should retain the right to review and formally approve (or in risky cases reject) each request on a case-by-case basis, to ensure that the firm doesn’t face any unnecessary risks further down the line.

Would you like to know more?

If you would like to discuss the above matter, please get in touch with your usual Blick Rothenberg contact or Robert Salter using the form below.