Blue Square Small Business Blog

Should my company hire remote workers from overseas?

Should my company hire remote workers from overseas?
November 26, 2018  |  Business Advice

There are plenty of companies and industries that rely on permanent, brick-and-mortar premises to trade, do business and thrive. Yet as technology continues to evolve and disrupt more traditional ways of conducting business, an increasing number of employers are choosing to ditch high-rent office space and allow their team members to work from wherever they choose.

Researchers have predicted that if current trends continue up to 50% of the UK’s workforce will integrate at least some degree of flexitime or remote working into their routine by 2020. But to be honest, it looks like UK companies have been a bit late to the party in terms of offering their staff the opportunity to work from home on a regular basis.

According to research conducted by the Swiss firm IWG, 70% of professionals worldwide now say they work from home a minimum of one day per week. Bearing in mind a huge proportion of those professionals are part of the gig economy or belong to the globes increasingly large community of digital nomads, these remote workers pose a huge opportunity for small UK companies.

The benefits of hiring remote workers

There are quite a few obvious benefits you can enjoy by abandoning old-fashioned business structures and choosing to manage a remote team to hire your business from the eradication of office rent and overheads, to environmental benefits, improved morale and better staff retention.

Above all else, one of the key benefits you’ll enjoy by hiring remote workers to help you run your business is that your hunt for top talent no longer needs to be bound by municipal or national borders. Your potential talent pool can span the entire globe, and you can hire anyone you like without stressing over visa rules.

You can leverage the knowledge of skilled professionals in markets you’re looking to explore but know little about, and you can even ensure your company is running around the clock and never stops trading by strategically hiring remote workers across an array of time zones.

That being said, just because there are overt benefits doesn’t mean there aren’t a couple of hurdles you’ll need to bear in mind. Hiring remote workers from overseas is a fantastic idea for many companies, and it could be right for you. But before you run off to start recruiting new staff, we’ve got a few tips you should follow.

There are also some legislative rules and tax laws you’ll want to make sure you understand before contracting overseas workers.

Carry out cultural research before hiring remote workers from overseas

One of the first hurdles you’ll need to overcome before hiring overseas remote workers is to bridge any cultural barriers and ensure you fully understand and anticipate any cultural or geographic differences your new team members may express.

This journey starts by attempting to educate yourself on what it means to be culturally sensitive. You need to conduct research on how professionals in different countries work best, and allow your remote workers to carry out their tasks in a way that is conducive to their own surroundings.

This might include religious customs dictating certain times a person should not be carrying out work, or a time of day in which your remote workers might be taking part in a routine that should not be disturbed. You’ve got to ask your prospective remote worker at the hiring stage if there are any customs you should be aware of and their work implications. After that, create a diversity calendar that will keep you in the loop with any religious holidays or cultural events you need to observe.

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Next, you’ll want to think long and hard about how you find and pursue leads on potential remote employees working from abroad. Generally speaking, you should start by thinking about the sort of individual you’d like to hire, rather than their location in the world. Consider what languages you’ll need your workers to be fluent in, and whether you have any expectations or necessities surrounding time zones and work patterns and any other must-haves that are crucial to your company in particular.

It’s worth reiterating that one of the best parts about hiring remote workers from overseas is that you’ll often be surprised by the calibre of talent, where professionals are based and how they can utilise their current situation from abroad to bring added value to your company.

How to make your recruitment of remote workers a success

If you’ve got country-specific requirements, you should advertise vacancies on regional or national job sites. Yet more often than not, you’ll find industry-specific job boards are better frequented by the sort of professionals you’re looking to hire. You should also be reaching out to potential candidates or acquaintances on social media and advertise on your website.

When writing a job description for an overseas remote vacancy (and particularly at the interview stage), be sure to emphasise the benefits and freedoms your prospective employee will enjoy by working remotely.

Another top tip you should bear in mind is that you’ll want to create a clear, written contractual agreement with any prospective overseas remote worker. In some cases, a major appeal of hiring an overseas remote worker could be that as employer your responsibilities to that employee will be slashed in terms of health and safety obligations. Yet just because you are not legally bound to offer an overseas contractor the same concessions you would offer a brick-and-mortar employee in the UK doesn’t mean you can afford to shun a basic contract.

By producing a contract for your foreign workers, you’ll be able to set out clear rules and expectations for your new working relationship with a remote employee. This could be largely adapted from any existing employee handbook you may possess, or it could take the form of a simple checklist you expect your remote employees to adhere to in terms of work patterns, behaviour, deadlines and performance indicators. This will help to manage everyones expectations, and confirm in writing what you are wanting to see from your employee in terms of responsibility.

Lets talk about tax

Just because your company’s team of professionals are scattered across the globe and outside the jurisdiction of the UK or the EU does not mean your company and your employees are totally exempt from labour and tax legislation. In fact, there are certain rules and guidelines designed by various regulators specifically to address the issue of foreign remote workers.

In most cases, UK companies aren’t allowed to formally hire foreign workers with local registration as an employer in the country in question. In some instances, local labour laws in countries do not allow employment by any foreign firm unless that firm has some sort of incorporated local presence in the country.

The rules aren’t quite so stringent surrounding the contracting of foreign workers to carry out tasks on a regular basis. Many UK companies comply with their HMRC obligations concerning employment by running a monthly payroll system in which regular, contracted foreign workers are cited as employees on a No Tax code. Your foreign workers can then be paid gross salary, and at present will not need to pay tax to HMRC unless they are contacted and told otherwise.

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Please note this does not absolve your company from paying any tax owed, and you should always consult HMRC or a professional accountant for guidance and best practice concerning payroll and international payments before issuing any salaries under an NC code.

It’s also worth noting that just because your foreign remote workers do not need to pay HMRC any tax does not mean they will not owe tax on their income generated. Under most tax regimes, a worker carrying out regular tasks for a UK company which has no presence in that country cannot legally call that worker an employee.

In turn, local tax laws will normally class that individual as being self-employed which means they will need to contact their local authority and pay tax voluntarily in the same way you would file for Self Assessment as a UK company director.

It must be emphasised that if you plan to hire employees working overseas under this route, you need to be aware of any country-specific employment laws that could change your workers status. For example, in Italy regulators deem anyone to be an employee of a company if they have gained 80% of their regular income from one source for a period of eight months or more. After this period, the authorities will contact the employee to recover any taxes owed.

Other tax considerations to bear in mind

One alternative that many foreign remote workers use to better protect their rights and make life easier for their UK employers is to incorporate a company within the country theyre based, and then enter a formal business-to-business supply agreement with the UK employer for which theyre working. This route simplifies ambiguous taxation rules, although it also means that the local company operated by your remote employee will then be held liable for its own accounting and administrative processes.

Another point worth mentioning is that if youre a UK citizen working abroad for a UK company, you can often expect different treatment from HMRC. In accordance with UK law, you will ordinarily be expected to pay tax on your UK income even if youre not living in the country.

This should be done via Self Assessment. But to avoid being taxed by both HMRC as well as the local tax authority based in the country youre living in, you (or your overseas employees) should conduct serious research on whether there are any existing double-taxation agreements with the UK Government, to ensure youre not taxed twice for the same income.

Finally, as an employer you need to bear in mind HMRC rules on paying formally contracted UK employees who spend most or all of their time in an overseas country. No matter where your employees are based, you must continue to deduct PAYE tax from all payments made to those individuals after they leave the UK, and you must issue them a letter when they go abroad clearly stating:

  • The date they went abroad to work
  • Their gross pay from the start of the tax year to the date they went abroad
  • The tax deducted from the start of the tax year to the date they went abroad

Fortunately, there is a silver lining here in that the HMRC says UK employees being paid by UK companies may be able to obtain full UK tax relief on their earnings if they spend most of their time abroad over a period of one year or more. In this instance, any tax returned will subsequently need to be accounted for and paid to any local authorities, as per the advice already mentioned.

If your employees are based in the EU, existing pre-Brexit tax laws dictate your remote workers based in the EEA should pay social security contributions to the tax authority based in the country they work in. The exception to this regime is if they are working abroad for less than 24 months, or if they regularly work in more than two different EEA countries.

If this is the case for your remote workers, as the employer you can apply toHMRCfor a Portable Document A1 (E101) for your employees so they can continue to pay their UK National Insurance Contributions. There are also a range of non-EU countries that have similar social security agreements with the UK, which you can learn about on the UK Governments website.

The bottom line

At the end of the day, hiring remote workers from overseas is an incredibly exciting opportunity for many company owners. Taking on foreign workers will help your small business to drastically expand its reach overseas with minimal investment. You can dip your toe into new markets, take advantage of local knowledge via your employees and ensure your company is running 24 hours per day.

Remote teams are often a low-cost, high-output solution that will enable your UK company to grow and prosper. You’ve just got to bear in mind divergence surrounding labour laws and tax regimes across the country. To do this, and when in doubt, you should play it safe and seek advice from a professional UK accountant or HMRC concerning overseas hiring, payroll laws and the rules your company must observe.

So long as you’re playing by the rules, there’s no reason your company can’t benefit from the creation of a global network of remote workers.

Want some more tips on how to lead a team of employees remotely? Check out the Blue Square Small Business Blog for all sorts of advice on small business management, home working, outsourcing and more.