Legal issues with remote working in the post-pandemic era

THE past year has been an inflection point for employers and employees alike, with both realising that a fair proportion of jobs can be done outside the traditional office. The next logical question is whether one can extend this further and work from anywhere in the world, including tropical beachfronts or pastoral ranges. Here are some legal issues to be considered before allowing employees to go forth and spread out across the globe.

Remote working may well become a permanent feature of working life. Employers may be tempted by the prospect of affordable, always-available, multinational labour, and employees will toy with the idea of having a genuine sandy beachfront as their Zoom background. But the implementation of remote working is not as straightforward as giving (and permitting) employees the ability to simply work from wherever they want.

Can employees really work anywhere?

Normally, an employee's place of work is not an issue. Typically, most (if not all) employees would work from a physical office, which would usually be where that employer was registered or incorporated.

However, Covid-19 has uprooted all pre-existing arrangements. In-office work and foreign travel have been curtailed, and foreign employees were faced with the unenviable choice of leaving their host countries or not seeing their families for some time.

In such circumstances, employers began to consider whether they could simply have their employee work from wherever they were so that there was no need for employees to "travel" for their work. From there, it is only a small mental step to allowing work from anywhere in the world. A global workforce upon which the sun never sets, with strong ties to family, country, and employer - the platonic ideal of a multinational corporation. As tempting as this arrangement may be, there are several key legal issues that cannot be overlooked.

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Employment and visa issues

Typically, an employer must obtain the relevant work permit from that country's authorities to hire a foreigner. So, in Singapore, where a company wishes to hire a foreigner to work in Singapore, that company will require a valid work pass for the foreign employee. It is illegal otherwise. Employers are also generally required to be registered in a country before they can apply for a relevant work permit, with Singapore being no exception. The upshot of this is that a foreign company which is not registered in a particular country may not be permitted to hire foreigners in that particular country.

Thus, if a foreign employer (A) wanted to employ a foreigner (B) in a country (C), A would have to be registered in C (for example, by registering to establish a branch or representative office in C) and thereafter apply for the relevant work permit for B from C's authorities. Otherwise, A could be in breach of C's employment laws regarding foreigners and B could be in breach of C's immigration and employment laws for working without a work permit.

Restricted industries

In addition, some countries restrict foreign businesses from operating in the country unless specific criteria are met. For instance, in Thailand, foreign businesses in certain industries are generally not allowed to operate in Thailand unless they obtain the relevant licences. In China, certain industries are considered "restricted activities" and foreign businesses must enter a joint venture with a Chinese firm to deal in these "restricted activities".

So even if A was looking to hire a local in C to work in C, A could still fall foul of C's laws if C's laws restricted foreign firms s like A from operating in C without a valid licence and/or permit, since employing an employee in C could be construed as operating a business in C.

Employment laws

The applicable employment laws are also important. Take, for instance, a Singapore employer that wanted to (and was allowed to) employ a Malaysian employee in Thailand - is the relationship governed by Singapore, Malaysian, or Thai laws? Much would turn on the specific laws in question, but it is possible for a country's employment laws to state that they would apply as long as you worked in that particular country, or that a country's employment laws applied to its citizens regardless of where they worked.

Tax issues

Employers should also consider whether the activities of the foreign-based individual would create foreign tax exposure for the company. For example, a foreign company which hires an employee in Singapore may create a permanent establishment in Singapore for itself. This could expose the foreign company to Singapore income tax on its business profits. In addition, services supplied by or to the foreign company through the employee could potentially be subject to Singapore goods and services tax. The foreign company may also need to furnish a tax return in respect of the employment income of the employee in Singapore. A company should therefore be aware of the tax implications before hiring an individual who is based in a foreign jurisdiction.

Concluding remarks

It is perhaps ironic that restrictions on international travel may have spurred increased internationalisation of the workforce. We are already starting to see companies provide permanent flexi-work arrangements post Covid-19 which may allow their employees to work anytime and anywhere in the world.

In this environment, employers would thus be well advised to ensure that they properly review any remote working arrangement before implementation and/or before they hire a foreign-based employee so that they do not fall foul of any country's legislation or expose themselves to unwanted tax consequences.

• The writers are from Drew & Napier LLC. Rakesh Kirpalani is director, dispute resolution & information technology; he is also the firm's chief technology officer. Charles Li is associate director, tax & private client services.