HR’s legal guide for hiring remote employees


The labour shortage has prompted many companies to consider hiring remote employees. If you’re looking to cast the net further afield, make sure you know your legal obligations.

Companies are no longer limited by geographical boundaries.

In the last few years, many businesses have come to realise that it’s possible to operate a successful company across physical divides. It’s agreat opportunity to build diverse and high–performing virtual teams, offer greater flexibility to your workforce and reach new markets.

Amid a tight labour market, looking further afield to source talent may help to plug gaps in your workforce.

However, if you’re planning to hire remote staff or have local employees on your books who are considering a move overseas or interstate, it’s essential to know your legal obligations.

Robin Young, Partner at Holman Webb Lawyers, discusses four key areas that HR needs to get across.

1. Paying remote workers

If an employee moves overseas to work remotely but remains employed by an Australian employer, their remuneration is unlikely to change.

“If, for example, there is an employee who used to work in the location where the office is based, but they’re now going abroad to do the same job, it’s unlikely anything would change in relation to their remuneration,” says Young.

“Exceptions would exist if the employer has asked them to move. They would have to cover the cost of them doing that, such as relocation expenses and possibly consideration for higher cost of living expenses. Aside from that, the actual remuneration is unlikely to change at all.”  

There are, however, some aspects of remuneration that could be a “matter for negotiation” between the employer and employee, says Young.

“For example, if a person is living in the United States they may want to be paid in US currency. If you decide to meet their request, there might be a cost attached to converting the currency from Australian dollars.

“If the employer has asked the employee to work in the US, then the employer would be responsible for any costs associated with the relocation such as the changing currency. Whereas if the employee asks to keep their job and they want to live in America, the employer might agree to that arrangement so long as it doesn’t cost them anything extra.”

Even if an employer doesn’t have an obligation to cover the conversion rate, the company may still choose to bear the cost. This may be more likely to occur given the current skills shortage that many companies are grappling with.

“If an employer is serious about retaining a top employee, they might be concerned that moving to America might result in them getting an offer from a US-based competitor. So they might decide to accommodate them in such a way that they’re not set back financially because of something like additional costs or tax requirements.”

2. Tax and superannuation for a global workforce

In most cases, tax requirements will remain the same for Australian residents working for Australian-based employers abroad unless there is a specific tax exemption.

“Employers must still withhold PAYG tax and employees must still pay tax to the Australian government,” says Young. “The source of the service is generally the place where the tax is going to be required. But this will generally depend upon various factors including the length of consecutive time worked overseas.”

The longer an employee is based overseas, the more likely it is that they’ll have to pay tax in their new location, he says, but this will depend on the specific employment arrangement.

If an employee is required to pay tax in their new location, the employer and employee could enter into a tax equalisation arrangement – a compensation plan in which the employer reimburses the employee for the difference in tax payments between the two countries. This would ensure the employee is no worse off financially because of their additional tax requirements if they had not worked abroad. 

“I think that type of arrangement is going to become a lot more common where they are unable to secure specialist roles locally. Companies may only be able to compete in the labour market by securing people abroad, paying more and offering more favourable arrangements.

“In that situation, the employer would be smart to provide accountancy support and advice for employees,” says Young.

Superannuation is treated much like tax, says Young.

“You would actually have to cease to be a resident to lose that entitlement. So superannuation is unlikely to change. 

“However, as other countries also have compulsory social security or superannuation obligations, Australia has bilateral arrangements with some countries to avoid having to pay super in both jurisdictions. A certificate of coverage should be sought from the ATO. Specific advice should be sought in this circumstance.”

Further information can be found on the ATO’s webpage.

3. Leave for remote workers

In most cases, an employee working remotely will have access to the same leave entitlements as employees working in Australia.

However, this will depend on where the contract was formed, and the exact terms of the contract.

“If an employee is engaged in Australia for an Australian employer, but then moves overseas, the employer will probably still be obliged to provide leave entitlements under the Fair Work Act. However, employees who work overseas may also have their employment regulated by the laws of the country where they perform the work, for example work health and safety laws.”

There may be circumstances when the arrangements made in Australia are inconsistent with the prevailing circumstances in another country, says Young.

This situation could arise if the employee’s new country marked a significant religious or cultural occasion with a day off, and that occasion wasn’t treated as a public holiday in Australia.

“There may be an obligation upon an Australian employer to accommodate arrangements under the laws of another country where the person is working,” says Young.

“You wouldn’t want your employee to be offending the local people by continuing to do something if everyone else is marking the day. Similarly, the employee may have more favourable rights in the other jurisdiction which should be respected if the employee is specifically engaged by the Australian employer to work there.”

This holds true for interstate Australia workers too. If your office is based in Sydney but you employ people in Victoria, you would have been legally obliged to allow them to take off the AFL grand final public holiday last week.

For this reason, employers and employees should seek advice on local laws, and consider the accommodations that may need to be made and included in their specific employment contracts.

As with all leave from work, managers can also help to manage this process by asking remote employees to keep team members informed about their specific arrangements in advance of taking leave.

4. Hire someone on the ground

Some companies might want to cast the hiring net wider, but opening an overseas office to bring remote workers on board can come with a heavy financial cost. Not only are there initial set-up and infrastructure expenses, but there are ongoing administrative costs.

Establishing an overseas branch may also not be entirely necessary if you only have a handful of remote workers.

That’s why an Employer of Record (EOR) can be a useful middle point.

EORs operate in the global employee’s local jurisdiction and take care of the task of managing and paying the employee which can bridge the divide between your business and remote workers.

“It’s an arrangement of convenience with a third party contractor so a business has a presence in another country, without having to go to the trouble and cost of setting up an entity, because there are many complications that come with that, such as needing to know the other jurisdiction’s legal framework, such as corporation’s laws and WHS requirements,” says Young.

Instead, the business has the option of using a local entity.

“It’s similar to a labour hire arrangement. The terms of the agreement are such that the Australian entity retains control when it comes to that person’s employment, but they don’t have to set up their own structure.”

However, Young notes that it’s critical to set up this arrangement with careful consideration.

“It undoubtedly carries some level of risk. Employers would need to be careful about the terms and conditions of the arrangement with both the employee and the EOR. Make sure you have all the necessary warranties, indemnity and insurance so you’re well-protected.”

Hiring remote employees can expand you company’s horizons, but it requires careful planning and close understanding of the legal requirements involved. It’s always advisable to seek independent legal advice to ensure compliance.


Not sure of your legal obligations when hiring remote workers? AHRI’s short course, Introduction to HR Law,
can be customised to your organisation’s needs. Enquire today.


 

Subscribe to receive comments
Notify me of
guest

2 Comments
Inline Feedbacks
View all comments
Lindall West
Lindall West
1 year ago

Depending on the industry there should also be consideration given to what licences or qualifications may be required in other jurisdictions regardless of whether the employee’s contract of employment is based out of Australia.

Mike
Mike
7 months ago

I am writing to inquire about employment legal advice. My name is Mikaeel, and I am a resident of Japan. Currently, I am employed on a part-time basis at a university in Japan and hold a highly-skilled professional visa. I am considering the possibility of working remotely for an Australian company, dedicating approximately 10 to 20 hours per week to conduct research activities. This work falls well within the scope of my current visa, and I have already confirmed with the immigration office in our city that there are no legal issues from the Japanese side. In light of this,… Read more »

More on HRM

HR’s legal guide for hiring remote employees


The labour shortage has prompted many companies to consider hiring remote employees. If you’re looking to cast the net further afield, make sure you know your legal obligations.

Companies are no longer limited by geographical boundaries.

In the last few years, many businesses have come to realise that it’s possible to operate a successful company across physical divides. It’s agreat opportunity to build diverse and high–performing virtual teams, offer greater flexibility to your workforce and reach new markets.

Amid a tight labour market, looking further afield to source talent may help to plug gaps in your workforce.

However, if you’re planning to hire remote staff or have local employees on your books who are considering a move overseas or interstate, it’s essential to know your legal obligations.

Robin Young, Partner at Holman Webb Lawyers, discusses four key areas that HR needs to get across.

1. Paying remote workers

If an employee moves overseas to work remotely but remains employed by an Australian employer, their remuneration is unlikely to change.

“If, for example, there is an employee who used to work in the location where the office is based, but they’re now going abroad to do the same job, it’s unlikely anything would change in relation to their remuneration,” says Young.

“Exceptions would exist if the employer has asked them to move. They would have to cover the cost of them doing that, such as relocation expenses and possibly consideration for higher cost of living expenses. Aside from that, the actual remuneration is unlikely to change at all.”  

There are, however, some aspects of remuneration that could be a “matter for negotiation” between the employer and employee, says Young.

“For example, if a person is living in the United States they may want to be paid in US currency. If you decide to meet their request, there might be a cost attached to converting the currency from Australian dollars.

“If the employer has asked the employee to work in the US, then the employer would be responsible for any costs associated with the relocation such as the changing currency. Whereas if the employee asks to keep their job and they want to live in America, the employer might agree to that arrangement so long as it doesn’t cost them anything extra.”

Even if an employer doesn’t have an obligation to cover the conversion rate, the company may still choose to bear the cost. This may be more likely to occur given the current skills shortage that many companies are grappling with.

“If an employer is serious about retaining a top employee, they might be concerned that moving to America might result in them getting an offer from a US-based competitor. So they might decide to accommodate them in such a way that they’re not set back financially because of something like additional costs or tax requirements.”

2. Tax and superannuation for a global workforce

In most cases, tax requirements will remain the same for Australian residents working for Australian-based employers abroad unless there is a specific tax exemption.

“Employers must still withhold PAYG tax and employees must still pay tax to the Australian government,” says Young. “The source of the service is generally the place where the tax is going to be required. But this will generally depend upon various factors including the length of consecutive time worked overseas.”

The longer an employee is based overseas, the more likely it is that they’ll have to pay tax in their new location, he says, but this will depend on the specific employment arrangement.

If an employee is required to pay tax in their new location, the employer and employee could enter into a tax equalisation arrangement – a compensation plan in which the employer reimburses the employee for the difference in tax payments between the two countries. This would ensure the employee is no worse off financially because of their additional tax requirements if they had not worked abroad. 

“I think that type of arrangement is going to become a lot more common where they are unable to secure specialist roles locally. Companies may only be able to compete in the labour market by securing people abroad, paying more and offering more favourable arrangements.

“In that situation, the employer would be smart to provide accountancy support and advice for employees,” says Young.

Superannuation is treated much like tax, says Young.

“You would actually have to cease to be a resident to lose that entitlement. So superannuation is unlikely to change. 

“However, as other countries also have compulsory social security or superannuation obligations, Australia has bilateral arrangements with some countries to avoid having to pay super in both jurisdictions. A certificate of coverage should be sought from the ATO. Specific advice should be sought in this circumstance.”

Further information can be found on the ATO’s webpage.

3. Leave for remote workers

In most cases, an employee working remotely will have access to the same leave entitlements as employees working in Australia.

However, this will depend on where the contract was formed, and the exact terms of the contract.

“If an employee is engaged in Australia for an Australian employer, but then moves overseas, the employer will probably still be obliged to provide leave entitlements under the Fair Work Act. However, employees who work overseas may also have their employment regulated by the laws of the country where they perform the work, for example work health and safety laws.”

There may be circumstances when the arrangements made in Australia are inconsistent with the prevailing circumstances in another country, says Young.

This situation could arise if the employee’s new country marked a significant religious or cultural occasion with a day off, and that occasion wasn’t treated as a public holiday in Australia.

“There may be an obligation upon an Australian employer to accommodate arrangements under the laws of another country where the person is working,” says Young.

“You wouldn’t want your employee to be offending the local people by continuing to do something if everyone else is marking the day. Similarly, the employee may have more favourable rights in the other jurisdiction which should be respected if the employee is specifically engaged by the Australian employer to work there.”

This holds true for interstate Australia workers too. If your office is based in Sydney but you employ people in Victoria, you would have been legally obliged to allow them to take off the AFL grand final public holiday last week.

For this reason, employers and employees should seek advice on local laws, and consider the accommodations that may need to be made and included in their specific employment contracts.

As with all leave from work, managers can also help to manage this process by asking remote employees to keep team members informed about their specific arrangements in advance of taking leave.

4. Hire someone on the ground

Some companies might want to cast the hiring net wider, but opening an overseas office to bring remote workers on board can come with a heavy financial cost. Not only are there initial set-up and infrastructure expenses, but there are ongoing administrative costs.

Establishing an overseas branch may also not be entirely necessary if you only have a handful of remote workers.

That’s why an Employer of Record (EOR) can be a useful middle point.

EORs operate in the global employee’s local jurisdiction and take care of the task of managing and paying the employee which can bridge the divide between your business and remote workers.

“It’s an arrangement of convenience with a third party contractor so a business has a presence in another country, without having to go to the trouble and cost of setting up an entity, because there are many complications that come with that, such as needing to know the other jurisdiction’s legal framework, such as corporation’s laws and WHS requirements,” says Young.

Instead, the business has the option of using a local entity.

“It’s similar to a labour hire arrangement. The terms of the agreement are such that the Australian entity retains control when it comes to that person’s employment, but they don’t have to set up their own structure.”

However, Young notes that it’s critical to set up this arrangement with careful consideration.

“It undoubtedly carries some level of risk. Employers would need to be careful about the terms and conditions of the arrangement with both the employee and the EOR. Make sure you have all the necessary warranties, indemnity and insurance so you’re well-protected.”

Hiring remote employees can expand you company’s horizons, but it requires careful planning and close understanding of the legal requirements involved. It’s always advisable to seek independent legal advice to ensure compliance.


Not sure of your legal obligations when hiring remote workers? AHRI’s short course, Introduction to HR Law,
can be customised to your organisation’s needs. Enquire today.


 

Subscribe to receive comments
Notify me of
guest

2 Comments
Inline Feedbacks
View all comments
Lindall West
Lindall West
1 year ago

Depending on the industry there should also be consideration given to what licences or qualifications may be required in other jurisdictions regardless of whether the employee’s contract of employment is based out of Australia.

Mike
Mike
7 months ago

I am writing to inquire about employment legal advice. My name is Mikaeel, and I am a resident of Japan. Currently, I am employed on a part-time basis at a university in Japan and hold a highly-skilled professional visa. I am considering the possibility of working remotely for an Australian company, dedicating approximately 10 to 20 hours per week to conduct research activities. This work falls well within the scope of my current visa, and I have already confirmed with the immigration office in our city that there are no legal issues from the Japanese side. In light of this,… Read more »

More on HRM