How to handle remote employee relocation

COVID-19 and the sudden rise in remote work linked to it have had a major impact on the way we work as well as on our value systems. After experiencing that remote work actually works for many professions across different industries, more and more employees request to retain their newly gained work flexibility, both in terms of working hours and choice of workplace. 

During the pandemic, organizations have seen a significant amount of relocation requests by employees who either want to move back to their home country and be closer to family and friends or to escape the restrictions of lockdown to enjoy a workation on a paradise-like island. Their argument: If they were able to work from home successfully for more than a year, they should be able to work from anywhere.

While relocating to a different country is usually perceived by employees as a pretty straightforward move, international employee relocation can cause HR departments quite severe headaches. Unlike in cases where the employee simply decides to relocate to a different region, moving to a different jurisdiction entails a series of legal challenges for employers. Yet offering employees the option to work remotely is necessary to retain valuable talent. 

In this article, we will dive into the complex challenges that come with remote employee relocation requests and point out different ways to master them. Finally, we will give you some practical tips on how to handle relocation requests from employees who want to work remotely from another country.

Usually, employee relocation is defined as a company or organization moving employees from one location to another, either on a local or international level. However, since the exponential rise in remote work during the coronavirus pandemic, employee relocation has acquired a whole new meaning. Before, employee relocation was primarily requested by the company. Now, relocation requests are made by employees who want to make use of the flexibility remote work arrangements offer them to travel or move abroad. 

In this context, remote employee relocation requests can take three different forms:

• Short-term relocation for travel purposes such as a workation stay on a Caribbean island which is possible with a digital nomad visa - for inspiration, check our full list of countries offering remote work visas

• Short-term relocation as a resident but with intention to move back to current country of residence, for example employees spending a couple of months back in their home country to be close to family

• Long-term relocation with no intended return, e.g. employees fulfilling their dream to move to a country where they have always wanted to live

In this article, we will focus on long-term relocation requests remote employees might make to their employers.

Employees relocating to a different area within the same jurisdiction is no big deal. But relocation requests on an international level are a totally different story. Moving from one country to another triggers several administrative, tax and legal changes which make it difficult to ensure compliance throughout the process. There are various aspects which need to be considered, including employment law, tax systems and visa / residency requirements - at least if remote employees ask to relocate to a country where they don’t have resident status yet. In the next paragraphs, we will look at these challenges in more detail and highlight possible solutions.

Complying with local employment laws

The rules and regulations governing work are different from country to country. If one of your employees wants to move to a different country, this means your organization’s HR department has to ensure that the employment complies with local norms. Necessary adjustments may include weekly working hours, overtime, annual leave as well as sick leave. Also, in case of employee termination, the local proceedings must be observed. It’s no secret that businesses who fail to respect local labor laws risk heavy fines and penalties.

Possible need to establish a legal entity in the employee’s new country of residence

However, simply adjusting the remote employee’s employment contract to make it compliant under local laws is not enough. Depending on which country the employee has chosen to relocate to, it might not be possible for them to be hired under a foreign entity. In this case, international employee relocation might cause a need to set up a local entity which, as we all know, can be a very costly and lengthy process.

Setting up payroll in a foreign country

Payroll works differently in every country, not only with regard to necessary social security contributions but also regarding restrictions on which practices are allowed and which aren’t. Depending on the country, it might not be possible to include your remote worker in your home-country payroll once they moved abroad. Consequently, you would have to set up payroll in the new country - and also find a way of paying your remote employees without spending lots of money on exchange rates and transaction fees.

Managing taxation and benefits for remote employees relocating to different countries

Just as for payroll, each country’s tax system is different. Therefore, managing remote employee relocation requests also involves becoming familiar with foreign tax systems. Otherwise, you risk fines and penalties for not complying with local tax laws or missing the deadline for paying social security contributions for your remote workers.

Company taxation: Avoiding permanent establishment risk

Let’s consider the following example: A high-level executive of a remote-first company requests to relocate long-term to a different country while keeping his current position. In some countries, the presence of managers who make executive decisions for your business might trigger a so-called permanent establishment risk. This means that the local tax authorities might decide that having high-level decision makers who are based in the country makes your organization liable for corporate taxation.

Remote work logistics are not the same everywhere in the world

Relocating to a nice Caribbean island or to some hidden paradise in Asia might seem like the ultimate dream to many remote workers. In some cases, however, remote work relocation may quickly turn this dream into a remote work nightmare when the internet connection proves to be far less reliable than expected and remote employees are far too distracted by their beautiful surroundings to be productive and do what they are paid for.

Dealing with time zone differences

Having a remote team whose members are all based within the same time zone - or at least a similar time zone - usually doesn’t require special arrangements. This dramatically changes when one of your employees decides to relocate from Europe to somewhere in Australia, for example. With a time difference of more than eight hours, arranging meetings and ensuring smooth workflows can be challenging.

Adjusting salaries for remote employees who decide to relocate

One of the biggest challenges for companies who are switching to remote-first is how to set salaries for their remote workers. As basing remote work salaries on employee location is one of three strategies for remote work compensation, this means that the relocation of remote employees could have a severe impact on their salaries and benefits. For HR departments, this means recalculating salaries and adjusting benefit packages to local standards.

Dealing with immigration and visa requirements

Unless an employee is intending to move back to his or her home country, remote work relocation might also involve having to deal with immigration departments to make sure visa requirements are met. Even though it’s your employee who requests to relocate, leaving it up to him or her to sort out residency and visa requirements is often not a good idea. Not because you shouldn’t trust them to take this seriously, but mainly because they might unknowingly get it wrong which could, in the end, affect your business.

Use an Employer of Record (EOR)

Using an Employer of Record (EOR) allows you to continue to employ remote workers who decide to relocate to a different country without having to set up a separate legal entity to do so. The Employer of Record will act as your employee’s legal employer, thus taking care of all the compliance issues such as employment law, payroll and taxation while you stay in charge of the employee’s day-to-day activities. 

Want to know more about Lano’s Employer of Record solutions? Check out our Global Employment page to find out how to hire and pay remote staff in over 150 countries.

Get a local payroll provider

Let’s imagine that, by coincidence, you end up having several remote employees requesting to relocate to the same country or you are thinking about expanding to that new market anyway. In this case, it might make sense for you to go ahead and set up a foreign legal entity. To reduce stress and compliance complexity, you can hire a local payroll provider who will take care of all payroll-related things in that particular country for you. 

Need help finding the right payroll partner for your business? With Lano’s international payroll provider network, you can connect to local experts in over 130 countries. What’s more, our API allows you to consolidate payroll data for your entire global team in one place. Let us simplify global payroll for you.

Asynchronous communication is key for remote teams spread across different time zones

As soon as you have remote employees requesting to move to different countries, it’s time to make asynchronous communication a reality. Asynchronous communication means having ways to communicate with each other that don’t rely on team members being available to respond immediately. Helpful collaboration tools for asynchronous communication are Slack or Microsoft Teams.

For more detailed information, check out our related blog post 3 tips for collaborating across different time zones.

Introduce a clear remote work compensation strategy

Remote work compensation has recently been all over the news. Big names like Facebook, Twitter or Google have announced pay cuts for remote employees deciding to relocate to less expensive areas, following a compensation strategy based on employee location. You can avoid trouble and salary discussion with remote employees by defining a clear remote work compensation strategy. Make it clear straight from the beginning that international relocation will have an impact on their salaries and benefits.

Don’t say ‘no’ straight away

Remote work has turned into an employee benefit in its own right. For instance, OWL Labs Remote Work report 2020 shows that 74 percent of employees are less likely to leave their employers if they are allowed to work remotely at least some of the time. Denying remote work relocation requests could therefore result in you losing some of your top performers. Trying to make relocation possible is crucial to retain valuable talent.

Be open about what employees who want to relocate can expect

When we really want something, not getting it or having to wait for it is likely to make us feel annoyed. The same goes for remote work relocation requests. Remote employees who wish to move to a different country are often really invested in the idea and want to relocate as soon as possible. By establishing clear procedures and guidelines on how relocation requests are handled, you will not only avoid giving your remote team the impression that their wishes are not taken seriously, but you will also prevent possible complaints about unfair treatment because some colleague or other got more support than they did.

Get your employees involved in the relocation process

Who says managing international employee relocation is only for employers and HR departments? If it’s one of your remote employees who asks to relocate to a foreign country, you should use their eagerness to make their move a reality and involve them in the process. Encourage them to conduct some research on compliance-related topics and contribute to the task. Working together on a relocation request will lessen the burden on your HR department. 

Having trouble imagining how employees can contribute to making remote work relocation a reality? Listen to Halley Bennett, Head of Marketing at Lano, on the State of Work podcast where she talks about how she managed to kickstart her own remote work journey and how she pushed for making her relocation to Spain happen.

Always know where your employees are

This isn’t exactly a tip for dealing with a concrete relocation request from one of your remote employees, but you should think of it as a general rule when working with a remote team. Although the nature of remote work makes it hard for superiors and managers to keep track of what their team is doing, this doesn’t reduce your responsibility as an employer. Even if, for example, one of your employees has already temporarily relocated to a different country without telling you, your company could still be liable for compliance risks. Therefore, it is crucial for remote businesses to always be aware of the whereabouts of their remote team members.

Whether you need to relocate remote employees internationally because of business reasons or because they ask for it, Lano is here to help you. With our Employer of Record solutions, you can hire full-time talent in over 150 countries without having to create a foreign legal entity. And if your employee’s relocation request is just the last push for you to finally establish a presence in a new market, let us simplify payroll for you. Get access to our network of top payroll providers and use our smart platform to have all your employee data consolidated in one single platform.

Get in touch with us today to have all your remote employee relocation needs covered.