Work from home has grown in scope due to the pandemic. “Digital nomads” once consisted of entrepreneurs, freelancers and the self-employed. Many companies have re-evaluated their work culture and include work from home in their strategic planning as it can offer many benefits.
Unsurprisingly, a 2020 Gartner study found that 82 percent of company leaders plan to offer at least part-time remote work after the pandemic. This is excellent news for those itching to work elsewhere, but the reality presents many challenges for employees and their employers.
The list of countries welcoming digital nomads is growing quickly. Each recognizes the benefits of setting up digital programs to jump-start their economies after the virus’s severe economic impact.
Most of these countries have low Covid-19 rates, a lower cost of living than the U.S., and often a more relaxed pace of life too. Naturally this is an attractive proposition, especially since applicants receive longer than standard visas and workers can often bring their family and pets.
Countries enticing workers are providing incentives for them to stay long-term. However, requirements vary; there is no instant approval and often heavy competition. Many require educational and salary minimums, a quarantine period or proof of a negative test for COVID-19. Understandably, almost all countries require healthcare coverage too.
Even if the applicant is approved, COVID-19 rates can change almost overnight. There’s no guarantee that any country will remain safe during these turbulent times or that a U.S. worker could easily navigate systems should things change for the worse.
Healthcare Remains a Priority
The State Department lifted its Level 4: Do Not Travel advisory on 6 August 2020, but coronavirus is still a dangerous threat. The State Department recommends all citizens traveling abroad review the Travel Advisory for their destination(s). Those considering work from home in a different country always assume the risk of the possibility of lockdown in a foreign region.
Additionally, The U.S. government does not provide medical insurance for U.S. citizens overseas. Travelers or their company needs to buy coverage, including travel health insurance, medical evacuation, and trip cancellation, considering the instability of transportation at this time.
Almost all travel health insurance policies do not cover an individual if they choose to travel to an area with a Level 4 advisory. However, coverage may apply if a sterner advisory comes into effect after you’re in the country.
Working on a sandy beach sipping a mojito sounds excellent, but you’ll need first to understand the tax implications. American citizens are subject to U.S. tax laws, regardless of where they reside.
Consequently, they usually need to file in both countries and sometimes pay tax in both too. This depends on the country’s laws and whether the country has a tax treaty with the U.S.
If no treaty exists, there can be employer implications too. The company may be obligated to pay payroll taxes in a foreign country, which generally requires a registered entity. Local authorities may consider an employee a sign of a “permanent establishment” with local corporate tax obligations.
Before you jump on a plane and head to Aruba, you’ll need to clear it with your employer. Otherwise, you could breach your employment contract and end up holding the bag for the taxes you owe.
Additionally, most countries do not recognize at-will employment. This means the laws of the territory apply, and these usually include mandatory benefits such as vacation and severance pay, social contributions and termination protection. This may trigger the need for a new employment contract or lead to additional employer costs.
Workers must also consider how they will handle their pay in another country. If their employer pays them in the U.S., they may face 3% withdrawal fees and they’ll be subject to exchange rate fluctuations. If they receive their wages in the new country, they’ll want to ensure they receive equal compensation in the local currency.
Another often ignored consideration is, what happens if you decide you don’t like your new dream location? Can you repatriate and still hold the same position? Will the company pay to bring you home, or are you on your own? Unfortunately, many don’t adapt well to a new country, culture, and business environment.
Benefits & Worker’s Compensation
Benefits plans, such as a 401(k), could be in jeopardy if work from home violates the Employee Retirement Security Act’s terms and conditions. Workplace protections afforded by workers’ compensation probably wouldn’t apply either as this plan was not drafted to include employees working abroad.
Should an individual incur an injury doing work from home in a different country, it could potentially expose the employer to the risk of a lawsuit, medical bills, legal fees, and more.
Work from Home & IP Rights
Intellectual property rights may apply in the U.S., but how does a company protect them when their employer is doing work from home in another country?
More than likely, work created in a foreign country must be protected in the locality it was created through a locally-compliant employment contract. Otherwise, it would be next to impossible to enforce its rights.
Employers may also need to set up a secure VPN for data transfers and conversations and use an encrypted service for documents.
Hiring Abroad? Sending Someone Overseas? Let Blueback Help
Companies that need workers in foreign locations may not want to risk sending someone from home. Considering the potential financial, legal and operational risks, hiring in-country is often a better option. It doesn’t require a business entity, workers are legal to work, understand cultural and business norms and can be paid through local payroll.
Let Blueback Global help your business overcome global hiring challenges so your company can tap into uncharted lucrative foreign markets to realize your business goals. We’re well-positioned, highly-experienced and can help you hire abroad affordably and with fewer problems.
Contact us for a free consultation and cut through the complications of finding the workers you need in a different country.