Compliance

Background

In early September 2024, one of WorkFlex's clients faced a labour inspection during a cross-border business trip. The case involved an employee traveling to their client’s office in Switzerland when Swiss labor authorities conducted a routine workplace inspection. This case proved to be a significant milestone, demonstrating the effectiveness of WorkFlex's compliance management system and proactive approach to cross-border workforce management, particularly in managing business travel compliance.

‍

The situation

During a workplace inspection, the labour authorities identified an employee that was not physically present during the check in that specific location at the client's premises. The Swiss authorities, known for conducting random compliance checks without prior notice, subsequently issued an official letter requesting documentation verification.

‍

Compliance risks and challenges

The case involved assessment and verification of critical compliance areas under Swiss regulations, such as Posted Workers Directive (PWD) compliance requirements and employment conditions verification, including working hours and salary documentation.

In cases like these, non-compliance with these aspects could lead to consequences ranging from minor implications to serious sanctions depending on the company-specific background, for example:

1. Fines of up to CHF 30,000
2. Risk of business restrictions in Switzerland, including possible country-wide bans for severe violations

‍

WorkFlex's response and action

Upon notification, WorkFlex swiftly implemented a comprehensive response strategy. Our team immediately assumed direct communication with the Swiss authorities. We conducted a thorough review of all client documentation while standardizing document formatting to meet strict authority requirements. Throughout this process, we reviewed the Swiss-specific salary calculations conducted by the client, ensuring all submissions met local regulations. After managing the submission of required documentation, we maintained proactive communication, following up with authorities to ensure all requirements were satisfied.

After our thorough preparation and submission of documentation, the Swiss authorities completed their inspection within a few weeks.

They confirmed all documentation was in order, resulting in a successful resolution without any penalties or warnings for our client. This outcome validated our systematic approach to compliance management and authority engagement.

‍

Key learnings and impact

This case serves as a compelling demonstration of why business travel compliance cannot be overlooked in today's global regulatory environment. While this particular inspection occurred in Switzerland, it reflects a broader reality: authorities worldwide are increasingly vigilant about cross-border business travel compliance. Labor inspections, taking place systematically on a random and unpredictable basis, are becoming more common across jurisdictions as countries strengthen their enforcement of employment, tax, and immigration regulations.

WorkFlex's handling of this Swiss authority inspection showcased our deep expertise and professional approach to compliance management that extends across multiple countries and regulatory frameworks. Our ability to swiftly take charge of authority communications, provide all necessary documentation, and successfully resolve the inspection without any penalties validates our comprehensive compliance management approach.

As global mobility continues to increase and regulatory scrutiny intensifies worldwide, our proven ability to navigate these challenges provides essential peace of mind for companies managing international business travel.

In today's global business landscape, protecting employee wellbeing during international travel has become more critical than ever. Recent studies show that 92% of travel managers worldwide consider duty of care their top priority when managing travel programs—and for good reason. As businesses expand their global footprint and embrace flexible work arrangements, the complexity of ensuring employee safety and compliance has grown exponentially.

We're proud to announce that WorkFlex has strengthened its Health & Safety capabilities with new features and deeper integration. Building on our comprehensive compliance risk management platform, these enhancements provide organizations with even more robust tools to protect their global workforce.

‍

New Health & Safety features

For organizations managing international business travel and workations, duty of care isn't just a legal obligation—it's a fundamental responsibility to protect employee wellbeing. Our platform has always helped organizations fulfill their duty of care through:

• Real-time tracking of employee destinations
• Preventing trip data leakage
• Comprehensive worldwide insurance coverage for every trip

Now, we've enhanced these capabilities further, streamlining how organizations meet their duty of care obligations while maintaining our proven approach to comprehensive risk mitigation. Let's explore the enhanced Health & Safety features that bring together our existing protections with new capabilities:

‍

1. Enhanced risk assessment

A new sub-assessment for Health & Safety is now integrated into every risk evaluation for workations and business trips, providing thorough analysis that:

• Delivers nuanced risk evaluations considering factors like political stability, social conditions, and regional security variations based on multiple data sources
• Provides information on general country ratings and region-specific warnings
• Offers clear health & safety risk classifications (e.g., "Low risk" or "Completed") based on comprehensive analysis

‍

2. Advanced alert system

Our dedication to employee wellbeing has been demonstrated since WorkFlex's origins. Most recently, our team personally reached out to all employees and HR managers in affected regions to ensure their safety during the severe storms in Spain in Autumn 2024. The response was incredible, with both employees and HR managers expressing deep appreciation for this proactive care.

Building on this commitment, we've systematized this level of protection through our new Advanced Alert System, which:

• Provides real-time alerts about emerging health and safety risks
• Automatically notifies both employees and HR managers during emergencies
• Maintains active communication until situations are resolved

This enhancement automates our proven approach while maintaining the same level of personal care that our clients have come to expect.

‍

3. Streamlined emergency access

While our Alert System proactively monitors and communicates about major events and regional emergencies, we recognize that employees may face individual emergency situations during their travels.

That's why we've added an SOS button to the WorkFlex App, enabling employees to instantly signal when they need assistance, regardless of the situation's scale. Whether it's a medical emergency, a security concern, or any other urgent situation, help is now just one tap away.

‍

4. Country guides

Our comprehensive destination guides are now available for countries worldwide, with each guide specifically tailored to its location. From major business hubs to emerging markets, every guide provides location-specific insights including:

• Health and safety considerations tailored to each destination
• Country-specific compliance requirements for temporary work arrangements
• Current security situations and risk assessments
• Region-specific emergency contacts and resources
• Local cultural considerations and business practices

Explore destination-specific advice in our country guides here.

‍

5. Integrated compliance tools

We've streamlined access to all health and safety-related compliance resources by bringing them together in one integrated hub. Our enhanced toolkit provides:

General Health & Safety resources:‍

• Tips and guidelines for pre-trip health screenings and required vaccinations
• Safety protocols for travel periods
• Comprehensive guidelines for workplace safety in foreign offices, emergency procedures, and additional on-site safety considerations

‍

Country-specific Posted Worker compliance support:

• Local training requirements documentation
• Labor code compliance guidelines
• Requirements for preventive medical examinations

‍

Looking forward

These new enhancements complement our established Travel Health Insurance coverage, creating an even more comprehensive protection system. The strengthened Health & Safety features reinforce our commitment to employee welfare while maintaining our streamlined risk management approach.

Experience our enhanced Health & Safety capabilities in WorkFlex today and enjoy greater peace of mind knowing your workforce continues to be well-protected globally.

How to enable Health & Safety features on WorkFlex platform

For WorkFlex clients: The enhanced risk dimension will be automatically integrated into your next business trip and workation requests. There's no action needed on your part to access these improved features.

For prospective WorkFlex users: Contact the WorkFlex team to learn about our comprehensive software solution that seamlessly integrates health & safety alongside our full suite of compliance risk assessment and mitigation measures.

Many companies operating across the EU believe they've found an elegant solution to social security compliance: obtaining multi-state A1 certificates for employees who are planning to do occasional travel between member states. We often encounter employers who are convinced that:

"Our employees travel to Austria 2-3 times a year for client projects, so a long-term A1 makes more sense than individual ones"

"We have 60 employees traveling from time to time to different EU countries – surely we can get one multi-state A1 for each of them to cover all trips"

While this approach might seem efficient, it's actually a compliance risk in most cases that could expose your organization to unwanted scrutiny and potential penalties.

‍

Understanding Article 13 vs. Article 12: A critical distinction

The confusion often stems from misinterpreting two key articles of EU Regulation 883/2004:

• Article 13 governs cases where employees "normally pursue an activity in two or more Member States". It's designed for situations where working across multiple countries is a regular part of the job. This article determines which country's social security legislation applies based on where substantial work is performed.
• Article 12, on the other hand, specifically covers "posted" workers – employees temporarily sent to work in another member state for a specific duration (up to 24 months). This is the article that typically applies to business trips and other temporary assignments.

‍

The true purpose of multi-state A1 certificates

Article 13 was designed for employees whose regular work pattern involves performing substantial activities in multiple countries. Let's break down the key requirements in detail:

1. Contractual specification

• The multi-state work arrangement must be identifiable in the employment contract  
• This means the contract should clearly outline that the employee's role involves regular work in specific member states
• Ad-hoc arrangements or verbal agreements are not sufficient

2. Normal pursuit of activity

• The work pattern must represent consistent and habitual employment across member states
• This means regular, planned work activities, not occasional or needs-based travel
• The arrangement should be part of the employee's standard working pattern, not an exception

3. Substantial activity

• The work in each country must constitute a meaningful portion of the employee's duties
• This typically means regular, ongoing responsibilities in multiple locations
• Occasional meetings or short-term projects don't qualify as substantial activity

‍

Why business trips don't usually qualify

Business trips, even frequent ones, typically don't meet these criteria because:

• They are typically ad-hoc arrangements rather than contractual obligations
• They represent temporary deviations from normal work patterns rather than the "normal pursuit of activity"
• They fall under Article 12, which specifically covers "posted" workers on temporary assignments

‍

Legal Precedent: What Courts Say About "Normal Pursuit"

Court decisions have helped clarify what qualifies as "normally pursuing an activity in two or more Member States". A notable case involving Format, a Polish company, established several key principles:

1. The work pattern across different countries should be a part of the regular employment arrangement
2. Long continuous periods (12+ months) in a single country do not qualify as multi-state work, as they resemble posting situations

‍

These interpretations further support why typical business travel patterns don't qualify for multi-state A1 certificates:

• Business trips do not follow a regular pattern of work
• They represent short-term presence rather than continuous work periods

‍

The risks of misapplying multi-state A1 certificates

Using multi-state A1 certificates inappropriately creates several risks:

1. Legal non-compliance: Social security authorities can revoke incorrectly issued A1 certificates, as supported by the confirmation of German and Austrian authorities in WorkFlex's original research.  
2. Permanent establishment risk: By declaring regular work activities in another country through a multi-state A1 that’s obtained for the wrong type of situation, you may inadvertently trigger permanent establishment concerns, leading to unexpected tax obligations.
3. Double social security liability: If your A1 certificate is revoked, you might face retroactive social security obligations in multiple countries.

‍

Making compliance simple with WorkFlex

The correct solution is straightforward but requires proper processes:

1. Obtain individual A1 certificates under Article 12 for each business trip or workation
2. Ensure these certificates are obtained or at least applied for before the travel begins
3. Maintain proper documentation of all cross-border work activities

‍

While this might sound administratively burdensome, modern solutions like WorkFlex automate the process, making it seamless to:

• Generate trip-specific A1 certificates automatically when travel is requested
• Ensure compliance without adding administrative overhead
• Maintain proper documentation for all cross-border work

‍

Conclusion

While multi-state A1 certificates can be appropriate in specific situations where cross-border work is required, they're not suitable for most business travel scenarios. For most business trips, individual A1 certificates remain the only compliant option. The risks of misapplying these certificates far outweigh any perceived administrative benefits. With automated solutions available, there's no reason to compromise on compliance.

➡️ What does it take for a company to remain fully compliant when employees go on work-from-anywhere trips? Is an A1 certificate and visa enough? What measures should HR and travel teams take to ensure the employer's duty of care is fulfilled when employees travel?

Our experts, Pieter Manden, LLM, MBA, Co-founder of WorkFlex, and Brock Dale, Senior WorkFlex Consultant, guide you through the critical aspects of compliant work-from-anywhere policy management.

In the session, you learn about key things to consider when creating and managing your work-from-anywhere policy. 🧐

‍

‍

Do you think that an A1 certificate is all you need for a compliant workation? Let us prove you wrong!

In our exciting webinar, we uncover the hidden risks that many overlook. Dorothee Schweigard, our compliance expert and head of the Compliance Research Center at WorkFlex, and Sandro Günaltay, our Senior WorkFlex consultant, will explain the most important factors that are essential for a safe and compliant workation.

Find out why an A1 certificate is just the beginning and how you can protect your employees comprehensively when they go on work-from-anywhere trips. Join us and delve deep into the world of workation compliance!

🗣️ Language: German

‍

There's been an ongoing discussion on working vs. presence days – and how to formulate it rightly in the company policy in your work-from-anywhere scheme.

Most company policies around remote work abroad include a maximum (30/60/etc.) of sometimes presence days. Other policies only include working days.

‍

Let’s clarify:
Working days are days an employee works abroad for the company – regardless of how many hours the employee did so
Presence days are all days an employee is abroad working and/or for leisure (incl. the weekends & holidays)

‍

This is quite a complex topic.

After all, as an employer, you have little to say on days that the employee is not working. On the other hand, because of the compliance aspects around presence, it is also understandable that companies decide to include a threshold for presence days.

‍

"For compliance, working days and presence days are both relevant as both have legal impacts!"

‍

Why do you need to check “the days spent” in general?

As days have a strong impact on compliance risk factors, such as wage tax, permanent establishment, work entitlement, social security, etc., the employer must be aware of the accumulated presence days per country (see above).

This way, the employer can limit the compliance risk – both for them, but also protect the employee. Another reason to limit the number of days abroad is to ensure office presence. For this, only working days need to be taken into consideration.

‍

Why do also presence days matter for compliance?

While for some dimensions, such as labour law or permanent establishment, (only) working days need to be taken into account, for most risk factors also presence days have a tremendous legal impact. Such as for:

·     E.g. wage tax

·     E.g. social security

·     E.g. work entitlement & registration

To correctly assess the compliance risks, WorkFlex needs to know how long someone is gone, e.g. for Center of Vital Interest Discussions and the 25% rule remainder in home country social security. So not only working more than 183 days in one country triggers compliance risks, but also vacations, business trips, & weekends count into the 183-day rule as well.

‍

Deep-Dive: What is the rationale behind the 183 days?

Whether you manage business travelers, short-term international employees, or remote workers, you have no doubt heard about the "183-day rule".

‍

This rule states – simplified – that an employee will not become taxable in the destination country, as long as his/her overall presence in that country remains below 183 days per year – which can be a calendar year, tax year, or any running 12-month period).

‍

Both globally and domestically, many tax jurisdictions expect an employer (as well as the employee) to track and report non-resident business travel. However, simply applying a "183-day" threshold does not always work to ensure tax compliance.

‍

{{download-box}}

The OECD commentary says:
Although various formulas have been used by member countries to calculate the 183-day period, there is only one way that is consistent with the wording of this paragraph: the “days of physical presence” method. The application of this method is straightforward as the individual is either present in a country or is not. (Source: Bundesfinanzministerium)

Therefore, the183-day rule refers to presence days (incl. weekends), so business travel, vacation, and workation count in this timeframe. It follows from these principles that any entire day spent outside the State of activity, whether for holidays, business trips, or any other reason, should not be taken into account. A day during any part of which, however brief, the taxpayer is present in a State counts as a day of presence in that State for purposes of computing the 183-day period. (Source: OECD, p.210)

If a double taxation agreement (DTA; German: DBA) bases the 183-day period on the tax year or calendar year instead of a twelve-month period, the days of stay must be determined separately for each tax year or calendar year. In Germany, the tax year corresponds to the calendar year. If the tax year of the other contracting state also corresponds to the calendar year, there are no special requirements if the corresponding DTA is based on the tax year for the calculation of the 183-day period (e.g. DTA-France, DTA-Greece, DTA-Italy). If the tax year of the other contracting state differs from the tax year of Germany (= calendar year), the tax year of the contracting state in which the activity is carried out is decisive.

‍

WorkFlex Solution

To make sure to correctly count the presence days & working days, WorkFlex has integrated the question "Will you be working throughout the entire stay" on its platform.
‍
So, for example, if an employee is 5 days abroad in Italy, but only works 3 days there, he will need to answer with "no" and add the number of days they will be working. This enables WorkFlex to accurately count both working days and days of presence in the destination country.

‍

‍

Posted workers notifications – or PWD notifications, in German EU Meldepflichten – are notifications based on the EU Posted Workers Directive (PWD). These notifications are required when employees are temporarily sent to work in a different country in the EU/EFTA region, in the framework of a service provision.

The purpose of PWD notifications is to notify local authorities about the presence of the employees providing services on their territory. In the case of labour controls and inspections, PWD notification proof is required. Further, some local working conditions must be observed (e.g. concerning working hours, equal pay, holidays entitlement).  

Non-compliance with notification obligations can lead to fines of up to € 5.000. Non-compliance with local working conditions can lead to fines of several thousands of euro , as well as non-financial penalties like multi-year restrictions on doing business in a specific country as well as imprisonment.

The PWD notification process varies by country. The exact content required for notification and the method of filing with local authorities also differ. Most countries offer online portals or processes for submitting PWD notifications, but some lack an online process altogether. Additionally, in some countries, the process is so complex that completing PWD notifications can be nearly impossible for someone not speaking the local language.

WorkFlex is an all-in-one software solution that manages remote work compliance. As part of its automated process, WorkFlex handles PWD notifications as part of trip management.

Here’s how it works: Once business trip information is submitted on the WorkFlex platform, WorkFlex assesses whether a PWD notification is required. If so, the process is automatically initiated for the specific trip destination. The notification confirmation will be uploaded to the WorkFlex platform before the trip starts. WorkFlex's trip handling logic covers nearly every PWD-required destination, ensuring that 98% of the time, your employees' business trips are fully compliant.

‍

{{download-box}}

The work of the future is here to stay, working remotely is now part of many people's lives. Many employers are not only adopting national hybrid working models, but also policies that allow their employees to temporarily work from abroad. This last topic is especially interesting, because it raises an important question even before the employee enters the destination country.

"How should someone who works temporarily from abroad for private reasons be qualified for VISA purposes?"

Since this is a relatively new topic, regulators never explicitly addressed the temporary remote workers in their VISA rules and regulations. As a result, there is no specific visa or applicable framework for this type of persona. Generally, VISA rules and regulations provide only three possible “titles” for non-nationals to be in a country: tourism, local employment or business travel. The question is whether these titles provide a suitable qualification for the temporary remote worker, and if so, which one. This question is relevant, because the administrative requirements for entering and being allowed to work in the country can strongly differ per title.

Hereinafter, we will separately discuss the three different titles and specifically address whether they are suited to cover temporary remote workers.

1. Tourism

Most countries specifically exclude any type of paid activity in order to qualify as a tourist. Therefore, it is unlikely that temporary remote workers can enter and work from those countries without further ado. Interestingly enough, this would imply that it is incompliant when employees, during their vacation, check their business email on their smartphone. At the same time, for as far as we know no-one ever made a problem out of this before; neither employers and employees, nor governments and authorities. As a result, one could argue that even tourists are practically entitled to perform some work activities.

Some countries specifically allow tourists to work remotely for their employer in the home country for a limited number of days. Schengen Area countries are examples; foreigners who wish to do some remote work whilst on holiday in Europe can do so with a tourist visa, or visa-free if from an exempt country1. Also, pursuant to the American Customs and Border Protection information centre, it is possible to work remotely for a foreign company with the Visa Waiver Program for a certain amount of time within the US.

However, it seems rather opportunistic to claim that this pragmatic exception applies to temporary remote workers everywhere and always, as their working activities generally are not clearly very limited and highly incidental.

‍

2. Local employment

On the other side of the spectrum, there is local employment. If non-nationals want to (permanently) work somewhere, they generally require a proper work permit. An example is the EU Blue Card. Only with this card, non-EU nationals are allowed to accept a job in the specific EU country that issued the card. Local employment in this regard means a local employment, for a local employer. The employee in this set up becomes a resident of the specific country. In the words of the European Commission, the regulations around EU Blue Cards relate to the conditions of entry and residence of highly qualified non-EU nationals in EU countries.

The key drivers for regulating this area is that countries want to protect both their own citizens and the immigrants.Their own citizens to ensure that their jobs cannot be stolen very easily by immigrants. And these immigrants ensure that they are not brought to a country to work against conditions that are much worse than those of the local population (social dumping). Looking at these two key drivers, it is clear that the rules were not meant to “protect” destination countries from temporary remote workers at all.

It goes without saying that temporary remote workers are not a part of a social dumping scheme. That does not mean that it is theoretically possible that the temporary worker ́s remuneration package would lie below the minimum standards of the destination country. Given that this is really unlikely, the number of cases where this will be the case will be extremely low. These exceptions do not change the fact that temporary work from abroad has nothing to do with social dumping.

Equally clear is the fact that temporary remote workers do not compete for jobs with the local workforce of the destination country. Temporary remote workers already have a job! They continue to work for the employer in their home country, and all of their remuneration continues to be paid and borne by that home country employer. They neither intend to become residents in the destination country, nor do they perform any activities for local businesses.

Whereas qualifying temporary remote workers as tourists is “too easy”, it seems at the same time unreasonable to qualify them as local employees. This would quite often require a local sponsor. In the case of a temporary remote worker, this sponsor is not available unless the home country employer would be willing to register in the destination country too. This is clearly not something that employers, who merely allowed their employees to work abroad for a while, will accept. Additionally, it should be noted that the process for obtaining a VISA for local employment is a lengthy, sometimes also costly, process. This is another reason why, if the conclusion would be that temporary remote workers would officially have to obtain a VISA for local employment, this in practice is likely to only lead to more remote workers going somewhere secretly as "tourists".

3. Business Travel

The third and last title for non-nationals to be in a country is business travel. According to the American bureau of consular affairs², business travel is defined as trips during which the employee temporarily engage in business activities such as:

·     negotiation of contracts;

·     consultation with business associates;

·     litigation;

·     participation in scientific, educational, professional or business conventions, conferences or seminars;

·     other legitimate activities of a commercial or professional nature.

Similar activities have been considered to lead for the application of a business visa by the Schengen Area countries³:

·     meeting or training at a business unit established in the destination country;

·     purchase and sale of products, business transactions and tenders;

·     attending an exhibition, conference or seminar.

Indeed, as a business traveller, you can do meetings, negotiate contracts and visit clients in the destination country. However, the question is whether "remote work" can be qualified as business travel or not. Of course, the rules are old and were not defined when remote work was at all relevant. Some important hubs for temporary remote workers, such as Spain or Portugal, have overtly stated that they do not have a specific framework for this type of travellers. As such, “performing regular work for your home country employer” is not specifically covered as a work activity under the header business travel.

Nowadays, temporary remote work obviously is relevant, and it is our opinion that business travel comes closer to temporary remote work than tourism (point 1) or local employment (point 2) do. After all, what do business travellers do in between having meetings and client visits? Exactly, regular work activities such as sending emails - which is basically exactly what temporary remote workers do. Employers and authorities never made a problem out of this, so we consider it unlikely that this would change now.

Some governments already unofficially confirmed that remote workers indeed qualify as business travellers for VISA/Immigration purposes. Moreover, we are unaware of any government taking a position against this approach. However, this does not mean that this may not eventually happen. Until this is cleared, the "business traveller" option is the best option available. It is neither “too easy”, nor is it unreasonably strict. It is a workable theory if employees would like to temporarily work from outside of the EU, in these cases where they do not have the nationality of the destination country.

‍

² U.S. Embassy & Consulates in the UK

³ IND  

Business travel is rebounding, playing a crucial role in international business expansion, can you relate? 📈 But here's the challenge: HR, Global Mobility, and Compliance teams face challenges ensuring compliance for employees on business trips!

Managing PWD notifications, invitation letters, PE and social security risks, and tracking employee travel details can be overwhelming. But neglecting compliance can result in costs of up to EUR 50 million and damage to your brand.

Check out our exclusive webinar on Business Travel Compliance!‍

{{download-box}}

‍

Together with industry experts we discussed:

👉 What's the most frightening situation a company can face in relation to business travel compliance breaches?

👉What are the strictest countries in terms of business travel compliance?

👉 What are some effective strategies to mitigate business travel compliance risks in your company?

👉 And more.

‍‍

Our esteemed experts:‍

• ‍Clarissa Kaiser*, Manager Global Mobility at BioNTech

• Orsolya Mochlar*, Head of International Careers at Merck Group

• Pieter Manden LLM MBA, Co-founder at WorkFlex

*All statements and opinions represent their own, not their employers.

There are many employers who allow workations within the European Union (EU) as they often entail less risks than flying to a third state. However, there are territories for which it’s unclear whether the same rules than in continental Europe apply. We’ll dive deeper into the distinction of workations and business travel-related compliance risks in outermost and overseas territories such as Azores (PT), Aruba (NL) or French Polynesia (FR).

There are over twenty territories located around the globe in the Atlantic, Antarctic, Arctic, Caribbean, Indian, and Pacific regions whose status is often a matter of concern for the employer allowing their employees to work from “anywhere in Europe”. Due to historical and geographic reasons, assessing if a territory is part of the EU or not and which rules apply in such territory may be more complex than expected.

Luckily, the European Commission sheds some light by making the following categorization within the territories located outside of its continental borders:

Outermost regions‍

Territories that are integral parts of the EU and its single market. These nine outermost regions, even though located far from continental Europe, are considered an extension of their respective member states and benefit from the rights and obligations that come with EU membership. Hence, EU law applies fully and uniformly, just like in any other region within the EU. The archipelagos of the Azores (PT) and Canary Islands(ES) are examples of this. More info can be found here.

Overseas countries and territories (OCTs)

‍Territories that have a special relationship with an EU member state (namely Denmark, France, and the Netherlands) but are not part of the EU as such. Unlike the outermost regions, OCTs do not have full EU membership, and EU law does not automatically apply to them. However, OCTs maintain a relationship with the EU through various agreements and arrangements established between the EU and the respective member states. They are all islands such as Greenland (DK), Aruba (NL), or French Polynesia (FR). You can find more information on the EU overseas territories here.

‍

This categorization means that territories can be covered (or not) by double tax agreements and social security treaties. For instance, Aruba (NL) as an overseas territory would not be covered by most of the treaties signed by the Netherlands, while Azores (PT) would actually be considered as Portugal for any legal matter and all the potential risks that a workation or business trip could trigger would be the same in continental Portugal than in the islands.

In a nutshell, not all the territories outside of continental Europe are the same concerning tax, social security, labour law, social security, and VISA matters. As a general rule, outermost regions do not generally entail the same challenges as overseas territories. However, a case-by-case assessment is always required, and it’s important that the potential risks are managed. This is why WorkFlex performs an individual risk assessment of each workation request and generates relevant documentation such as employer statements, PWD registrations, and employee instructions among others. This way, both the employee and the employer can comfortably enjoy a workation slightly further from continental Europe.

{{download-box}}

‍

Pieter Manden is the Co-Founder of WorkFlex and former Head of Trust & Employer Compliance at WorkMotion. He is a Dutch certified tax lawyer specialising in compliance around modern mobility. Pieter has 13 years of professional experience with PwC in the Netherlands and Germany. He was Director responsible for the PwC Germany's Remote Work proposition prior to joining WorkMotion in January 2022.

Gonzalo Corrales Cortes is a Senior Associate Tax & Legal at WorkFlex. He is a Spanish law graduate, specialising in international tax. He enjoyed his international education in Spain, France and the Netherlands. He has working experience in both France and Belgium, where he started his career with Deloitte. Gonzalo is currently enrolled in a Legal Practice Master's program to obtain a certification as a lawyer in Spain.

‍

‍

1. Introduction

In recent years, especially after the COVID-19 pandemic started in 2020, remote work has become a reality for many people. The number of employees working remotely is increasing and is likely to continue to do so in the future. This also means that employees will not necessarily work from their resident country all the time, but possibly from other countries too as part of a so-called Workation (a combination of work and vacation). Especially in this international setup, several employer compliance topics must be addressed, including immigration, social security or tax.

With remote work being such a relatively new concept, it was not in the back of the minds of the regulators who were working on work-related issues. An example of this is the Directive 96/71/EC of the European Parliament and the Council of 16 December, also known as the Posted Workers Directive (PWD). The PWD prescribes that employers, amongst other things, need to notify local authorities if they have posted an employee from the employment country in the specific destination country. This is a significant administrative burden that employers prefer to prevent. In this regard a question that we are often being asked is:

Do temporary remote workers qualify as posted workers in the sense of the PWD?

‍
2. Definitions

Temporary remote worker

An employee who works outside the country of employment on a temporary (<183 days) basis, without this trip having any business reason or purpose. The employer has allowed the employee to temporarily work outside the country of employment, but this trip is entirely privately driven.

Posted worker

An employee who, for a limited period, is sent by his/her employer to carry out a service in an EEA member state other than the state in which he/she normally works, in the context of a contract of services, an intra-group posting or a hiring through a temporary agency.

‍

3. Conclusion

We are of the opinion that this question should be answered negatively. Temporary remote workers do not qualify as posted workers in the sense of the PWD.

The fact that some of the PWD´s translation into national law is somewhat ambiguous, does not change our conclusion. In our view, neither the EU nor the specific countries had the ambition to cover temporary remote workers under these regulations. The aforementioned leads to the implication that we find that no PWD notification duties arise related to temporary remote workers.

Hereinafter, we elaborate on the arguments in favour of our conclusion, some grey areas and we discuss a future outlook.

4. The aim of the PWD

The objective of the PWD is to protect the rights and working conditions of the posted employees and to address a number of concerns such as social dumping. Following the PWD, the member states are obliged to guarantee to these employees certain rights and conditions of employment that are granted to local workers in the host country.

Remote workers were not initially meant to be covered. Indeed, regarding the objective of the law, they should not even be a subject of concern, because they do not compete with the local workforce, and rights such as assuring the minimum wage of the host country are irrelevant, since remote workers often come from countries where they are paid higher salaries than local ones. At least, it is clear that this is not a situation of social dumping.

The PWD has been enacted into national legislation by all the EEA member states and Switzerland, thus the definition of posting workers can vary and have a broader or more restricted meaning depending on the country. The majority of the time, remote workers are clearly excluded from the scope of these national rules, especially as they do not meet the posting workers main characteristics. By way of illustration, some examples can be mentioned:

‍

Spain

According to the Law 45/1999, following which displaced worker is deemed to be the worker, whatever his nationality, of the companies included in the scope of this Law moved to Spain for a limited period of time in the framework of a the provision of transnational services, provided that there is a working relationship between such undertakings and the worker during the period of posting.

France

The French legislator has enacted the PWD via its Labour Code, defining a posted worker as any employee regularly established and exercising his/her activity outside France and who usually working on behalf of the latter outside the national territory, carries out his/her work at the request of the employer for a limited period on national territory under the conditions defined in Articles L.1262-1 and L. 1262-2.

Netherlands

The PWD is translated into national Dutch law via the “WagwEU”. This law defines posted workers as foreign employees who have been sent to work in the Netherlands for a limited time as part of a transnationalservices agreement. Under such a transnational services agreement, the employees are at the Dutch recipient´s disposal to perform work activities in the Netherlands.

‍

Based on the above, it becomes even clearer then, that remote workers do not fit in the general definitions of posted workers given in most of the member states national law. The reasoning behind is that a posted worker generally provides a transnational service to a specific recipient in the country of arrival (i.e a parent company or a subsidiary belonging to the group), while the employee working remotely will keep providing the service to the same employer regardless of the place of residence. Besides, while a remote worker is in the destination for private reasons, posted workers are being sent to another country at the request of his/her employer to perform some specific tasks in a contracting enterprise.

5. Arguments against: grey areas

On the other hand, it should be noted that due to the different perspectives to implementing the PWD among EEA member states, a few countries have adopted a much more compliance-heavy approach. They seem to have enlarged the concept of posted workers in their local law. Examples are Portugal or Belgium. In these countries, any “work-related presence” may trigger the application of the directive and could cause more administrative obligations for the employer in order to avoid being fined. This approach would also make the country less attractive for the potential workforce looking for a few weeks or months working therein.

Belgium

According to Belgian national law, a posted worker is an employee that works and was initially hired outside the country but is temporarily working in Belgium.

Portugal

Following the Portuguese Labour Code, a posted worker is an employee hired outside the country but temporarily working in Portugal in the context of acontract of services, an intra-group posting or a hiring out through a temporaryagency.

As such, in the case of Belgium the local implementation of the PWD seems to have a broader sense than other countries. This is also true for the UK, where employees have certain minimum statutory rights from day one. This can be a complicating factor, particularly if a dispute or termination scenario arises and the employee asserts that they have employment rights in another jurisdiction… While in Portugal it could be easily argued that the context is not the performance of a service due to a specific contract but the validity of the same contract with the same employer.

Although in practice these countries have differentiated between posted workers and temporary remote workers situations, by not imposing the PWD rules to privately driven individuals. This was confirmed by local tax authorities upon our request, it has however not been published as an official statement (yet).

Additionally, it is undeniable how the treatment of both posted workers and remote temporary workers remains the same in some specific areas such as Social Security or VISA/immigration law.

Concerning Social Security, it should be kept in mind that when a company posts employees into other EU countries on a temporary basis, most of the time they remain insured for social security purposes in the country where the company business is located. In these cases, an A1 certificate or a CoC (Certificate of Coverage) should be issued. An A1 certificate of coverage is an European form that states the country in which a worker is covered by social insurance. Regardless of the travel reason (privately driven employees or employees sent by their employers), employees must always be covered by social security since in order to protect both employer and employee, there should be a way to certificate their coverage during the stay abroad.
‍

Related to immigration law, when non-EU member state employees are posted into an EU country, they need both a visa and work or resident permits. So do remote workers when they visit third countries, as a result of the performance of services abroad they need a business visa to travel instead of a tourist one as well as being in possession of a valid work permit if requested in the country.

6. Future Outlook

Even if the disparities are bigger than the similarities, these two concepts may be misleading and can drive the legislator to vaguely apply similar regulations on both cases despite the differences. Elements like who is the actual beneficiary of the services, or the request of the employer to carry out the job in another country have been considered key elements to differentiate these two realities by several authors.

Most of the countries have already openly stated that temporary remote workers are out of the scope of their PWD transposition in national law which provides with an unquestionable flexibility for both employers and employees.

Although, due to the high volume of employees aiming to benefit from some periods working from abroad (that will keep increasing in the upcoming years) and the opportunity that entails attracting migrant talent into our borders, governments and EU institutions proactivity is crucial in order to create an assured and suitable atmosphere for both employers and employees and avoiding regulatory gaps for remote workers aiming to work from overseas. Designing remote work policies that comprehend the harmonisation of member state legal approaches or clarifying complex and unclear points regarding social security would be a nice way to start this journey.

‍

Balancing between the employee interest of workations as a benefit on the one hand, and the employer compliance risks on the other hand. How to lay this down in the company policy for temporary work from abroad? What must be in the policy and what not? How would our guests change their policy if they had the opportunity to create it from scratch?

{{download-box}}

Guest speakers:

• Sophie Kostka - Head of HR & Culture @ Enpal  
• Małgorzata Miaśkiewicz - Global Mobility Principal @ Delivery Hero  
• Sabine Ziesecke - Tax Partner @ PwC  
• Moritz Gamon - Teamlead People Operations & Services @ IU Internationale Hochschule  

‍

What are the employer compliance and data security risks related to temporary work from abroad? How can employers manage & mitigate them, so that employees can enjoy this benefit beyond boundaries in a well-informed, instructed, and insured manner?

Speakers:

• Jonas Jacobsen, Data privacy lawyer at HK2 Rechtsanwälte
• Pieter Manden, Head of Trust & Employer Compliance at WorkMotion
• Patrick Koch, General manager of WorkFlex

‍

Risks associated with workations

Workation is generally associated with pleasant experiences – employees get the chance to improve their work-life balance, as well as spend time on boosting their mental health and wellbeing. However, we have to acknowledge the fact that health & occupational risks are not eliminated when working from abroad, and both – employees and employers – should protect themselves from those.

Getting some minor injuries when working in the office is not uncommon. The same can happen when workflexing – to name a few of generic examples, poorly designed workstation in your hotel room leading to back injury; the universal slips, trips and falls somewhere on your way to take a work call from the beach! Injuries can also happen in the spare time when taking a walk on the beach, hiking, surfing, or doing other activities.

Employer Concerns

After hearing about these risks, WorkFlex‘s clients often ask:

• Who is liable in case an accident happens when the employee is abroad?
• Is travel insurance always needed?
• Can the travel insurance for workations be the same as for business trips?
• How should we handle any insurance claims or any other medical issues?
• Is health insurance included in the A1/CoC?
• And others.

The concern of who is exposed to paying medical bills in case of an accident while working from abroad is legitimate! Although it might appear that the work to purchase extensive travel health insurance must be conducted by the employee, the legal frameworks stating what is an occupational accident during workations is ambiguous. Therefore, employers might be enjoined to cover the medical expenses if it is deemed as an occupational accident.

To illustrate with an example, one mother required an early emergency delivery of her baby and post-natal treatments while travelling in a foreign country. After being discharged, she is facing a $950,000 bill for medical rehabilitation because she was not sufficiently educated on what is included in her existing insurance of the home country and because she did not procure a suitable travel health insurance (Nelson, 2014).

Another concern is the quality of medical services employees get in case of an accident. The medical insurance coverage we would receive in destinations might not be as broad as expected, even if you carry public or private insurance and your home country has a social security treaty with the destination country.

Coverage without additional health insurance

Can I rely on my public insurance?

It is important to bear in mind that public insurance is only valid in the EU countries, Switzerland, Liechtenstein, Norway, and Iceland. Generally, it is advised to carry the European Health Insurance Card (EHIC) to prove the insurance coverage of your home country’s insurance while travelling abroad. Though public insurance is helpful, will it be able to cover all the different situations you may encounter during your temporary work abroad?

Imagine…

You are a German citizen carrying public insurance and you decide to workflex in France. There will be situations that you encounter where the standard of medical treatment while using your EHIC card will not be the same standard as you experience in Germany.

Scenario 1

If for emergency reasons you  need to seek medical treatment,  you must ensure that the medical facility is under the public health scheme, otherwise the German public insurance will not cover the treatment costs. Even if the German public insurance partially covers the costs, the employee must pay 30% for ambulant care, 80% of the pharmaceutical costs, and 20% of the hospital stay in addition to extra daily charges for the hospital and other co-payments based on the complexity of the treatment. Moreover, it is often required to prepay the treatments in the medical facility before receiving a medical report that can be submitted to the insurance provider.

Scenario 2

If transportation back to Germany is needed for medical reasons, this type of insurance will not cover you – getting this service would imply tens of thousands of euros to be paid either by you or your employer, depending on the root cause of the emergency! Irrespective of the country where the accident takes place, you should assume paying a significant share of the medical costs yourself.  

But what about private insurance?

Although private health insurance providers are required to provide coverage to the insured for at least one month globally, the actual length of the coverage depends on your provider and the insurance conditions might differ to the home country’s standards (see here for an overview of German private insurance providers and their restricted travel policies). However, employees have the option to purchase additional policies to amplify the existing insurance scope. The employee should also assess whether a separate foreign travel health insurance is recommended based on deductibles. These would need to be paid in case of a compensation claim and whether medical repatriation is included. Furthermore, many private health insurance providers reimburse a portion of the premiums if no claims have been submitted in a year. If that is the case, it is advisable to purchase a separate travel health insurance to safeguard the bonification.

To sum up, coverage of workations with existing insurance, either public or private, is indeed extremely complicated. There are a myriad of different rules across all the insurance providers that also depend on the destination of your choice. Moreover, it is important to remember that acquiring an A1 certificate or a Certificate of Coverage (CoC) from the insurer that’s needed for workflexing trips does not address your health insurance needs.

Ultimately, to contain your  financial risk and save effort on researching the local insurance conditions for a destination country, one should procure private travel health insurance to workflex abroad.

Reduce employer & employee risk with a dedicated workation insurance

Injuries abroad can get expensive – not only emotionally, but also financially. Knowing that this pain could be the responsibility of both employee and employer, it’s definitely worth it to hedge the risk by purchasing specific workation insurance packages for each employee.

To minimise the employer and employee risk of potentially paying the medical expenses for the employee, WorkFlex has partnered with Hallesche Krankenversicherung a.G. This provides comprehensive travel insurance for employees temporarily working from abroad using WorkFlex.

With this new feature, WorkFlex has added another layer of safety – travel health insurance for your employees’ workflexing trips.

What’s covered by WorkFlex’s insurance feature?

• Unlimited medical coverage to suit your and your employee’s needs while in a foreign country, including any emergency situation in any clinic, dental treatments, cases of Covid-19 and medical repatriation
• No restrictions on home & destination countries: Many insurance providers have great restrictions on countries their packages cover. With the WorkFlex solution there are no restrictions on home & destination countries eligible for the insurance package
• Easy-to-use & integrated with WorkFlex platform for a seamless and easy application
• No administrative burden: The WorkFlex team takes care of applying, communicating, and managing the insurance package throughout the whole trip period.
• Comprehensive & easy-to-grasp guide of the insurance policy provided for the employee and employer. Hallesche Krankenversicherung also provides 24/7 phone and email support for any questions about the insurance coverage or assistance while abroad under 0049 711 66 03 39 30 in 25 languages.

If you want to learn more about WorkFlex’s new insurance feature, feel free to book a demo or reach out to your WorkFlex consultant!

‍

{{download-box}}

‍

‍

‍

Workations are rapidly becoming an important employee benefit, and that´s for a good reason. If employees are no longer expected to work from the office, why should they only work from home? Although, not all people adapt at the same pace, and many consider it weird to go on an extended vacation only to work from there too. To be more specific, our baby boomer parents probably think it’s a classic ‘Millennial’ or ‘Gen Z’ thing to do. Nevertheless, we expect workations to develop into something usual as more employers increasingly offer them and employees continue to enjoy them.

Employers are sometimes hesitant to allow workations because of the compliance risks.

Permanent Establishment (PE) risk, in particular, is considered a showstopper. The risk here is that the employee could trigger a corporate tax liability in the destination country, meaning the employer would need to pay corporate taxes over the profits generated in the destination country. Given that the presence in the country is very limited, however, these corporate taxes generally aren't the key problem. The biggest problem is the administrative burden that comes with having to pay the taxes which, besides setting up bookkeeping, includes registrations with authorities and documentation for intercompany billing and profit allocation.

For this reason, it’s safe to say that employers really don't want their employees to constitute a PE. After all, workations should be an employee benefit rather than an employer burden.

This raises the questions; how does an employee temporarily working from abroad constitute a PE, as well as if, (and how) it can be prevented? And this is where we have good news — there’s no “permanent” in temporary work from abroad. As the name suggests, PE’s require a certain level of permanency. A workation is by character temporary and will therefore generally not be permanent enough. This is supported by both the OECD and the UN, the two organisations whose tax treaty models and commentaries have been most widely adopted. Both state that a so-called ‘fixed place of business PE’ and ‘service PE’ will usually not be constituted if the presence in the other country is below 183 days. This is one of the reasons why an international stay that exceeds this threshold no longer qualifies as “temporary”. In practice, workations are generally much shorter.

Of the more than 1,000 workation requests processed through our WorkFlex platform, more than 95% were below 30 days.

This makes it highly unlikely that these workations pose a PE-risk, even in countries that have adopted even tighter policies around ‘fixed place of business’ or ‘service PE’s’ than the OECD and UN policies. Yet, there are three additional factors that need to be considered;

1. That the company doesn’t have an office or entity in the destination country. If it does, it must be made clear that the employee did not visit the office or perform activities for the benefit of the local entity. Deviating from this will not always, nor automatically, create a significant PE-risk. However, it would make it difficult to confidently state that the workations are not likely to form a PE-risk.
2. For the 183-day threshold, you may be required to look at multiple workations in the same destination country. In other words, an accumulation of workationers in one country might increase the PE-risk in that location.It’s therefore recommended to have a single system in place, like WorkFlex, to manage all of the company’s workation requests. It’s also important to note that this accumulation doesn’t simply apply to employees from different departments who happen to enjoy a workation in the same country. PE-risk is more likely to increase  if there is some organisational overlap. For example, if various employees working on the same project accumulate in the same, destination country. Although this is often the case for business trips, it’s hardly the case for workations. It does show why it is important to distinguish between the two from each other, though.
3. Lastly, is the only type of PE –- other than the previously discussed ‘fixed place of business’ and ’service PE’ – that can still pose significant risk even if the workation is below 183 days. This concerns the so-called ’dependent agent PE’. In short, the OECD and UN consider a ’dependent agent’ an employee that habitually plays the principal role leading to the conclusion of contracts. It is broadly accepted that “habitually” implies a certain frequency. For example, five contracts where the individual played the leading role. Still, this doesn’t exclude the theoretical possibility that a dependent agent constitutes a PE during a workation of one day. For this reason, it’s recommended to take two extra measures to mitigate and manage the dependent agent PE of workations.

The first one is to determine who actually qualifies as a dependent agent. Normally, the vast majority of employees don’t, as they do not habitually play this leading role in the conclusion of contracts. Examples of employees who are more likely to qualify as a dependent agent are senior managers and employees in sales and procurement roles. Workation requests of these employees need to be highlighted. A second measure is to assess the actual dependent agent PE risk for these requests. Questions to consider are; how often does the employee usually perform high-risk activities? Can they realistically refrain from performing these activities during the envisioned workation?

Together with many specialists in the field, we are of the opinion that even the most senior employees should be able to enjoy a 30-day workation without triggering a material Dependent Agent PE risk.

However, a case-by-case assessment is always required, and it’s important that the potential risks are managed. This is why WorkFlex performs an individual risk assessment of each workation request and generates relevant documentation such as employer statements and employee instructions. This way, both the employee and the employer can comfortably enjoy a workation.

‍

{{download-box}}

‍

‍

Workations are rapidly becoming a significant employee benefit, for a good reason. Why should employees only work from home if they are no longer expected to work from the office? Allowing them to work from abroad for some time is an excellent example of implementing increased flexibility, similar to enabling them to work from home. For employers, the beauty of flexibility as a benefit is that it is more or less free of costs. That is, as long as the employer does not pay for the workation and the workation does not trigger any unexpected obligations for the employer. As an employer can decide on the first topic, this white paper focuses on the second topic.

Any unexpected obligations for the employer are likely to relate to the compliance risks around workations. A practical example would be the obligation for the employer to set up payroll in the destination country or the employer's liability in case the employee requires medical assistance during a workation. This raises the question of which compliance risks are related to workations, and how employers can manage or mitigate these risks.

Definition of Workation

Before diving into the compliance topics, it is essential to align on the definition of a workation. In short, this is a situation where an employee continues to work while temporarily abroad for private purposes.

The following four characteristics are relevant:

1. Abroad. This means outside the country of employment and residence of the employee. The employee will not give up his/her residency in the home country during the workation.

2. Private. The stay abroad is privately driven and has no business objective at all. Thus, a workation is something different than a business trip. A workation can be combined with a business trip, e.g., when the employee stays for a workation after visiting a business seminar.

3. Work. The employee continues to perform work activities for (the benefit of) his/her home country employer only. This means that the employee does not create any local value in the destination country.

4. Temporary. The stay is temporary, namely maximum 183 days in any running 12-month period (accumulated per country). However, many employers have limited workations within their company to a maximum number of working days that lie significantly below these six months, such as 30 or 60 days.

Summary of compliance topics‍

‍

Tax

• Corporate Income Tax: The risk that the employee constitutes a so-called Permanent Establishment (PE). This would trigger a corporate liability for the employer in the destination country. Although this is not necessarily expensive in terms of the taxes due, the administrative burden that comes with this liability is disproportionally high.
• Employment Tax: The risk is that the employer needs to set up payroll to calculate, withhold and remit employment tax in the destination country. If a remote worker constitutes a PE in the destination country, this will also trigger an employment tax liability. On the contrary, as long as a remote worker does not constitute a PE, the employment tax liability is generally only triggered in exceptional cases.
• Social Security: The social security risk around workations is twofold. First is the risk that the employee loses coverage from the home country's social security system. Second, the chance that the social security system of the destination country becomes applicable. Both risks are relatively easy to manage for countries within the EU and countries where a social security treaty is in place.
• Personal Income Tax: The risk is that the employee becomes taxable in the destination country for personal income tax purposes. If this only affects the employer indirectly, e.g., the employee's income tax liability can trigger an employer's employment tax liability.

Legal

• VISA / Immigration: Does the employee have the right to work in the destination country? One may question whether a valid working title is required if the visitor's primary purpose is tourism. This is somewhat unclear, as the VISA / Immigration legislation was not written with 'workationers' in mind. Nevertheless, it is essential to consider this topic, as the fines and penalties for illegal labour are generally hefty.
• Local Labour law: The risk that local labour law becomes applicable. Assuming the employment contract explicitly states that the labour law of the home country applies, it is unlikely that local labour law becomes applicable. This may differ for particular arrangements, such as those around minimum wage and working conditions. In this regard, it is relevant to note that notifications based on the so-called Posted Worker Directive are not applicable for employees enjoying a workation. After all, the employer may have approved the workation but did not post the employee. Moreover, the employee does not perform services locally.
• Duty of care: Every employer has a duty of care for its employees. However, it is relatively unclear what this duty of care precisely consists of, i.e., when the duty is fulfilled. Generally, it prescribes the employer to do everything that can be reasonably expected. As a result, an employer's duty of care is likely much lower during a workation than when the employee works from the office. At the same time, it also means that it cannot be excluded that an accident during a workation should be considered a work accident for which the employer bears the (partial) responsibility.
• Internet and Data security: The risk is that the employee working from abroad breaches security regulations in the home country - such as GDPR regulations - or the destination country. Such as a local prohibition on using VPNs. The breach might also find its origin in client contracts, which may exclude the service providers from performing their services from particular countries.
• Sanctioned countries: Looking at our WorkFlex data, it is rather unlikely that employees want to spend their workation in a country sanctioned by institutions such as the UN or EU. However, this is not impossible thus it is recommended to have the list of these countries available.

The long list above might scare people off, but it should not. The risks hardly differ from those relevant when employees work abroad for business purposes, e.g., during a business trip. Also, employees used to work now and then during their vacation, even before the term workation was invented. Neither of these examples was/are considered a big problem, so one should not make the risks above a red flag all of a sudden for workations only. Instead, one should be educated on the risks and manage or mitigate them.

In-depth assessment: PE-risk

For example, taking a better look leads to the conclusion that it is unlikely that workations create a significant PE risk. As the name suggests, PEs require a certain level of permanency. However, there are no "permanent" temporary workers from abroad. A workation is temporary by character and will generally not be permanent enough. The OECD and the UN support this, the two organisations whose tax treaty models and commentaries have been most widely adopted. Both state that a so-called 'fixed place of business PE' and 'service PE' will usually not be constituted if the presence in the other country is below 183 days. This is one of the reasons why an international stay that exceeds this threshold no longer qualifies as "temporary." As a result, even in countries that have adopted even tighter policies around 'fixed place of business' or 'service PE' than the OECD and UN policies, employees enjoying workations will hardly ever constitute a PE.

Yet, three additional factors need to be considered:

1. Local presence. The employer does not have an office or entity in the destination country. If it does, it must be made clear that the employee does not visit the office or perform activities for the benefit of the local entity. Deviating from this will not always, nor automatically, create a significant PE risk. However, it would make it difficult to confidently state that the workations are not likely to form a PE-risk.

2. Accumulation. For the 183-day threshold, you may be required to look at multiple workations in the same destination country. In other words, accumulating workationers in one country might increase the PE risk in that location.

It's also important to note that this accumulation doesn't simply apply to employees from different departments who enjoy a workation in the same country. PE risk is more likely to increase if there is some organisational overlap. For example, various employees working on the same project accumulate in the same destination country. Although this is often the case for business trips, it is hardly the case for workations. Nevertheless, it does show why it is essential to distinguish between the two from each other.

3. Dependent Agent PE. Lastly, the only type of PE- other than the previously discussed 'fixed place of business' and' service PE' – can still pose a significant risk even if the workation is below 183 days. This concerns the so-called' dependent agent PE. In short, the OECD and UN consider a 'dependent agent' an employee that habitually plays the principal role leading to the conclusion of contracts. It is broadly accepted that "habitually" implies a specific frequency. For example, five contracts where the individual played the leading role. Still, this doesn't exclude the theoretical possibility that a dependent agent constitutes a PE during a workation of one day. For this reason, taking two extra measures is recommended to mitigate and manage the dependent agent PE of workations.

The first one is to determine who qualifies as a dependent agent. Typically, most employees don't, as they do not habitually play this leading role in the conclusion of contracts. Examples of employees more likely to qualify as dependent agents are senior managers and employees in sales and procurement roles. Workation requests of these employees need to be highlighted. A second measure is to assess the actual dependent agent PE risk for these requests. Questions to consider are; how often does the employee usually perform high-risk activities? Can they realistically refrain from performing these activities during the envisioned workation.

Managing and mitigating risks

Besides being educated, employers should manage and mitigate the compliance risks of workations. This can be done in many ways. A common way to start is to draft a policy. It forces the company to consider what it wants to allow - and what not. This is not only relevant for compliance purposes. There can be various business objections against workations, e.g., when the employee is expected to be in the office at a particular time or when the time difference between the home location and destination is too significant.

Further, a crucial part of managing workations is ensuring a process is in place. After all, one cannot manage what one does not know. The process starts with the employee initiating a workation request. After this, it should include a manager's approval, as well as a tax and legal compliance assessment taking into consideration the topics mentioned above. Once the request has been approved, the process should prescribe the request of a social security certificate. Other potential actions may include generating and notifying the company ́s travel insurance company, putting an addendum to the employment agreement in place, generating an employer statement and/or employee instruction sheet. Preferably, this process is supported by a technology that combines all of the process requirements above. Moreover, a technology-enabled process saves both the employee and the employer time, besides having some other advantages. For example, suppose the number of workation requests is high. In that case, the technology can help to focus on those requests that are potentially problematic. Moreover, technology can help put an audit trail in place so that all information and documentation are easily accessible. A solid policy and (technology-enabled) process should pave the way for both the employee and the employer being able to comfortably and safely enjoy a workation. And that is exactly the objective: workations are meant to be an employee benefit, not become an employer burden.

‍

{{download-box}}

‍

‍

While a workation within the EU entails fewer risks than working from third countries, this does not mean it is risk-free. In practice, they have proven to be a BIG burden for employers, but why?

Permanent Establishment (PE) risk

Watch out, because if the employee conducts activities on behalf of the enterprise, a Dependent Agent PE could easily be triggered. Some EU countries have a strict approach to PE and potentially even a Fixed Place of Business PE could be created depending on the location where the employee is working from.

No audit trail and employee's confirmation of the work-from-abroad policy

This means a higher labour law risk, in case something goes wrong during the workation. Combine this with no travel insurance (from the employer) and it turns out to be not as safe as one would expect.

No management

A good 30-day workation management requires some time. Even a trip within the EU should not be done without proper employee instructions and neither without A1s (or a WorkFlex Social Security Statement for countries where the process of obtaining an A1 is not that quick). Sometimes forgotten, yet essential.

Accumulated presence

Be careful, not every EU country follows the same logic to stipulate tax obligations in regard to physical presence. That is why in particular countries (e.g. Czech Republic) being compliant can be more complex than expected and it demands you to update yourself regularly as local regulations often change.

HR risk

Not adopting a Working From Abroad policy is definitely not appealing for any employee. Some may wonder why they cannot spend more days abroad if they are EU nationals and want to enjoy this benefit.

Implications of family visits

Visiting family is one of the main purposes of a workation and this entails two inconveniences. Firstly, these trips may lead to having the center of vital interests in the other country (and this has some tax implications). Secondly, workations in the EU countries only could lead to non-EU citizens wondering why they cannot visit their families. Eventually, this policy can reduce engagement and reduce retention.

Your employees undoubtedly love the freedom to go on workations! To avoid compliance risks, we highly recommend implementing a workation management process, even if your current policy permits travel within the EU for less than 30 days. Book a demo with WorkFlex today to see how we can help you streamline this process and mitigate potential risks via the No-Risk Workation Concept.

{{download-box}}

Your employees would love to go on workations. But you are reluctant to give them the freedom to work from anywhere because of concerns about employer compliance risks.  Is there a common ground? 🤔  

Yes, there is! 🙌  

Watch the webinar on No-risk workations led by WorkFlex Co-Founders Pieter Manden & Patrick Koch. In the webinar, we will introduce you to the groundbreaking concept of no-risk workations that protects the employer from the relevant compliance risks of workations.

‍

‍

‍

In a series of 3 webinars, we explore everything you have to know about managing workations compliantly and efficiently together with best-in-class experts of temporary work from abroad. Join in for employer experience stories and opinion-sharing!

Episode 1: Should your company make workations a benefit? (🇩🇪 in German)

Flexibility at the workplace is among the most demanded employee benefits that help employers win the war for talent. Besides talent attraction, there are many additional bonuses to workations - e.g. improved employee satisfaction and loyalty. However many companies also fear that workations will hurt employee productivity.

‍

Episode 2: How to get the workation compliance right? (🇬🇧 in English)

Many employers are now offering workations to employees. However, not everyone is aware of the severe employer compliance risks associated with workations, including permanent establishment, wage tax, social security, and others. In the webinar, we discuss what are the must-have HR processes and documents to manage and mitigate the risks.

‍

‍
‍

{{download-box}}

Episode 3: What workation management tool to choose? (🇩🇪 in German)

Your employees love to go on workations and they request a lot of trips. You are aware of compliance risks and acknowledge they have to be managed and mitigated. In the webinar, we discuss what tools can you use to manage the workation compliance and workation management process.

‍