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Overseas remote working staff: from contractors to employees

Discussion in 'Employment & HR' started by John Groats, Jul 9, 2016.

  1. John Groats

    John Groats UKBF Newcomer Free Member

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    I work for a technology startup which has remote contractors in several different countries, one per country (programmers, designers, etc.). We find talent in different places and some contractors are full time with an SLA contract.

    We'd like to make these contractors employees however, with holiday and sick pay etc., especially our contractors in Europe. To be clear: the contractors are permanent residents and citizens of the countries in which they're based and have no intention of moving to the UK. My company is a UK Limited company.

    Two questions:
    1. Does HMRC care if UK companies have overseas contractors which function as employees (work full time etc.)? Is HMRC likely to consider those contractors as employees for legal purposes, as they would British contractors?
    2. Is it possible for a UK company to legally employ a foreign citizen residing in a foreign country, without having any legal entity (or payroll) in that country? If my company signs a contract of employment (under UK jurisdiction) with someone whos living in, say, Poland, would it be valid and provide the Pole with enforceable rights?
    Thanks!
     
    Last edited: Jul 9, 2016
    Posted: Jul 9, 2016 By: John Groats Member since: Jul 9, 2016
    #1
  2. Scalloway

    Scalloway UKBF Legend Free Member

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    1. If the person is not a UK resident I don't think HMRC would care.
    2. Just having a quick google on the subject makes me think you are obliged to open a local branch to employ staff.
     
    Posted: Jul 9, 2016 By: Scalloway Member since: Jun 6, 2010
    #2
  3. Raw Rob

    Raw Rob UKBF Enthusiast Free Member

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    2. It wouldn't work - generally an employee has to pay tax / social security in the country where they reside, so you would need to set up as an employer in each country so that the correct taxes could be paid. (I know this is true for the Netherlands and Portugal and I assume this is true for most/all other countries.)
     
    Posted: Jul 9, 2016 By: Raw Rob Member since: Aug 1, 2009
    #3
  4. John Groats

    John Groats UKBF Newcomer Free Member

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    Thanks Scalloway; regarding 1, would the uk company be liable under similar laws in the contractor's nation, do you think? E.g. being a contractor and working like an employee in Poland makes the uk company liable for back taxes or litigation.
     
    Posted: Jul 10, 2016 By: John Groats Member since: Jul 9, 2016
    #4
  5. John Groats

    John Groats UKBF Newcomer Free Member

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    Interesting, so despite the many EU attempts at legal integration, European companies must register separately in each member nation in order to employ people in those countries?
     
    Posted: Jul 10, 2016 By: John Groats Member since: Jul 9, 2016
    #5
  6. Scalloway

    Scalloway UKBF Legend Free Member

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    The EU has not so far created a unified tax system. Each nation is still responsible for raising its own taxes.

    Personally I would keep them as contractors. It's hard enough sometimes to keep up with UK employment laws, never mind those of other nations. Your contractors should factor in holidays and sickness into the rates they charge you.
     
    Posted: Jul 10, 2016 By: Scalloway Member since: Jun 6, 2010
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  7. John Groats

    John Groats UKBF Newcomer Free Member

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    Thanks for the tip, rob. I prefer to have direct relationships with staff, and am currently using a model of generous full time SLAs (UK jurisdiction) with overseas contractors, with informal agreements relating to time off and sickness. Not ideal.
     
    Posted: Aug 25, 2016 By: John Groats Member since: Jul 9, 2016
    #7
  8. Matty-GES

    Matty-GES UKBF Newcomer Free Member

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    Hi John,

    You have a point there, if the contractors are not subject to any supervision and are free to establish their own working pattern, then it should be fine to engage with them on an occasional basis as long as they comply with the legislation of the country where they live and operate.

    If instead the workers are subject to a defined working pattern (i.e. Monday to Friday 8 – 17), are engaging with one client only on a regular basis, receive specific instructions during their working hours and use the client’s email address and equipment, then they should rather be employed in order to comply with the labour legislation.

    Feel free to get in touch if you still need assistance, we could certainly help you with this
     
    Posted: Feb 1, 2018 By: Matty-GES Member since: Jan 31, 2018
    #8
  9. Newchodge

    Newchodge UKBF Big Shot Free Member

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    Hopefully the Op has ot this sorted over the last 18 months.
     
    Posted: Feb 1, 2018 By: Newchodge Member since: Nov 8, 2012
    #9