Key Takeaways:
- An employee's move to another country can trigger new tax, payroll, and employment requirements, even if their job stays exactly the same.
- Just because an employee can legally live abroad doesn't mean they can legally work there.
- Before saying yes to a relocation, employers need to understand the risks and figure out whether they can legally support the move.
Working remotely from another country might sound like a dream for employees. For their employers, it's not always so simple.
Remote work has given many employees more freedom over where they live, and for some, that freedom now extends across borders. Boston Consulting Group's Talent Tracker estimates that roughly 2.6 million highly skilled professionals moved to another country in 2024.
Sooner or later, one of your valued employees might ask if they can move abroad and still keep their job. On the surface, this sounds like a simple request. The employee already works from home, and their daily tasks won't change. You already have the tools in place for remote collaboration. No problem, right?
Not so fast. Crossing a border can change the legal, tax, and employment requirements a company needs to follow.
Before approving an employee's request to relocate abroad, it's important to understand what's involved.
Can an Employee Move Abroad and Keep Their Job?
It depends. The answer depends on the laws of the country they're moving to and whether their employer can legally support the arrangement.
Even if a company meets all the employment and tax requirements in its home country, it doesn't necessarily meet those of the country where the employee wants to work.
For starters, the employee may need a visa or work permit to legally work there. Their income may also become taxable in the new country, which could mean the employer needs to register for and run local payroll.
There are other considerations, too. The employee may become entitled to additional protections under local employment laws, such as more paid leave or longer notice periods. Their current benefits or insurance may no longer cover them, and depending on the work they do, their move could create corporate tax liabilities for the company.
Since the rules vary by country, employers need to understand the potential risks before approving a relocation.
Does an Employee Need a Work Permit to Move Abroad?
Not always, but an employee must have the legal right to work in the country they're moving to. Permission to enter or live in a country doesn't necessarily include permission to work there.
Unless the employee is a citizen or already has residency with work rights, they will likely need a visa or work permit. In many countries, the employer must sponsor or support the application, and some require the company to be registered locally.
What About Digital Nomad Visas?
A digital nomad visa (DNV) can seem like an easy way for an employee to move and keep their current job. These visas let people live in a specific country while working remotely for a company based elsewhere.
However, a digital nomad visa only addresses the employee's immigration status. It doesn't automatically exempt their employer from local tax, payroll, or social security requirements.
That means an employee could qualify for a digital nomad visa but still be unable to relocate without creating legal or financial complications for their employer. In some cases, those complications may make the arrangement impractical for the company.
What Are the Legal and Financial Implications of an Employee Moving Abroad?
Even if an employee has permission to work in another country, their relocation can create new legal and financial requirements for the company.
Here's what employers need to consider before approving the move.
Tax, Payroll, and Social Contributions
Where an employee physically works can affect where they owe income tax. If they move to another country to live and work, they may become a tax resident there. As a result, the employer may need to register for local payroll and withhold income tax in that country, often with the help of a global payroll provider.
Some countries have agreements that allow employees to remain in their home country's social security system while working abroad temporarily. For example, within the EU, employees on qualifying temporary assignments may be able to stay in their home country's system for up to 24 months with an A1 certificate. Otherwise, social security contributions may need to be paid in the country where the employee works.
The “183-day rule” is often cited as the point when an employee starts owing taxes in another country. But it's not that simple. Under the Organisation for Economic Co-operation and Development (OECD) model tax treaty, the threshold is one of several factors used to determine where employment income can be taxed. Days may also be counted over a rolling 12-month period, rather than a calendar year.
Each country has its own tax residency rules, which may also consider factors such as a permanent home or family ties. As a result, an employee could become a tax resident long before reaching that threshold.
How Local Employment Laws Apply
An employee who moves abroad may become subject to the employment laws of the country they move to, even if their employer is based elsewhere. Some employment rights may apply from the employee's first day of work, regardless of what their existing contract says. In the EU, for example, choosing another country's laws to govern a contract doesn't allow an employer to bypass mandatory local labor protections.
Local laws may set maximum working hours, minimum pay, and paid time off requirements. They may also guarantee benefits like paid parental leave, even when those benefits aren't required in the employer's home country. As a result, the company may need to update the employee's contract and adjust their pay, benefits, or working hours.
Termination requirements also vary by country. Some countries only allow employers to dismiss employees under specific circumstances, while notice periods and severance pay may depend on length of service. Without understanding these requirements upfront, a company could face unexpected costs if it later needs to terminate the employee.
Corporate Tax and Permanent Establishment Risk
An employee moving abroad doesn't just have potential tax implications for the employee. Depending on where they move and the work they do, it could also affect the company's corporate tax responsibilities.
That's because an employee working from another country can create a permanent establishment (PE) for the company. A PE is a taxable business presence that can make the company liable for corporate tax in that country.
Whether this happens depends on several factors, including the type of work the employee performs and their working arrangements. For example, an employee who regularly negotiates or signs contracts on behalf of the company may create PE risk. Working from a home office abroad can also raise questions about whether the company has a taxable presence there.
In November 2025, the OECD updated its Model Tax Convention guidance to clarify when working from a home office abroad could create a PE. Under the guidance, a home office generally isn't considered a place of business if the employee works there less than 50% of the time over a 12-month period.
If the employee spends more than half their working time there, the OECD considers other factors, including whether there's a business reason for working from that location, such as meeting with local customers or suppliers. Simply allowing an employee to relocate to retain them generally doesn't count as a business reason.
However, this guidance doesn't automatically apply in every country, so employers should check the local rules before approving a move.
What Other Issues Should Employers Consider Before Approving a Move?
Beyond employment and tax requirements, an international relocation can create other complications that employers need to consider. These include gaps in employee benefits and restrictions on where certain work can be performed.
Employee Benefits and Insurance Coverage
Health insurance plans may not cover employees once they move abroad, and their existing retirement plans may not be available in the new country. Some workers' compensation policies also limit coverage outside the home country. An employer might not realize there's a gap until an employee needs to make a claim. And if the employment contract promises benefits that are no longer covered, the company may still be responsible for providing them.
Data Protection and Restrictions on Working Abroad
A company's contracts with its customers may also restrict where employees can work, particularly when they handle sensitive information. Some industries have additional regulations that limit where certain activities can be performed, or data can be accessed.
Data protection and intellectual property laws can create further complications. Depending on the circumstances, an employee working abroad may trigger additional data protection requirements, including those under the GDPR. Export control rules may restrict access to certain technical information from another country, while intellectual property created abroad may be subject to different ownership laws.
What Are the Employer's Options?
The best way to handle an employee's request to work abroad depends on several factors, including the destination country, how long they plan to stay, their immigration status, and the type of work they do.
For a short stay, it may be possible to keep the employee on their existing contract and payroll, provided local laws allow it. However, this arrangement may not work for a permanent move. If the company already has a local entity in the new country, it can employ the worker through that entity under a local contract.
Some countries also allow companies to register as non-resident employers. This lets a company remain the legal employer and run local payroll without establishing a local entity, although it doesn't eliminate PE risk. Setting up a local entity is another option, but the time and expense involved may be difficult to justify for a single employee.
An employee might suggest switching to independent contractor status to simplify the move. However, a company can't simply reclassify an employee as a contractor to avoid local employment requirements. Worker classification depends on local laws and the actual working relationship. If the employee continues doing the same job under the same manager, changing their status could create a risk of employee misclassification.
Another option is to partner with an Employer of Record (EOR). An EOR can legally employ the worker in the new country and handle local payroll, benefits, and employment compliance, while the company continues to manage their day-to-day work. This allows employers to accommodate relocations without setting up their own local entity.
If none of these approaches are feasible, the company may need to deny the relocation request. Explaining the specific barriers, such as work authorization or tax risks, can help the employee understand the decision and decide whether to stay in their current location or pursue the move.
What to Check Before Approving an Employee Relocation
Before approving an employee relocation request, employers need to understand the requirements involved. Here's what to check.
- Which country is the employee moving to, and how long will they stay?
- Can they legally live and work there?
- What payroll, tax, and social security requirements will apply?
- Which local employment laws will apply to the role?
- Could the employee's work create PE risk for the company?
- Will their current benefits and insurance still cover them?
- Does the company have a compliant way to employ them in that country?
Employers should address any unresolved issues before approving the relocation. Once they've confirmed the move is feasible, they should put the agreed-upon terms in writing, including where the employee will work and any changes to their employment arrangement.
Frequently Asked Questions
Can an employee work remotely from another country without telling their employer?
Employees should get their employer's approval before working from another country, even for a short period. An international move can create tax, immigration, payroll, and employment law requirements that the company may not be prepared to handle. Working abroad without approval could also violate company policies or the employee's employment contract.
How long can an employee work abroad before their employer has to pay taxes there?
There's no universal grace period. While the 183-day rule is often mentioned, tax requirements can arise much sooner. Depending on the country, an employer may need to register for payroll, withhold income taxes, or make social security contributions from the employee's first day of work. The employee's activities could also create corporate tax exposure for the company.
Can an Employer of Record help an existing employee relocate abroad?
Yes. An Employer of Record (EOR) can help a company retain an existing employee who wants to move to another country. The EOR becomes the legal employer in the new location and handles local employment contracts, payroll, benefits, and compliance, while the company continues to manage the employee's daily work. However, an EOR doesn't automatically eliminate permanent establishment risk, and the employee must still have the appropriate work authorization.
Keep Valued Employees Who Relocate Abroad With RemoFirst
When an employee wants to move abroad, saying no could mean losing an experienced team member. And finding and training a replacement can be both time-consuming and expensive.
RemoFirst can help you keep that employee on your team. As an EOR, we can legally employ workers in 185+ countries, handling local employment contracts, payroll, benefits, and compliance while you continue to manage their day-to-day work. If the employee needs a visa or work permit, we can help with applications in 110+ countries.
An international move doesn't have to mean losing a great employee. Book a demo today to see how RemoFirst can help make your employee’s relocation possible.
