With remote work now a lasting part of modern life, many employees are reimagining where they want "home" to be. They might want to follow their dream of living in a new city, moving closer to family, or seeking out a country with a lower cost of living.
But the idea that remote employees can work from anywhere without impacting the businesses they work for is a popular misconception. The reality is that global mobility creates very real compliance, corporate tax, legal, and operational challenges for employers.
For example, some companies can only legally employ workers in specific regions, such as a single country (or even a state), due to the structure of their business. When an employee moves outside of that region, the employer faces unintentional risk, even if the employee did so without explicit permission.
Creating and documenting a relocation policy can help you proactively establish ground rules to avoid risks and legal missteps before an employee decides to relocate.
Key takeaways:
- Unapproved relocations can create business risk and trigger tax, immigration, and employment law violations.
- Every country has unique regulations, so employers must be proactive in setting internal policies and carefully review each employee's relocation request.
- Not every move can be approved, due to visa, tax, or labor restrictions, but there may be some potential options.
Why Employees Relocate Without Telling HR
There are a variety of reasons why an employee might want to relocate, including a desire to:
- Embrace a digital nomad lifestyle by exploring the world, working from a variety of new and exotic locations
- Meet personal obligations, such as moving due to a spouse accepting a job in another state or country, or a desire to be closer to family members
- Live out a dream of relocating to a beach town, atop a snowy mountain, in a remote village, etc.
- Seek a lower cost of living by moving to another state — or continent
While these are all understandable reasons for wanting to pick up stakes, it becomes dicey when an employee does so without consulting human resources first, as it could potentially put the company at risk.
Risks Unapproved International Moves Pose for Employers
Employees who relocate without employer approval may put themselves — and the company — at risk of compliance, tax, visa, and security violations.
Compliance Risks
By moving to a country where your company doesn’t have a legal entity, an employee might inadvertently create a taxable presence for your company. This unintended permanent establishment (PE) can trigger local corporate income tax liabilities.
Depending on local employment law, you may also then be required to establish a local entity — a costly, time-consuming process — to employ that worker legally.
In addition, you’ll be responsible for complying with all local labor laws governing:
- Employment contracts
- Statutory employee benefits
- Taxes
- Minimum termination notice periods
- Severance pay
- And more
If the worker who relocated is a contractor, that poses its own potential issues.
Local laws differ, and businesses must be cautious about worker misclassification — treating a contractor as an employee, or vice versa.
If a relocated worker is determined to be an employee rather than a contractor, you may need to pay back taxes and benefit contributions, or risk costly legal disputes.
Tax Risks
In addition to the potential of owed corporate income tax due to creating a PE, your company may need to register with local tax authorities and withhold payroll taxes in the employee’s new country of residence.
Navigating social security contributions also becomes more challenging, since it can be difficult to determine whether you’re legally responsible for paying social security in your employee’s original home country, or the country they’re currently living in. Mistakes here might lead to double contributions or gaps in coverage.
Without a valid tax treaty between the two countries, the employee's income may also be subject to double taxation — once by their home country and once by the foreign country. Claiming tax relief often requires additional filings and documentation.
Finally, employer tax deductions can be impacted by an employee's move. Certain expenses may be treated differently for tax purposes depending on where the work is performed. You should always confirm deductibility with local tax advisers.
Visa and Immigration Risks
When employees relocate abroad without approval, they may unintentionally violate visa or immigration laws.
Many countries prohibit people from participating in paid work, even for a foreign employer, while on a tourist or short-stay visa. For example, in the Schengen Area, non-EU/EEA citizens can stay for a maximum of 90 days within any 180-day rolling period. However, employment of any kind is prohibited during that stay.
The fallout of working in another country without proper authorization can impact both the employee and employer. The worker may face deportation, fines, or long-term reentry bans, while a company may be investigated or penalized for non-compliance.
In some cases, the resulting fallout could mean your business is prohibited from sponsoring future visas or hiring in that region.
It's essential always to verify visa requirements for any country your worker intends to reside and work in, and to establish clear internal processes for approving international relocations.
Operational & Security Risks
If employees move abroad without proper approval and established processes in place, your business can face a range of challenges in managing employment in that region.
Daily logistics can become tricky, from scheduling meetings across time zones to tracking performance and collaborating on cross-team projects. This may lead to situations where employees attend mandatory local meetings but miss broader company-wide events, such as All Hands, which can erode employee engagement and loyalty.
Corporate insurance plans often don’t cover employees working outside the company’s registered jurisdictions, leaving both the business and the employee exposed in the event of an injury, cyber incident, or property loss.
Statutory benefits also vary by country, and employees may miss out on mandatory protections if the company isn’t aware of their overseas move. Failing to comply with these requirements can create legal risk and deny employees benefits they’re entitled to in their new location.
Additionally, employees handling personal or customer data may trigger new data protection obligations — such as GDPR — potentially exposing the company to significant fines and regulatory penalties if compliance isn’t maintained.
That's because even if your company is based in a country not governed by the GDPR, such as the U.S., you may still be liable under local data privacy laws for data processed by your overseas employees.
Preventing Stealth Relocation with HR Technology
If you're concerned about employees attempting to hide an unsanctioned move, consider utilizing HR or global workforce management tools that enable the monitoring of employee location data and flag potential discrepancies.
While VPNs and privacy concerns make monitoring location data challenging, these systems can help you identify risks early, particularly for compliance-sensitive roles, such as those that impact data security.
Review privacy and labor laws before investing in location-tracking HR tools, as you may be subject to state and federal regulations that require informed consent or limit tracking to working hours or business needs.
How to Set Policies for Relocation Transparency
Clear guidelines for relocation, along with the process for obtaining permission to work from a new location, provide the best protection against legal and compliance issues.
Create an internal process for reviewing requests that assesses:
- Tax exposure
- Immigration requirements
- Legal risks
- Data privacy
- Operational impact
The policy should specify which departments, such as HR, finance, and legal, must sign off on relocations; when the process applies (international versus interstate relocation); and what the request timeframe is to ensure all parties receive enough notice to make an informed decision.
Next, set relocation procedures that define:
- Where employees can live and work, including any known restrictions
- Who employees must notify and when (e.g., before they sign a lease)
- What information they must provide (e.g., destination, expected duration, reason for move)
- How requests are evaluated and documented
- Guidance on compensation and benefits adjustments (e.g., how their salary or benefits package will potentially change to remain compliant and equitable)
- Consequences for unauthorized moves (e.g., could include disciplinary action, up to and including termination)
Setting these boundaries upfront helps prevent accidental violations of local labor, payroll, or tax laws and reinforces accountability.
Preventative Measures & Best Practices
Although every scenario is different, some employees may be able to legally relocate and work abroad without causing compliance issues.
For example, the employee might be eligible for a visa or work permit that enables them to live and work in a specific country. Visa requirements vary and depend on factors like the employee’s nationality, role, and the planned duration of their stay.
If you opt to pursue a work visa for your employee, RemoFirst can assist with the application process in more than 85 countries, helping you navigate documentation, registration, and compliance requirements.
There’s also the digital nomad visa, available in over 60 countries, which lets remote workers live abroad temporarily while continuing to work for a foreign employer. These visas typically last from six months to two years and usually require proof of income, health insurance, and remote employment arrangements.
Another option for an international relocation or expansion is partnering with an Employer of Record (EOR). An EOR allows you to legally employ staff in another country by acting as the worker’s legal employer. The EOR handles all the HR complexities — from global payroll to taxes, benefits, and local compliance — and prevents the creation of a PE. The employer, meanwhile, maintains complete control over the employee’s day-to-day workload.
One caveat is that the EOR model is only viable if the employee you’re seeking to hire is legally entitled to work in the country where they’re living.
Manage and Pay Remote Global Employees With RemoFirst
Whether employees can work abroad compliantly depends on your company's legal structure, policies, visa requirements, and ability to comply with local laws, as well as any necessary adjustments to the benefit package and tax requirements.
But if your corporate culture supports global mobility, RemoFirst can help you and your employees navigate the process.
Our team handles the hard stuff, so you can focus on keeping your team productive and engaged. Schedule a demo to learn how RemoFirst simplifies global compliance and helps you manage and pay remote employees anywhere in the world.
