Yes, but this can lead to a number of implications for the employer.
Regardless of whether an employment contract governed by English and Welsh law is in place, an employee may acquire local employment rights if they work in another jurisdiction – these can include minimum rates of pay, annual leave and rights on termination of employment. To ensure the employer is properly protected across all relevant jurisdictions, we recommend instructing local employment counsel to advise on the arrangement and approve terms and conditions of employment.
If the employee is performing all of their duties of employment outside of the UK, they will likely be subject to tax in the country in which they are based, which will mean the UK employer is liable to deduct foreign tax from salary payments and pay this to overseas authorities. Further, it is important to note that there can be significant corporate tax implications if the employee’s activities or presence in the foreign country creates a permanent establishment for the company in that country. If a permanent establishment is created, the profits attributable to the company would be subject to corporate tax in the foreign country, which may be considerably higher than in the UK.
As a result, and because certain jurisdictions do not allow foreign entities to directly employ employees, some employers partner with an employer-of-record (“EOR”) that can serve as the employer for foreign employees. However, it is vital to do some research on the jurisdiction (and the EOR) before using a EOR to ensure it is the right fit for your business needs.
Some employers decide to onboard foreign workers as independent contractors, but please note that this may create a misclassification risk if the worker is deemed to be an employee. Assessment of whether a worker can be properly classified as an independent contractor will depend on the laws of the foreign jurisdiction in which the individual is based.