Remote work from abroad. Is it necessary to inform the employer?

In the era of the pandemic, more and more companies are opting to switch to remote work. It is not uncommon to encounter a situation where an employee working remotely for a Polish company is located outside the country. Are they allowed to do so, and more importantly, what consequences does this have for the employer?

The statutory definition of remote work is contained in Article 3(1) of the Act of 2 March 2020 on special solutions related to preventing, counteracting, and combating COVID-19. An employer may instruct an employee to perform, for a specified period, work defined in the employment contract outside the place of its usual performance. As a rule, there is nothing preventing an employee from working abroad. However, the legality of such action does not mean that the employer has nothing to worry about. The place of work performance is significant when it comes to payroll and other employment-related settlements and, in extreme cases, may lead to the necessity to tax the company’s profits abroad (so-called tax establishment).

The biggest challenge is the possibility of the employee being subject to foreign legislation in terms of calculating and remitting income tax advances, determining which law applies for social security purposes, and the amount of contributions due. This is especially risky when the employee is in a country with which Poland has not concluded a double taxation avoidance agreement. In such a case, the employee will be subject to taxation from the first day of stay during which work is performed. As a rule, the employer should then suspend withholding income tax advances in Poland or apply the appropriate double taxation avoidance method.

In the case of work in EU countries, tax authorities generally consider an employee a tax resident if they stay in a given country for more than 183 days in a tax year. This exposes the employer to the obligation to pay income tax abroad.

More about what determines an employee’s tax residency: Tax residency: how to protect yourself from double taxation?.

Temporary work abroad may trigger the application of EU rules on posting workers within the framework of service provision. Consequently, the employer may be obliged, for example, to pay wages in accordance with the conditions applicable in the country of the employee’s current stay or to fulfil a range of administrative obligations, failure to meet which on time may result in administrative penalties in another country.

Although there are no clear prohibitions in the regulations, the doctrine has an ongoing dispute regarding the employee’s free choice of the remote work location. It is beyond doubt that an employee may perform remote work at a place of residence or permanent stay known to the employer. However, failure to inform the employer about a long-term stay abroad poses significant risks to the employer related to tax, social security, and other formalities dependent on the given country.

Offer: Labour Law – Warsaw Law Firm

Employee Abroad – A Lifeline for Employers

Unfortunately, to protect their interests, employers will have to “replace” the legislator by taking care of their own interests. The most common practice is to obtain declarations from employees, in which they commit not to perform work abroad (or outside the EU) or not to stay abroad for more than 183 days in a tax year. More cautious employers regulate these issues in work regulations.

However, it should be remembered that the Labour Code limits the employee’s liability for damages, and if the employee breaches their obligation causing tax or contribution liabilities abroad, the employer will bear the responsibility. Under the current legal framework, there are no regulations that fully protect entrepreneurs from this risk.