Globally remote working: employer tax and payroll obligations
Context and Challenge
Employers increasingly allow or discover that employees, executives and directors are working from countries other than their country of employment. The main challenge with globally remote working is that it can create tax, payroll, social security, immigration, employment law, corporate tax and governance obligations in more than one jurisdiction. Common symptoms include informal approvals without technical review, incomplete travel and location data, unidentified payroll withholding triggers, and assumptions that remote working removes compliance exposure. These obligations are easy to miss until a tax authority, auditor, investor or board raises the question.
Who Should Read This
UK employers, HR directors, finance directors, tax directors, company secretaries, reward teams, founders, general counsel, globally mobile executives, non-executive directors and professional advisers managing cross-border remote working requests.
Core Finding and Summary
Employers may have tax, payroll, social security, immigration, employment law and corporate tax obligations in any country where an employee, executive or director performs work — even where the arrangement is short-term, informal or employee-driven. The position depends on the country, role, duration, employing entity, contract, authority and reporting structure. Assess before work begins, document the basis for decisions taken, and implement controls.
In practice: Treat every overseas working arrangement as potentially creating compliance obligations unless a structured review confirms otherwise.
Technical reference: Where applicable, A1 certificates, Certificates of Coverage, tax treaty provisions and short-term business visitor agreements may provide specific relief, but these require active application and evidence.
Decision point
Is an employee, executive or director performing work in a country other than the country of employment, what is the nature and duration of those duties, who benefits from the work, and have payroll, tax, social security, immigration, employment law and corporate tax positions been assessed in each relevant jurisdiction?
The Issue
What triggers the issue?
An employee, executive or director works in a country other than their country of employment — whether formally approved, informally arranged or employer-unaware.
Why does it matter?
Non-compliance can lead to employer liabilities for tax, payroll withholding, pension contributions, social security, penalties, interest, immigration sanctions, employment law claims, permanent establishment exposure and governance failures.
What decision is needed?
Determine obligations in each relevant jurisdiction, apply available treaty or social security relief where supported by the facts, and implement a controlled approval and monitoring framework.
Technical Analysis
1.Legal and tax position
A globally remote worker is an employee, executive or director who performs duties in a country other than their country of employment. This includes individuals working from home overseas, travelling to client sites, attending meetings, performing project work, joining boards, or combining personal travel with working days.
Employment income is generally taxable in the country where the duties are physically performed. The country of employment may also retain the right to tax the same income. Tax treaty relief may be available under a relevant double taxation agreement, but relief depends on the specific treaty, the facts of the arrangement, the employing entity, the duration, and who bears the cost of the employment.
Tax residence is determined by the domestic rules of each country and by treaty residence tie-breaker provisions where the individual may be resident in more than one jurisdiction. A person does not need to become tax resident in a country in order to create a taxable event there. Employment income sourced to overseas working days may be taxable regardless of residence status.
For directors and office holders, the position is often more restrictive. Director fees and office holder income may be taxable in the country where the company is incorporated or where board duties are performed, even if the director is non-resident and performs no other duties in that country. Expenses such as travel and accommodation may also be treated as taxable in some locations.
The employer must assess the tax position in each country where work is performed, not only in the country where the employee is based.
2.Employer obligations
Employers may be required to operate payroll withholding, register with local tax authorities, file employer returns, operate shadow payroll, or apply modified payroll arrangements in any country where an employee performs work. These obligations can arise even where the employer has no legal entity, office or commercial presence in that country. A client in the host location may also be required to operate a shadow payroll as if it were the employer in some circumstances.
Social security obligations may arise for the employer and the employee. Within the EU/European Economic Area, an A1 certificate provides evidence which country's social security system applies for a specific period only. Without a valid A1 certificate, the employer may face dual social security liabilities. Outside the EEA, bilateral social security agreements (Certificates of Coverage) may apply but are not universal.
Employer registration requirements vary by country. Some jurisdictions require employer registration before payroll can be operated. Others impose registration obligations only above certain thresholds. The employer should not assume that the absence of a local entity removes the obligation to register.
Immigration is a separate but related issue. The employee must have the legal right to work in the country where they are performing duties. A right to reside does not always include a right to work, and a right to work for one employer does not always extend to another.
3.Employee and individual consequences
Employees working overseas may face personal tax return obligations in more than one country. They may become tax resident in the host country, lose tax residence in the home country, trigger capital gains, inheritance or wealth tax consequences, or lose access to pension reliefs, social security benefits or healthcare entitlements.
The employee may also acquire local employment law rights — including rights to notice, severance, working time protections, benefits and statutory entitlements — that the employer did not intend to create.
For senior executives and directors, the personal consequences may extend to regulatory status, professional registration, data protection, fiduciary obligations and personal liability.
Employers should ensure that employees understand the personal consequences of working overseas before the arrangement begins. Informal approvals without explanation can create a duty-of-care exposure for the employer.
4.Evidence and reporting requirements
Employers should maintain records that evidence where each employee, executive and director has performed work, for how long, in what capacity, under whose direction, and with what authority. Records may include travel data, HR approvals, calendar records, expense claims, payroll records, immigration records, employee self-certifications and board meeting attendance logs.
These records serve two purposes. They support the employer's compliance position if a tax authority reviews the arrangement. They also demonstrate that the employer took reasonable care to identify and manage cross-border obligations — a factor that can influence whether penalties are imposed.
For directors and senior executives, the reporting requirement is often higher because of the governance sensitivity of their roles, the visibility of their positions and the potential for permanent establishment or regulatory exposure.
5.Practical controls
A robust globally remote working framework should normally address the following elements: who can request overseas working, which countries are permitted, restricted or prohibited, how many overseas working days are allowed without escalation, whether directors and senior executives are subject to stricter rules, when payroll, social security, immigration, employment law and corporate tax review is required, what records must be kept, who approves exceptions, how the business monitors actual working location, and what happens if an employee works overseas without approval.
The framework should be practical enough for HR to operate and technically robust enough for tax, payroll, legal and governance teams to rely on. A policy without monitoring is not enough. A technical review without implementation is not enough. Globally remote working requires both judgement and control.
For employers with cross-border director populations, the framework should include specific provisions for board meeting locations, director fee arrangements, office holder analysis, treaty review and regulatory considerations.
Case Scenario
UK Employee Working Remotely from the Netherlands
Situation: A UK employer allows an employee to work from home in the Netherlands for an extended period. The employee remains on UK payroll, under a UK employment contract, reporting to a UK manager.
Issue: Whether Dutch tax, payroll, social security, employment law and corporate tax obligations arise for the employer and employee.
Analysis: The employee is physically performing duties in the Netherlands. Dutch employment income tax may apply to the Dutch-sourced working days. The employer may need to register with the Dutch tax authorities and operate Dutch payroll or shadow payroll. Without a valid A1 certificate, Dutch social security contributions may also arise. The employee may acquire Dutch employment law rights, including mandatory notice periods and benefits. Depending on the nature and duration of the arrangement, the employer's activities in the Netherlands may also raise permanent establishment questions.
Outcome: The employer is required to assess and manage Dutch obligations in parallel with the continuing UK position. Failure to do so creates potential liabilities for back-taxes, social security, penalties, interest and employment law claims.
Lesson: Every overseas working arrangement should be assessed across all relevant disciplines before it begins. The fact that the employee remains on UK payroll and under a UK contract does not remove the need to analyse the host-country position.
Fenton International's Advisory Position
Technical position?
Employer tax, payroll, social security, immigration, employment law and corporate tax obligations can arise in any country where an employee, executive or director performs work.
Professional judgement required?
Yes — depends on jurisdiction, role, duration, treaty, employing entity, contract, authority, reporting structure and interaction between disciplines.
Main risks:
Tax
payroll
social security
pension contibutions
immigration
employment law
corporate tax / permanent establishment
governance
reputational
cost
evidence
Evidence needed:
Travel records
HR approvals
working location data
calendar records
expenses
payroll
contracts
immigration permissions
social security certificates
board meeting records
Recommended controls
Pre-approval assessment
country risk ratings
working day thresholds
director-specific procedures
tracking
payroll review
training
escalation triggers
monitoring
Professional Judgement & Advisory Application
Professional judgement is required where the arrangement spans multiple jurisdictions with differing domestic rules and treaty provisions, where the individual holds a senior, revenue-generating or director role, where social security, immigration and employment law obligations interact with the tax position, or where the facts are incomplete, evolving or contested.
Fenton International's judgement and recommendation: assess the tax, payroll, social security, pension, immigration, employment law and corporate tax position across all relevant jurisdictions before the individual begins working overseas, document the basis for the position taken in each jurisdiction, and apply controls before compliance exposure arises. For directors and senior executives, apply a stricter review threshold and ensure the governance record supports the position taken.
Frequently Asked Questions
Does a remote working arrangement automatically remove UK tax and payroll obligations?
No. A UK employer may retain UK PAYE and National Insurance obligations even when the employee works overseas. The UK position depends on the employment contract, the employing entity, the duties performed, and the terms of any relevant tax treaty. Working overseas does not automatically extinguish UK obligations.
Can an employer rely on a tax treaty to avoid payroll obligations in the host country?
Not automatically. A double taxation agreement may ultimately exempt the employee from income tax in the host country, but it does not automatically eliminate the employer's local payroll registration, withholding, social security or reporting obligations. Treaty relief usually requires active application, evidence and, in some cases, prior approval from the host-country tax authority.
What records should employers keep for globally remote workers?
Employers should maintain evidence of where each individual has worked, for how long, in what role, under whose direction, and with what authority. This typically includes travel records, HR approvals, calendar data, expense claims, payroll records, immigration records, employee self-certifications and, for directors, board meeting attendance records.
When should professional advice be taken on a remote working arrangement?
Before the arrangement begins, or as soon as an employer becomes aware that an employee, executive or director is working overseas. Early review allows the employer to design the arrangement correctly, apply available relief and implement controls. Retrospective review is more expensive, more complex and may not fully resolve historic exposure.
How Fenton International Can Help?
Fenton International advises employers, senior executives, directors and professional advisers on cross-border employment tax, global mobility and international people advisory when individuals work across borders.
Cross-border payroll and employment tax review
Tax treaty and social security analysis
Non-resident director compliance
Permanent establishment and corporate tax risk assessment
Discuss this issue: Contact Fenton International for a cross-border director tax and compliance review.
Author
Mark Abbs, CEO, Fenton International
Fellow of the Association of Taxation Technicians (FATT)
Enrolled Agent of the IRS (EA)
Global Mobility Specialist – Talent Management (GMS-T)
Accredited Expert Witness (MAE)
32+ years' experience in international tax, cross-border employment tax and global mobility
Advises CFOs, HRDs, and Chairs on cross-border tax governance
Head of Advisory at Global Tax Network
Former Tax Partner, Head of International and Senior Leadership Team at Blick Rothenberg and Senior Tax Adviser in the Big 4.
Key terms: globally remote working, work from anywhere, cross-border employment tax, employer payroll obligations, social security, A1 certificate, permanent establishment, non-resident directors, immigration, global mobility compliance, remote working policy, PAYE, National Insurance.
Scope note: This Insight provides a general framework for employer obligations arising from globally remote working. It does not provide jurisdiction-specific compliance guidance for individual countries. Separate Insights are available for specific corridors (e.g. UK–Netherlands, UK–Germany, UK–US) and for non-resident director obligations. This Insight does not cover self-employed individuals, independent contractors, or employer-of-record arrangements.
Jurisdiction: UK / Multi | Last reviewed: June 2026 | Next review due: December 2026 | Insight type: Technical Guide
© 2026 Fenton International. All rights reserved.
This article is general information and not legal or tax advice. Professional advice should be taken for specific circumstances.
