Are you a digital nomad?

The appeal of the digital nomad lifestyle has changed the horizons. Businesses need to be aware that this is likely to be seen by highly skilled individuals as attractive, at least as an option. However, while most of the media focus in this area is on the liberating effect it can have on the individual, there are three key considerations before agreeing to working this way.

First, individuals who do not comply with visa restrictions and personal tax laws in the countries where they are working are taking a calculated risk. There is currently a low probability that a digital nomad on a tourist visa is going to appear on the radar of the immigration or tax authorities of a given country. Some countries, notably Estonia, are actively trying to capture some of this demographic as a way to attract young tech professionals in particular. However, many governments are building their capacity to police and enforce immigration restrictions and payment of personal taxes within their jurisdictions and businesses found to be complicit in individuals breaking tax or immigration law are exposed to regulatory, financial and reputational risk.

Second, in many of the countries in which people imagine themselves working in this way, such as France and India (to pick two diverse examples), individuals who are effectively doing the work of employees, even though they are working remotely for an overseas business, are entitled to the mandatory employment rights of the host country. In some countries, these rights will go much further than the familiar UK minimum entitlements and obligations. If the individual is found to be an employee in this way, the employer is also likely to be in breach of any applicable legal obligations, such as establishing or registering an employing entity in the relevant country and paying mandatory social security contributions.

Third, the fact that a given set of tasks and can be delivered remotely by a digital nomad is not a complete answer to the question of whether this is a good idea for the company and the individual. It is important that the company has practices and structures in place to ensure that someone working from the beach in Uruguay has the same connections to colleagues and exposure to developments within the organisation as someone located in the physical workplace.

Life as a digital nomad therefore is not all pure shores. The legal and tax implications of this way of working should be considered in full by employers and employees to mitigate the risks that can result from nomadic working.

To speak to Russell: rdann@clarkslegal.com