Employment law and immigration law are two distinct areas of law. On occasion, they meet each other and can create headaches for employers. We examine what happens when immigration law collides with discrimination law, unfair dismissal law and TUPE.

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Employment and immigration: an uncomfortable relationship?

It can be helpful to think of employment law and immigration law as two awkward siblings. They usually get along fine, sometimes they even work together well, but they are distinct beings. Occasionally, they get in each other’s way. When we consider their overarching structure and purpose, the potential for conflict between these bodies of law is clear:

• Employment law governs how the working relationship functions. It is concerned with rights for employees e.g. rights to pay and notice, protection from discrimination and unfair dismissal etc. Employment tribunals and civil courts hear disputes between employers and employees. If an employer breaches employment law, an employee may lodge a claim. If the employee wins, in many cases the employer will be ordered to pay compensation

• Immigration law exists in a parallel world in which the Home Office is king. Immigration law dictates how someone can join a UK workforce from abroad. The Home Office sets, monitors and enforces immigration rules. A fundamental principle is that all employees must have the ‘right to work’ for their employer in the UK. Most non-British/Irish workers need to obtain and hold a work visa before they can do their job in the UK. A failure to follow the rules – for example, working without appropriate immigration permission – may result in the Home Office taking action against the employer and/or the employee.

We consider three of the most common scenarios in which immigration and employment issues overlap.

Can an employer reject job applicants who do not have the right to work in the UK?

Immigration law versus discrimination law

Immigration law is discriminatory. It creates a two-tier hierarchy of job applicants and employees, divided along nationality lines. British and Irish nationals can start any job in the UK without anything other than an assessment of their professional credentials. But other nationals, for the most part, need something more. To hire a migrant who does not already hold some form of immigration status that enables them to work in the UK, an employer will usually have to “sponsor” that individual under a work visa (e.g. a Skilled Worker visa). The employer must first have obtained a “sponsor licence” from the Home Office. The grant of that licence requires the employer to understand and fulfil various compliance obligations. Then, the candidate needs to apply for a visa, which involves satisfying eligibility criteria and the payment of fees to the Home Office (commonly covered by the employer). Because of these financial and administrative hurdles, a question we are sometimes asked is: can an employer automatically reject candidates who do not already have the right to work in the UK?

The employment right at play here is protection from discrimination. All workers and job applicants in the UK enjoy the right not to be discriminated against in relation to certain protected characteristics (including race, ethnicity and nationality). The Home Office has issued guidance for employers in the form of a statutory code of practice: ‘Avoiding unlawful discrimination while preventing illegal working’. The code states:

Employers should:

• be consistent in how they conduct right to work checks on all prospective employees, including British citizens

• ensure job selections are made on the basis of suitability for the post

• ensure that no prospective job applicants are discouraged or excluded, either directly or indirectly, because of known or perceived protected characteristics

Employers should not:

• discriminate when conducting right to work checks

• only check the status of those who appear to the employer likely to be migrants

• make assumptions about a person’s right to work in the UK or their immigration status on the basis of their colour, nationality, ethnic or national origins, accent, surname or the length of time they have been resident in the UK

An employment tribunal may take the Code into consideration when determining whether discrimination has occurred.

Can a rejection policy be justified?

An automatic rejection policy based on right to work status is likely to be “indirectly” race discriminatory against a group of job applicants, namely non-British/Irish nationals (meaning the policy technically applies to all applicants, but in practice has a particularly detrimental effect on a particular group). Indirect discrimination can, however, be “objectively justified” if it is found to be a “proportionate means of achieving a legitimate aim”. This means that an indirectly discriminatory policy could potentially be lawful if the employer has a good reason for it, and there are not other, less discriminatory, ways of achieving the same aim. What is or is not a valid justification will turn on the particular facts presented to an employment tribunal.

The first question is whether the employer has a “legitimate aim” – put simply, a good reason – for the policy. This, of course, depends on the specific context and facts. But, as a general point, the case law in this area is underdeveloped and not particularly favourable to employers. The leading case – Osborne Clarke v Purohit – is from 2009 and long pre-dates the current immigration system but remains binding on tribunals. It concerned a law firm’s policy of excluding candidates from trainee solicitor roles if they did not already have the right to work. The Employment Appeal Tribunal found that the policy did amount to unlawful indirect race discrimination as it could not be objectively justified on the basis of cost alone, especially in light of the firm’s ample resources. Instead, the firm should have conducted the recruitment process on merit ‘as normal’. It should only have thought about sponsorship questions towards the end of the process.

The Home Office code of practice (mentioned above) reinforces that central takeaway message, stating that employers should “ensure job selections are made on the basis of suitability for the post” (although both the judgment and the code do state that there is no obligation to sponsor someone). An employer considering implementing an automatic rejection policy should therefore be aware of the risk of relying only on costs to justify such policies, with the risk that a spurned job applicant would lodge an indirect discrimination claim with an employment tribunal.

Although this case remains binding, the immigration system of today is more complex and costly than it once was. An employer may, therefore, have more success if these kind of “objective justification” arguments were presented now (although, to our knowledge, the point is untested). For example, some employers have taken a view that a rejection policy for lower paid roles may be more likely to be justified, because roles paying less than £25,600 a year are, generally, ineligible for sponsorship under the Skilled Worker route. However, this is not a hard-and-fast rule. Some employees can be sponsored on an annual salary of less than £25,600. As a result, an employer would be well advised to think through this issue in detail, with careful consideration given to the reasons behind its policy. We recommend that legal advice is sought at an early stage.

Immigration fee clawbacks

As an alternative means of managing the cost of sponsoring an employee, increasingly employers are asking sponsored employees to sign up to ‘clawback’ repayment agreements. These see the sponsored employee being required to repay some or all of the fees associated with their visa application if the employment relationship ends. However, these arrangements are not without legal risk. An employee may argue that it is an unlawful penalty clause, an unlawful restraint of trade, or a discriminatory measure. Careful drafting is essential, with mechanisms such as ‘tapering’ the amount of the repayment over time and including a ‘sunset’ provision often advisable. It should also be noted that the Home Office prohibits a sponsor from passing on the cost of any Immigration Skills Charge it has paid.

Should an employer dismiss an employee who does not hold the right to work in the UK?

Immigration law versus unfair dismissal law

Immigration law requires that all employees have the right to work for their employer in the UK. If an employer suspects that an existing employee does not have the right to work for them in the UK, continuing the employment relationship may pose compliance risks for the employer. On the other hand, employment law says that employees with two years’ service have the right not to be “unfairly” dismissed from their job. Further, all employees (regardless of their length of service) have the right not to be treated in a discriminatory way. So, how should an employer handle a situation where it comes to light that an employee may not hold the right to work? Balancing the immigration and employment risks in this situation can be challenging.

Conducting right to work checks and investigating immigration status

The first thing to note is how the UK’s right to work regime operates. If an employee works without immigration permission, the Home Office considers them to be an “illegal” worker. The employer would be liable to receive a civil penalty (a financial penalty of up to £20,000) in respect of each illegal worker. It may even face criminal prosecution if it knew or should have known of the illegal working in question. However, if an employer properly undertook a right to work check, they will receive a “statutory excuse” against a civil penalty in respect of that illegal worker. If a worker does not hold the right to work, but the employer did a compliant right to work check before the start of their employment, the employer will not be liable for a civil penalty.

There is no obligation to do follow-up right to work checks during the employment relationship, except where an employee has time-limited immigration permission. However, it may come to light that an employee who once had the right to work in the UK may no longer continue to hold that right. For example, they may have forgotten to apply for an extension of their immigration permission before it expired. If an employer becomes aware of the possibility that an employee has lost their right to work in the UK, swift and considered action is advisable, because the continued employment of an employee without immigration permission may pose serious immigration risks for the employer.

But the employment law dimension must not be forgotten. To minimise employment risks, the employer should promptly try to investigate the employee’s right to work status. However, there is an obvious conflict here: while there is a need to undertake a form of procedure to mitigate the employment risks, there is also a need for urgent action to mitigate the immigration risks.

A fair procedure would probably involve the employer meeting with the employee. The employee should be encouraged to provide information that would be helpful in determining their immigration status.

The employer may also wish to conduct a check using the Home Office’s Employer Checking Service, because a ‘Positive Verification Notice’ would give the employer a statutory excuse against liability for a civil penalty for six months. Caution should be exercised even if a ‘Negative Verification Notice’ is received. This can sometimes happen where an individual does actually have the right to work e.g. where an application or appeal has not yet been logged on the Home Office’s systems or it has not been registered that the person is a Windrush generation individual. We recommend that immigration law advice is sought in this scenario.

If the employer, having conducted its investigation, concludes that the employee probably does not have the right to work, dismissal may well be appropriate – and, potentially, necessary. However, a failure to follow a fair procedure and arrive to an informed decision may prompt the employee to lodge an unfair dismissal and/or discrimination claim.

Dismissing for right to work reasons

If, following a fairly conducted investigation, the employer reaches a conclusion that dismissal is unavoidable, the termination letter should include:

• a description of the investigation;

• a reference to the right to work provisions in the employment contract;

• the reason for the dismissal (taking the form of “because we believe that you do not have the right to work”, rather than “because you do not have the right to work”);

• the right of appeal; and

• potentially an offer of re-engagement if the employee can prove they have the right to work.

We recommend that full legal advice on how to handle these scenarios is sought on a case-by-case basis both because of the risk of tribunal claims and also because an employee who seemingly does not have the right to work may, in fact, actually have that right.

Does a TUPE transfer of sponsored employees require the new employer to do anything?

Most employment lawyers are familiar with the Transfer of Undertakings (Protection of Employment) Regulations 2006 (aka “TUPE”). After a TUPE transfer, employees’ terms and benefits are preserved when their employment transfers to the new employer. However, the ways in which TUPE interacts with immigration law are less well understood. Consequently, it is not uncommon to overlook a couple of important immigration-related issues in corporate transactions.

Post-transfer right to work checks

Under TUPE, right to work checks that were done by the seller of the transferring business are deemed to have been done by the buyer. In other words, the buyer will get the benefit of a statutory excuse that the seller obtained in relation to a transferring illegal worker. The flip side of this is that if the seller did not do proper right to work checks, and so did not obtain a statutory excuse for a transferring illegal worker, the buyer will potentially be liable for a civil penalty in respect of that person.

For this reason, the buyer would be well advised to undertake due diligence on whether the seller has done compliant right to work checks. The transaction paperwork (e.g. the asset purchase agreement) should address the issue in the form of appropriate warranties and/or indemnities. Then, after the transfer, the buyer should ensure that it conducts fresh right to work checks on those transferring employees. There is a grace period of 60 days from the transfer date to do so.

Sponsor licence notification or application

If the TUPE transfer involves the transfer of sponsored employees, both the buyer and the seller must notify the Home Office of the change of sponsor. They must do so within a relatively short period of 20 working days from the date of the transfer. If the buyer does not itself already hold a sponsor licence of its own, it must apply for one from the Home Office and prepare to assume responsibility for the sponsorship of those employees. The window for applying is, again, 20 working days from the date of the transfer. A failure to make an application will likely mean that the Home Office cancels the sponsored employees’ immigration permission. Both parties to the TUPE transfer must therefore be alive to their post-completion obligations and the transaction agreements should be drafted accordingly.

If a sponsored employee’s duties and responsibilities will change, such that the transfer is outside the scope of TUPE, this would usually require a fresh immigration application to be made to authorise them to start working in the new position for their new employer.

Any questions?

Although this article considers aspects of some of the more commonly encountered questions that we deal with, it cannot give a full account of the various dimensions and complexities of each scenario. We therefore strongly recommend that full legal advice is sought on a case-by-case basis when handling these difficult questions in practice. If you need assistance, please do get in touch with a member of our Employment Team or Immigration Team.

Related Item(s): Employment, Immigration

Author(s)/Speaker(s): Tom McEvoy,

During the Covid-19 pandemic many employees asked if they could work from “home” from an overseas country. Similarly, employees from overseas countries asked if they could work remotely in Ireland. Two years on, these flexible working arrangements remain attractive to employees and employers may consider allowing employees to work remotely overseas. There are important legal and practical issues associated with these requests, which are explained in this note.

Text:

Please click download files to read the full note.

The content includes:

• Applicable laws and employee rights
• Income tax and social security implications
• Immigration implications
• Regulatory issues
• Information security, data protection and data privacy issues
• Confidential information implications
• Health and safety implications
• Permanent establishment risk

This note is reproduced from Practical Law with the permission of the publishers. For further information, visit www.practicallaw.com.

Related Item(s): UK & Ireland, Employment, Remote working overseas

Author(s)/Speaker(s): Laura Ensor, Síobhra Rush,

Attachment: Ireland: Remote working overseas PDF

During the Covid-19 pandemic many employees asked if they could work from “home” from an overseas country. Similarly, employees from overseas countries asked if they could work remotely in Ireland. Two years on, these flexible working arrangements remain attractive to employees and employers may consider allowing employees to work remotely overseas. There are important legal and practical issues associated with these requests, which are explained in this note.

Text:

Please click download files to read the full note.

The content includes:

• Applicable laws and employee rights
• Income tax and social security implications
• Immigration implications
• Regulatory issues
• Information security, data protection and data privacy issues
• Confidential information implications
• Health and safety implications
• Permanent establishment risk

This note is reproduced from Practical Law with the permission of the publishers. For further information, visit www.practicallaw.com.

Related Item(s): UK & Ireland, Employment, Remote working overseas

Author(s)/Speaker(s): Laura Ensor, Síobhra Rush,

Attachment: Ireland: Remote working overseas PDF

On 20 July 2022 the Home Office published further details of its strategy to deliver an end-to-end digital immigration system. The planned system transformation will involve a digital process for applying for permission to travel and identity verification for immigration applications, as well as using eVisas to cross the border and demonstrate entitlements within the UK.

Text:

The New Plan for Immigration: legal migration and border control strategy covers the Home Office’s vision across the following areas:

• Planning to come to the UK

• Making an application

• Travelling to the UK

• Crossing the border

• Living in the UK

• Cross-system improvements

Planning to come to the UK

The Home Office intends to:

• Provide clearer customer guidance on GOV.UK, with a simplified set of guidance for work visas due to be available later in 2022;

• Roll out additional interactive customer support tools, building on the success of tools such as Check if you need a UK visa and Check if you may be eligible for a Skilled Worker visa;

• Produce a series of ‘how to’ videos to assist customers to complete tasks such as making an application for an Electronic Travel Authorisation (ETA), proving their identity or making an application for a sponsor licence;

• By 2025, have in place a fully digital end-to-end process for individuals using the UK immigration system;

• Reduce customer queries through improved customer information and application processes; and

• Provide digital self-service support for customer queries using chatbot and voicebot services.

Applying to come to the UK

‘Digital by default’ system

The ‘digital by default’ agenda for the immigration system will be pursued further, with more people being able to enrol their biometrics digitally (or being able to reuse previously enrolled biometrics), making their application online and receiving an eVisa rather than physical proof of their status.

eVisas

eVisas are considered by the Government to be more secure, up-to-date and convenient to apply for and maintain. However, there are currently known issues with EU Settlement Scheme participants being able to access their UKVI account, which the Independent Monitoring Authority is currently investigating. Minimisation of such issues, combined with an effective resolution centre service will be critical to ensuring that individuals are not disadvantaged. The Home Office has stated that from 2023 their customer service agents will be in-house experts able to view all of the customer’s immigration interactions via one view.

Improvements are being made to the digital customer account this year and next year to enhance useability. The Home Office is also exploring opportunities to link up government information and services, including through the government’s One Login initiative.

Visa vignettes and biometric immigration documents (biometric residence permits and cards) are due to be replaced by eVisas by December 2024. This deadline coincides with the expiry of a large number of existing biometric immigration documents. These are currently only valid to 31 December 2024, even if the holder’s immigration permission expires after this date.

Originally the reason for short-dating was due to the current encryption technology in the cards not meeting EU requirements from 1 January 2025. However, since the UK left the EU, the Home Office has continued to short-date with the expectation that the cards will be phased out by the end of 2024. Individuals will be given guidance on how to convert the proof of their status to an eVisa by this date.

Although not covered in the strategy document, employers will also need to be prepared to carry out an online repeat right to work check for employees with limited immigration permission who relied on a short-dated biometric residence permit as evidence of their right to work. The volume of these checks will be significant for larger employers.

Sponsorship

In terms of recent developments, the Home Office has put in place automatic checks with HMRC to be able to verify whether skilled workers are being paid in line with their certificate of sponsorship.

The timelines for sponsorship reform have been revised due to resourcing limitations. This most likely refers to the need for resources to be diverted to processing Ukraine Scheme applications.

The planned review of service standards to reduce the time needed to sponsor workers is now anticipated to be in place by Spring 2023. The new ‘Sponsor a Visa’ service is now anticipated to go live for limited roll-out in early 2023. The ‘Manage a Licence’ service is due for limited delivery by late 2023 and the ‘Become a Sponsor’ service by early 2024.

Travelling to the UK

A permission to travel scheme will be put in place in 2023, under which all travellers will either need a British or Irish passport, eVisa or Electronic Travel Authorisation (ETA). This could have significant cost and practical implications for individuals who are currently demonstrating their long-term residence in the UK using physical documents, for example an indefinite leave stamp or certificate of entitlement to the right of abode.

ETAs are expected to be implemented in three phases, firstly in Q1 2023 for a private beta release, secondly in Q2-Q3 2023 for nationals who are currently eligible for an electronic visa waiver, and thirdly in Q3-Q4 2023 for the rest of the world.

Carriers will also become able to access a single permission to travel confirmation message from the Home Office when they submit Advance Passenger Information (API) regarding travellers who are due to board services to the UK. Initial testing of an interactive API system (iAPI) has already taken place in April 2022, and integration of a messaging system for all carriers is expected to be completed by early 2024.

Crossing the border

The Home Office hopes to improve and standardise border infrastructure and facilities by 2025. It will also aim to deliver greater levels of automation for processing arriving passengers and improved availability and functionality of eGates. There is a proposal to reduce the qualifying age for using an eGate from 12 to 10.

The role of Border Force Officers will be focused on passengers of interest, e.g. those whose identity needs to be verified, who have a risk profile, where there is specific intelligence, agency directed intervention or a safeguarding concern. Border Force may also be reformed as an organisation, in line with the recommendations arising from the Independent review of Border Force, published on 20 July 2022.

Living in the UK

The main planned change in this area will be increased system-to-system communication of immigration status information between Government departments and public authorities.

Information sharing of this type is already in place with the Department for Work and Pensions (DWP), HM Revenue and Customs (HMRC) and NHS England and Wales. In 2022 and 2023 these will be expanded to the DVLA, Social Security Scotland, the Student Loans Company and some local authorities.

This development may result in increased convenience for many individuals who currently need to go online to prove their rights to third parties. However, there are also risks of substantial detriments to individuals if the system data on immigration status is not correct and any errors cannot be swiftly and effectively addressed.

Communications and engagement

The Home Office intends to run communication campaigns for system users as its programme of changes progresses. These will cover topics such as the upcoming requirement to apply for an ETA, as well as how to use eVisas, UKVI accounts and online services.

The Home Office will also continue to take advice from advisory groups and key stakeholders including those in business, academics and the non-profit sector. Some engagement events will be delivered in person.

If you have any queries about the strategy document or the issues raised in this article, please get in touch with a member of our Immigration Team.

Related Item(s): Immigration

Author(s)/Speaker(s): Andrew Osborne, Stephen OFlaherty, Parvin Iman, Tara Sayer,

On 20 July 2022 the Home Office published further details of its strategy to deliver an end-to-end digital immigration system. The planned system transformation will involve a digital process for applying for permission to travel and identity verification for immigration applications, as well as using eVisas to cross the border and demonstrate entitlements within the UK.

Text:

The New Plan for Immigration: legal migration and border control strategy covers the Home Office’s vision across the following areas:

• Planning to come to the UK

• Making an application

• Travelling to the UK

• Crossing the border

• Living in the UK

• Cross-system improvements

Planning to come to the UK

The Home Office intends to:

• Provide clearer customer guidance on GOV.UK, with a simplified set of guidance for work visas due to be available later in 2022;

• Roll out additional interactive customer support tools, building on the success of tools such as Check if you need a UK visa and Check if you may be eligible for a Skilled Worker visa;

• Produce a series of ‘how to’ videos to assist customers to complete tasks such as making an application for an Electronic Travel Authorisation (ETA), proving their identity or making an application for a sponsor licence;

• By 2025, have in place a fully digital end-to-end process for individuals using the UK immigration system;

• Reduce customer queries through improved customer information and application processes; and

• Provide digital self-service support for customer queries using chatbot and voicebot services.

Applying to come to the UK

‘Digital by default’ system

The ‘digital by default’ agenda for the immigration system will be pursued further, with more people being able to enrol their biometrics digitally (or being able to reuse previously enrolled biometrics), making their application online and receiving an eVisa rather than physical proof of their status.

eVisas

eVisas are considered by the Government to be more secure, up-to-date and convenient to apply for and maintain. However, there are currently known issues with EU Settlement Scheme participants being able to access their UKVI account, which the Independent Monitoring Authority is currently investigating. Minimisation of such issues, combined with an effective resolution centre service will be critical to ensuring that individuals are not disadvantaged. The Home Office has stated that from 2023 their customer service agents will be in-house experts able to view all of the customer’s immigration interactions via one view.

Improvements are being made to the digital customer account this year and next year to enhance useability. The Home Office is also exploring opportunities to link up government information and services, including through the government’s One Login initiative.

Visa vignettes and biometric immigration documents (biometric residence permits and cards) are due to be replaced by eVisas by December 2024. This deadline coincides with the expiry of a large number of existing biometric immigration documents. These are currently only valid to 31 December 2024, even if the holder’s immigration permission expires after this date.

Originally the reason for short-dating was due to the current encryption technology in the cards not meeting EU requirements from 1 January 2025. However, since the UK left the EU, the Home Office has continued to short-date with the expectation that the cards will be phased out by the end of 2024. Individuals will be given guidance on how to convert the proof of their status to an eVisa by this date.

Although not covered in the strategy document, employers will also need to be prepared to carry out an online repeat right to work check for employees with limited immigration permission who relied on a short-dated biometric residence permit as evidence of their right to work. The volume of these checks will be significant for larger employers.

Sponsorship

In terms of recent developments, the Home Office has put in place automatic checks with HMRC to be able to verify whether skilled workers are being paid in line with their certificate of sponsorship.

The timelines for sponsorship reform have been revised due to resourcing limitations. This most likely refers to the need for resources to be diverted to processing Ukraine Scheme applications.

The planned review of service standards to reduce the time needed to sponsor workers is now anticipated to be in place by Spring 2023. The new ‘Sponsor a Visa’ service is now anticipated to go live for limited roll-out in early 2023. The ‘Manage a Licence’ service is due for limited delivery by late 2023 and the ‘Become a Sponsor’ service by early 2024.

Travelling to the UK

A permission to travel scheme will be put in place in 2023, under which all travellers will either need a British or Irish passport, eVisa or Electronic Travel Authorisation (ETA). This could have significant cost and practical implications for individuals who are currently demonstrating their long-term residence in the UK using physical documents, for example an indefinite leave stamp or certificate of entitlement to the right of abode.

ETAs are expected to be implemented in three phases, firstly in Q1 2023 for a private beta release, secondly in Q2-Q3 2023 for nationals who are currently eligible for an electronic visa waiver, and thirdly in Q3-Q4 2023 for the rest of the world.

Carriers will also become able to access a single permission to travel confirmation message from the Home Office when they submit Advance Passenger Information (API) regarding travellers who are due to board services to the UK. Initial testing of an interactive API system (iAPI) has already taken place in April 2022, and integration of a messaging system for all carriers is expected to be completed by early 2024.

Crossing the border

The Home Office hopes to improve and standardise border infrastructure and facilities by 2025. It will also aim to deliver greater levels of automation for processing arriving passengers and improved availability and functionality of eGates. There is a proposal to reduce the qualifying age for using an eGate from 12 to 10.

The role of Border Force Officers will be focused on passengers of interest, e.g. those whose identity needs to be verified, who have a risk profile, where there is specific intelligence, agency directed intervention or a safeguarding concern. Border Force may also be reformed as an organisation, in line with the recommendations arising from the Independent review of Border Force, published on 20 July 2022.

Living in the UK

The main planned change in this area will be increased system-to-system communication of immigration status information between Government departments and public authorities.

Information sharing of this type is already in place with the Department for Work and Pensions (DWP), HM Revenue and Customs (HMRC) and NHS England and Wales. In 2022 and 2023 these will be expanded to the DVLA, Social Security Scotland, the Student Loans Company and some local authorities.

This development may result in increased convenience for many individuals who currently need to go online to prove their rights to third parties. However, there are also risks of substantial detriments to individuals if the system data on immigration status is not correct and any errors cannot be swiftly and effectively addressed.

Communications and engagement

The Home Office intends to run communication campaigns for system users as its programme of changes progresses. These will cover topics such as the upcoming requirement to apply for an ETA, as well as how to use eVisas, UKVI accounts and online services.

The Home Office will also continue to take advice from advisory groups and key stakeholders including those in business, academics and the non-profit sector. Some engagement events will be delivered in person.

If you have any queries about the strategy document or the issues raised in this article, please get in touch with a member of our Immigration Team.

Related Item(s): Immigration

Author(s)/Speaker(s): Andrew Osborne, Stephen OFlaherty, Parvin Iman, Tara Sayer,

Spain has long been the favoured holiday destination for many sun-seeking Brits. The proposed introduction of a new digital nomad visa, opening the door to both “working holidays” and longer term relocations, will therefore be welcome news to employees.

Text:

But will these potentially complex arrangements now be more straightforward for employers to navigate? We consider the potential employment, immigration and tax implications.

The pandemic saw a surge in requests from employees to work remotely in another country, often for an extended period. Initially, requests were usually short-term relocations related to the crisis. Increasingly, however, requests have involved permanent or semi-permanent moves abroad, with the trend continuing even though the public health crisis has now abated.

The challenges of the “digital nomad”

Such requests create headaches for employers. No one wants to upset their staff or put themselves on the backfoot in the war for talent. At the same time, employers are faced with a litany of legal issues which we have considered in detail before. Would the employee’s activities in the third country create a “permanent establishment” for corporation taxes? Would the employer need to register to withhold income tax, and pay employer social security charges? Does the employee have the right to work, or could the employer find itself facing immigration penalties? Would the employee find themselves in possession of a host of local employment rights, able to take the employer to a local labour court they know little about in the event of a dispute? Will the local labour inspector come knocking at the employee’s door? What about data protection? Regulatory issues? Health and safety?

It’s therefore understandable that employers tend to tread carefully on this issue. This can mean requests being refused, authorisations time limited, or permission being granted only in specific circumstances (such as where there is an existing local entity that can employ staff). Employers of record present one possible solution, but this arrangement is not without its own challenges.

Digital nomad visas – the legal implications

Is there a better way? Some countries think so: the Bahamas was fastest off the mark with a “digital nomad visa”. The basic premise behind this is that, in return for attracting well paid staff to come and spend their earnings in the local economy, the visa conditions mean that employers won’t need to worry about any of these complex issues. Countries as diverse as Estonia and the UAE have since followed suit.

Now comes a possible game changer for British employers: the so called “Start-up Law” recently introduced as a bill in the Spanish Parliament, with approval anticipated by the end of 2022. This seeks to establish a brand-new visa and residence permit for “digital nomads” which will permit people working remotely for foreign companies to live in Spain without needing a full work visa or a local sponsoring entity.

This latest development will be of particular interest to many UK employers, given Spain’s huge popularity as both a tourist and second home destination for Brits; at end of 2020 it was estimated that there were over 380,000 British citizens residing in Spain. However, employers will need to pay close attention to the detail: although the new visa will make life easier as far as immigration law is concerned, there remains a potential sting in the tail with respect to tax and employment law.

Immigration law

If approved, the bill will be a turning point in terms of Spanish immigration law. Permit-holders will be allowed to work remotely in Spain provided that their employer is located abroad and does not operate a Spanish entity. In addition, self-employed “freelancers” will be able to work for Spanish clients, provided that the time spent does not exceed 20% of the individual’s professional activity.

Under the proposed legislation there are two main immigration routes available for individuals:

• Visa for international remote work: this is intended for qualified professionals, graduates, postgraduates of renowned universities, vocational education, and renowned business schools or applicants with at least three years of professional experience.

Foreign nationals (not ordinarily residing in Spain) who intend to stay and work remotely for a non-Spain-based company would be able to apply for a visa which will be valid for up to one year, or the duration of their employment contract if shorter.

Visa holders would also have the right to apply for a “residence permit for international remote work”, starting 60 calendar days prior to the expiry of their visa, provided the conditions that led to their original visa being granted are still satisfied.

• Residence permit for international remote work: foreign nationals who either hold the “visa for international remote work”, or who otherwise have legal status to reside in Spain, would be able to apply for this type of permit.

This permit would be valid for up to three years, or the duration of the contract if shorter. Thereafter, holders would have the right to renew their permits for periods of two years, provided that the conditions of its original approval continue to be met.

Employment law

The employment law implications of the proposed visa, however, are more complex. If employees work remotely in Spain for UK employers under the new visa, the arrangement will not qualify as a “secondment” under the Spanish legislation that implements the EU Posted Workers Directive. This means that (under this legislation at least) none of the local legal protections associated with secondments – including the obligation to grant to seconded employees certain minimum employment rights and conditions – would apply.

Even where visa holders’ contracts are governed by UK law, the position on whether local employment rights will apply is not straight forward. Although an individual employment contract may be governed by the law agreed between the parties, this choice of law is not unfettered; under EU rules, certain mandatory rules (meaning those which can’t be derogated from by agreement) cannot be contracted out of.

This begs the question which mandatory rules trump this choice of law? These are the mandatory rules of the country:

• in which the employee “habitually” carries out their work;

• in which the place of business through the employee was engaged is situated; or

• which is “more closely connected” with the contract based on all existing circumstances.

When a comparison is made between the law chosen by the parties and the applicable mandatory rule, whichever gives greater protection to the employee will apply.

In this context, this means that Spanish legislation in its entirety (including applicable industry-wide Collective Bargaining Agreements (CBA)) would apply to UK employees working remotely in Spain if the following conditions are met:

• the Spanish legislation grants them enhanced rights when compared with UK legislation; and

• the employee will habitually carry out their work in Spain (placing importance on determining how much time the employee will stay in Spain working remotely as compared to their time spent providing services from the UK), or the employee is able to prove stronger ties with Spain than with the UK (for example: if social security contributions are paid in Spain; the employee becomes a Spanish tax resident; or has worked in Spain for longer than they have worked in the UK).

With this in mind, it may sometimes be prudent for overseas employers with employees working remotely from Spain under the proposed visa to acknowledge and grant the minimum working conditions established by Spanish legislation and the applicable Spanish CBA. In particular, this would be advisable with respect to rules regarding workplace accidents, which would involve the Spanish Labour Authorities. However, what is appropriate will depend on the circumstances, and we would recommend seeking local advice on a case-by-case basis.

Corporation tax

The draft “Start-up” Act does not include any special provisions in respect of corporation tax. This means that the question of whether a company will be considered to have a permanent establishment in Spain because it sends an employee there under the new visa scheme will be determined by the existing legislation. In addition, double taxation treaties signed by Spain will continue to apply. Although this is a fact specific question – mere presence of a digital nomad does not necessarily mean that there is a permanent establishment in Spain – it may be a practical limitation on employers allowing staff to avail themselves of the new visa.

Income tax and social security

As long as an employer does not carry out an “economic activity” in Spain (defined as “the organisation on one’s own account of means of production and / or of human resources, with the aim of intervening in the production or distribution of goods or services”), which will be the case for most digital nomads, there will be no obligation for the company to withhold tax on employment income in Spain.

As “digital nomads” will conduct their activity in Spain, they will be covered by the Spanish social security system and must, therefore, contribute to it. That said, those who have a valid Social Security Coverage Certificate validly issued by a Member State of the European Union, or by a state with which Spain has signed a Social Security Agreement (which includes the UK by virtue of the post-Brexit trade deal), will be exempt from this obligation.

What next?

Time will tell whether the proposed new visa will result in a renewed upsurge in requests to work from Spain, and businesses should keep a close watch on the extent to which other countries follow Spain’s lead by introducing similar measures. Whilst this won’t be in place for this summer season, if the Spanish government follows through on its plans, employers may wish to consider relaxing their rules on employees working from “home” in Spain in summers to come.

Related Item(s): Employment, Immigration

Author(s)/Speaker(s): Colin Leckey, David Lyons, Gisella Alvarado Caycho, Mounia Jrabi, Luis de Alcaraz,

Spain has long been the favoured holiday destination for many sun-seeking Brits. The proposed introduction of a new digital nomad visa, opening the door to both “working holidays” and longer term relocations, will therefore be welcome news to employees.

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But will these potentially complex arrangements now be more straightforward for employers to navigate? We consider the potential employment, immigration and tax implications.

The pandemic saw a surge in requests from employees to work remotely in another country, often for an extended period. Initially, requests were usually short-term relocations related to the crisis. Increasingly, however, requests have involved permanent or semi-permanent moves abroad, with the trend continuing even though the public health crisis has now abated.

The challenges of the “digital nomad”

Such requests create headaches for employers. No one wants to upset their staff or put themselves on the backfoot in the war for talent. At the same time, employers are faced with a litany of legal issues which we have considered in detail before. Would the employee’s activities in the third country create a “permanent establishment” for corporation taxes? Would the employer need to register to withhold income tax, and pay employer social security charges? Does the employee have the right to work, or could the employer find itself facing immigration penalties? Would the employee find themselves in possession of a host of local employment rights, able to take the employer to a local labour court they know little about in the event of a dispute? Will the local labour inspector come knocking at the employee’s door? What about data protection? Regulatory issues? Health and safety?

It’s therefore understandable that employers tend to tread carefully on this issue. This can mean requests being refused, authorisations time limited, or permission being granted only in specific circumstances (such as where there is an existing local entity that can employ staff). Employers of record present one possible solution, but this arrangement is not without its own challenges.

Digital nomad visas – the legal implications

Is there a better way? Some countries think so: the Bahamas was fastest off the mark with a “digital nomad visa”. The basic premise behind this is that, in return for attracting well paid staff to come and spend their earnings in the local economy, the visa conditions mean that employers won’t need to worry about any of these complex issues. Countries as diverse as Estonia and the UAE have since followed suit.

Now comes a possible game changer for British employers: the so called “Start-up Law” recently introduced as a bill in the Spanish Parliament, with approval anticipated by the end of 2022. This seeks to establish a brand-new visa and residence permit for “digital nomads” which will permit people working remotely for foreign companies to live in Spain without needing a full work visa or a local sponsoring entity.

This latest development will be of particular interest to many UK employers, given Spain’s huge popularity as both a tourist and second home destination for Brits; at end of 2020 it was estimated that there were over 380,000 British citizens residing in Spain. However, employers will need to pay close attention to the detail: although the new visa will make life easier as far as immigration law is concerned, there remains a potential sting in the tail with respect to tax and employment law.

Immigration law

If approved, the bill will be a turning point in terms of Spanish immigration law. Permit-holders will be allowed to work remotely in Spain provided that their employer is located abroad and does not operate a Spanish entity. In addition, self-employed “freelancers” will be able to work for Spanish clients, provided that the time spent does not exceed 20% of the individual’s professional activity.

Under the proposed legislation there are two main immigration routes available for individuals:

• Visa for international remote work: this is intended for qualified professionals, graduates, postgraduates of renowned universities, vocational education, and renowned business schools or applicants with at least three years of professional experience.

Foreign nationals (not ordinarily residing in Spain) who intend to stay and work remotely for a non-Spain-based company would be able to apply for a visa which will be valid for up to one year, or the duration of their employment contract if shorter.

Visa holders would also have the right to apply for a “residence permit for international remote work”, starting 60 calendar days prior to the expiry of their visa, provided the conditions that led to their original visa being granted are still satisfied.

• Residence permit for international remote work: foreign nationals who either hold the “visa for international remote work”, or who otherwise have legal status to reside in Spain, would be able to apply for this type of permit.

This permit would be valid for up to three years, or the duration of the contract if shorter. Thereafter, holders would have the right to renew their permits for periods of two years, provided that the conditions of its original approval continue to be met.

Employment law

The employment law implications of the proposed visa, however, are more complex. If employees work remotely in Spain for UK employers under the new visa, the arrangement will not qualify as a “secondment” under the Spanish legislation that implements the EU Posted Workers Directive. This means that (under this legislation at least) none of the local legal protections associated with secondments – including the obligation to grant to seconded employees certain minimum employment rights and conditions – would apply.

Even where visa holders’ contracts are governed by UK law, the position on whether local employment rights will apply is not straight forward. Although an individual employment contract may be governed by the law agreed between the parties, this choice of law is not unfettered; under EU rules, certain mandatory rules (meaning those which can’t be derogated from by agreement) cannot be contracted out of.

This begs the question which mandatory rules trump this choice of law? These are the mandatory rules of the country:

• in which the employee “habitually” carries out their work;

• in which the place of business through the employee was engaged is situated; or

• which is “more closely connected” with the contract based on all existing circumstances.

When a comparison is made between the law chosen by the parties and the applicable mandatory rule, whichever gives greater protection to the employee will apply.

In this context, this means that Spanish legislation in its entirety (including applicable industry-wide Collective Bargaining Agreements (CBA)) would apply to UK employees working remotely in Spain if the following conditions are met:

• the Spanish legislation grants them enhanced rights when compared with UK legislation; and

• the employee will habitually carry out their work in Spain (placing importance on determining how much time the employee will stay in Spain working remotely as compared to their time spent providing services from the UK), or the employee is able to prove stronger ties with Spain than with the UK (for example: if social security contributions are paid in Spain; the employee becomes a Spanish tax resident; or has worked in Spain for longer than they have worked in the UK).

With this in mind, it may sometimes be prudent for overseas employers with employees working remotely from Spain under the proposed visa to acknowledge and grant the minimum working conditions established by Spanish legislation and the applicable Spanish CBA. In particular, this would be advisable with respect to rules regarding workplace accidents, which would involve the Spanish Labour Authorities. However, what is appropriate will depend on the circumstances, and we would recommend seeking local advice on a case-by-case basis.

Corporation tax

The draft “Start-up” Act does not include any special provisions in respect of corporation tax. This means that the question of whether a company will be considered to have a permanent establishment in Spain because it sends an employee there under the new visa scheme will be determined by the existing legislation. In addition, double taxation treaties signed by Spain will continue to apply. Although this is a fact specific question – mere presence of a digital nomad does not necessarily mean that there is a permanent establishment in Spain – it may be a practical limitation on employers allowing staff to avail themselves of the new visa.

Income tax and social security

As long as an employer does not carry out an “economic activity” in Spain (defined as “the organisation on one’s own account of means of production and / or of human resources, with the aim of intervening in the production or distribution of goods or services”), which will be the case for most digital nomads, there will be no obligation for the company to withhold tax on employment income in Spain.

As “digital nomads” will conduct their activity in Spain, they will be covered by the Spanish social security system and must, therefore, contribute to it. That said, those who have a valid Social Security Coverage Certificate validly issued by a Member State of the European Union, or by a state with which Spain has signed a Social Security Agreement (which includes the UK by virtue of the post-Brexit trade deal), will be exempt from this obligation.

What next?

Time will tell whether the proposed new visa will result in a renewed upsurge in requests to work from Spain, and businesses should keep a close watch on the extent to which other countries follow Spain’s lead by introducing similar measures. Whilst this won’t be in place for this summer season, if the Spanish government follows through on its plans, employers may wish to consider relaxing their rules on employees working from “home” in Spain in summers to come.

Related Item(s): Employment, Immigration

Author(s)/Speaker(s): Colin Leckey, David Lyons, Gisella Alvarado Caycho, Mounia Jrabi, Luis de Alcaraz,

Since the UK Government launched the Global Business Mobility (GBM) routes on 11 April this year, there are more sponsorship options for international businesses to consider. In this article we provide an overview of these and outline some considerations for choosing which licences to apply for.

Text:

Broadly speaking, which option is most appropriate will depend on a wide range of factors, including:

• The extent to which the international business is established in the UK;

• What kinds of business contracts it has;

• The skills profile of the workers it needs to have present in the UK;

• How long the workers need to stay; and

• Whether the workers want the opportunity to settle.

In some cases it will also be appropriate for the business to hold multiple licences, either concurrently or over time.

Global Business Mobility: UK Expansion Worker (UKX)

When this route may be appropriate

The UKX route can be used:

• By an overseas business intending to set up a branch or wholly-owned subsidiary in the UK, but that has not already started trading in the UK;

• To facilitate UK immigration permission for up to five of the overseas business’s existing senior management or specialist employees, for an initial period of up to one year, and an overall stay in the category of up to two years; and

• Where the sponsored workers have not already spent more than five years in any six year period with immigration permission under any of the Global Business Mobility routes (or the previous intra-company routes).

Considerations

This route is only intended to facilitate the establishment of an overseas business in the UK within two years. A sponsor licence in this route is granted for a period of four years and cannot be renewed. It is therefore important to time the licence application so that it is in place at the point the business is ready to proceed with its UK expansion. In particular, a ‘UK footprint’ must be demonstrated at the time of application, which can either be evidence of registration with Companies House, or evidence of UK business premises.

With limited exceptions, the overseas business must be active and trading for at least three years immediately before the UKX licence application. The UK business must also be intending to operate the same type of business as the overseas business.

Unlike the previous Sole Representative route, there is no prohibition on an owner who has a majority shareholding or control of the overseas business being sponsored as a UKX worker. There is also no stipulation that the headquarters of the business remains abroad rather than in the UK.

Consideration should be given to applying for a Senior or Specialist Worker and/or Skilled Worker licence as appropriate (as an alternative to, or in addition to a UKX licence) once the business has started trading in the UK if any of the following factors are relevant:

• The UK business is being set up to undertake a different type of business from the overseas business (in this case UKX will not be appropriate);

• More than five workers need to be sent from the overseas business to the UK at any one time;

• The UK business intends to sponsor workers in roles below RQF Level 6 (i.e. bachelor degree equivalent);

• The UK business intends to sponsor workers who are not employed by the overseas business;

• The UK business intends to sponsor workers beyond the four-year validity period of the UKX licence; or

• Sponsored workers wish to settle in the UK.

Global Business Mobility: Senior or Specialist Worker (SSW)

When this route may be appropriate

The SSW route can be used:

• By a UK business that is already active and trading in the UK, and which is linked by common ownership or control to businesses overseas;

• To facilitate immigration permission for a linked overseas business’s senior or specialist workers for an initial period of up to five years;

• Where the sponsored workers have been employed by the group abroad for at least 12 months, unless they are a high earner being paid £73,900 or more; and

• Where the sponsored workers have not already spent more than five years in any six year period with immigration permission under any of the Global Business Mobility routes (or the previous intra-company routes), or, where a sponsored worker is a high earner, they may remain in these routes for a maximum of nine years in any ten year period.

Considerations

SSW sponsors must be active and trading in the UK at the time they apply for the licence. Practically, a common challenge around this for a newly-established UK business is obtaining a UK corporate bank account from a UK bank that is registered by both the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). This factor by itself can make it worthwhile for some businesses to use the UKX route initially.

The SSW route is largely unchanged from the predecessor Intra-Company Transfer route. The Home Office rejected the Migration Advisory Committee’s recommendation to allow the SSW route to lead to settlement, and the minimum skill level for SSW is RQF Level 6 as opposed to RQF Level 3 for Skilled Workers. As the Skilled Worker category provides a more flexible option for employers in many cases it may be preferred, unless for example the worker being transferred has a high level of allowances or cannot meet the English language requirement for Skilled Worker eligibility.

Consideration should be given to applying for a Skilled Worker licence as appropriate (as an alternative to, or in addition to a Senior or Specialist Worker licence) if any of the following factors are relevant:

• The UK business intends to sponsor workers in roles below RQF Level 6;

• The UK business intends to sponsor individual workers for longer than the maximum time thresholds allowed under the SSW route;

• The UK business intends to sponsor workers who are not employed by the overseas business;

• Sponsored workers can meet the requirements for the Skilled Worker route (including English language and salary requirements without allowances) and wish to settle in the UK.

Global Business Mobility: Graduate Trainee

When this route may be appropriate

The Graduate Trainee route may be used:

• By a UK business that is already active and trading in the UK, and which is linked by common ownership or control to businesses overseas;

• To facilitate immigration permission for a linked overseas business’s employees who are required to take a UK placement on a graduate training course leading to a senior management or specialist position, and who wish to be in the UK for a period of up to one year;

• Where the graduate trainee has been employed by the group abroad for at least three months; and

• Where the sponsored workers have not already spent more than five years in any six year period with immigration permission under any of the Global Business Mobility routes (or the previous intra-company routes).

Considerations

This route is more flexible and could attract higher usage than the previous Intra-Company Graduate Trainee route because the new route does not have a limit of 20 certificates of sponsorship per financial year.

The Global Business Mobility route version of Graduate Trainee continues to have a RQF Level 6 skill requirement and includes other stipulations around the nature of the training course and employment by the group abroad. It may be worthwhile for businesses to consider an individual’s eligibility under the Government Authorised Exchange route for a period of proposed training or internship that is not eligible under the Graduate Trainee route.

Consideration should be given to applying for a Skilled Worker licence as appropriate (as an alternative to, or in addition to a Graduate Trainee licence) if any of the following factors are relevant:

• The UK business intends to sponsor workers in roles below RQF Level 6;

• The UK business intends to sponsor workers who are not employed by the overseas business;

• Sponsored workers can meet the requirements for the Skilled Worker route (including English language and salary requirements without allowances) and wish to remain in the UK for more than a year, or wish to immediately be on a path to settlement in the UK. This may be the case for example if the worker’s permanent position will be in the UK after they complete their training course.

Skilled Worker

When this route may be appropriate

The Skilled Worker route can be used:

• By a UK business that is already active and trading in the UK, irrespective of whether that business has any linked entities abroad;

• To facilitate immigration permission for workers whose jobs are skilled to at least RQF Level 3 (i.e. A-level equivalent); and

• Where the sponsored workers will be sponsored for up to five years at a time, with no limit on how many extensions can be applied for.

Considerations

The Skilled Worker route may be attractive to some intra-group assignees because it offers the possibility of settlement in the UK. Some assignees may prefer to use this route from the outset if offered because time spent in UKX, SSW and Graduate Trainee cannot be counted towards settlement, even if the worker subsequently switches into the Skilled Worker route.

Where a UK business is already active and trading in the UK and does not anticipate wanting to assign group employees to the UK who will not meet the requirements for the Skilled Worker route, it may be possible to bypass holding a UKX or SSW licence. Holding a SSW licence may however be beneficial for cases where a transferee cannot meet the requirements for a Skilled Worker visa for any reason.

Other sponsorship options

If an overseas business does not intend to become established in the UK but has significant contracts with UK-based clients, then the UK-based client may agree to obtain or use an existing Service Supplier or Secondment Worker sponsor licence to facilitate the short-term presence of the overseas business’s personnel. For further information on these options, see our earlier article here.

This article is intended to provide a high-level overview only. If you need more detailed information about the immigration options available for international businesses, please get in touch with a member of our Immigration Team.

Related Item(s): Immigration

Author(s)/Speaker(s): Supinder Singh Sian, Andrew Osborne, Li Xiang, Hennie Shin,

Since the UK Government launched the Global Business Mobility (GBM) routes on 11 April this year, there are more sponsorship options for international businesses to consider. In this article we provide an overview of these and outline some considerations for choosing which licences to apply for.

Text:

Broadly speaking, which option is most appropriate will depend on a wide range of factors, including:

• The extent to which the international business is established in the UK;

• What kinds of business contracts it has;

• The skills profile of the workers it needs to have present in the UK;

• How long the workers need to stay; and

• Whether the workers want the opportunity to settle.

In some cases it will also be appropriate for the business to hold multiple licences, either concurrently or over time.

Global Business Mobility: UK Expansion Worker (UKX)

When this route may be appropriate

The UKX route can be used:

• By an overseas business intending to set up a branch or wholly-owned subsidiary in the UK, but that has not already started trading in the UK;

• To facilitate UK immigration permission for up to five of the overseas business’s existing senior management or specialist employees, for an initial period of up to one year, and an overall stay in the category of up to two years; and

• Where the sponsored workers have not already spent more than five years in any six year period with immigration permission under any of the Global Business Mobility routes (or the previous intra-company routes).

Considerations

This route is only intended to facilitate the establishment of an overseas business in the UK within two years. A sponsor licence in this route is granted for a period of four years and cannot be renewed. It is therefore important to time the licence application so that it is in place at the point the business is ready to proceed with its UK expansion. In particular, a ‘UK footprint’ must be demonstrated at the time of application, which can either be evidence of registration with Companies House, or evidence of UK business premises.

With limited exceptions, the overseas business must be active and trading for at least three years immediately before the UKX licence application. The UK business must also be intending to operate the same type of business as the overseas business.

Unlike the previous Sole Representative route, there is no prohibition on an owner who has a majority shareholding or control of the overseas business being sponsored as a UKX worker. There is also no stipulation that the headquarters of the business remains abroad rather than in the UK.

Consideration should be given to applying for a Senior or Specialist Worker and/or Skilled Worker licence as appropriate (as an alternative to, or in addition to a UKX licence) once the business has started trading in the UK if any of the following factors are relevant:

• The UK business is being set up to undertake a different type of business from the overseas business (in this case UKX will not be appropriate);

• More than five workers need to be sent from the overseas business to the UK at any one time;

• The UK business intends to sponsor workers in roles below RQF Level 6 (i.e. bachelor degree equivalent);

• The UK business intends to sponsor workers who are not employed by the overseas business;

• The UK business intends to sponsor workers beyond the four-year validity period of the UKX licence; or

• Sponsored workers wish to settle in the UK.

Global Business Mobility: Senior or Specialist Worker (SSW)

When this route may be appropriate

The SSW route can be used:

• By a UK business that is already active and trading in the UK, and which is linked by common ownership or control to businesses overseas;

• To facilitate immigration permission for a linked overseas business’s senior or specialist workers for an initial period of up to five years;

• Where the sponsored workers have been employed by the group abroad for at least 12 months, unless they are a high earner being paid £73,900 or more; and

• Where the sponsored workers have not already spent more than five years in any six year period with immigration permission under any of the Global Business Mobility routes (or the previous intra-company routes), or, where a sponsored worker is a high earner, they may remain in these routes for a maximum of nine years in any ten year period.

Considerations

SSW sponsors must be active and trading in the UK at the time they apply for the licence. Practically, a common challenge around this for a newly-established UK business is obtaining a UK corporate bank account from a UK bank that is registered by both the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). This factor by itself can make it worthwhile for some businesses to use the UKX route initially.

The SSW route is largely unchanged from the predecessor Intra-Company Transfer route. The Home Office rejected the Migration Advisory Committee’s recommendation to allow the SSW route to lead to settlement, and the minimum skill level for SSW is RQF Level 6 as opposed to RQF Level 3 for Skilled Workers. As the Skilled Worker category provides a more flexible option for employers in many cases it may be preferred, unless for example the worker being transferred has a high level of allowances or cannot meet the English language requirement for Skilled Worker eligibility.

Consideration should be given to applying for a Skilled Worker licence as appropriate (as an alternative to, or in addition to a Senior or Specialist Worker licence) if any of the following factors are relevant:

• The UK business intends to sponsor workers in roles below RQF Level 6;

• The UK business intends to sponsor individual workers for longer than the maximum time thresholds allowed under the SSW route;

• The UK business intends to sponsor workers who are not employed by the overseas business;

• Sponsored workers can meet the requirements for the Skilled Worker route (including English language and salary requirements without allowances) and wish to settle in the UK.

Global Business Mobility: Graduate Trainee

When this route may be appropriate

The Graduate Trainee route may be used:

• By a UK business that is already active and trading in the UK, and which is linked by common ownership or control to businesses overseas;

• To facilitate immigration permission for a linked overseas business’s employees who are required to take a UK placement on a graduate training course leading to a senior management or specialist position, and who wish to be in the UK for a period of up to one year;

• Where the graduate trainee has been employed by the group abroad for at least three months; and

• Where the sponsored workers have not already spent more than five years in any six year period with immigration permission under any of the Global Business Mobility routes (or the previous intra-company routes).

Considerations

This route is more flexible and could attract higher usage than the previous Intra-Company Graduate Trainee route because the new route does not have a limit of 20 certificates of sponsorship per financial year.

The Global Business Mobility route version of Graduate Trainee continues to have a RQF Level 6 skill requirement and includes other stipulations around the nature of the training course and employment by the group abroad. It may be worthwhile for businesses to consider an individual’s eligibility under the Government Authorised Exchange route for a period of proposed training or internship that is not eligible under the Graduate Trainee route.

Consideration should be given to applying for a Skilled Worker licence as appropriate (as an alternative to, or in addition to a Graduate Trainee licence) if any of the following factors are relevant:

• The UK business intends to sponsor workers in roles below RQF Level 6;

• The UK business intends to sponsor workers who are not employed by the overseas business;

• Sponsored workers can meet the requirements for the Skilled Worker route (including English language and salary requirements without allowances) and wish to remain in the UK for more than a year, or wish to immediately be on a path to settlement in the UK. This may be the case for example if the worker’s permanent position will be in the UK after they complete their training course.

Skilled Worker

When this route may be appropriate

The Skilled Worker route can be used:

• By a UK business that is already active and trading in the UK, irrespective of whether that business has any linked entities abroad;

• To facilitate immigration permission for workers whose jobs are skilled to at least RQF Level 3 (i.e. A-level equivalent); and

• Where the sponsored workers will be sponsored for up to five years at a time, with no limit on how many extensions can be applied for.

Considerations

The Skilled Worker route may be attractive to some intra-group assignees because it offers the possibility of settlement in the UK. Some assignees may prefer to use this route from the outset if offered because time spent in UKX, SSW and Graduate Trainee cannot be counted towards settlement, even if the worker subsequently switches into the Skilled Worker route.

Where a UK business is already active and trading in the UK and does not anticipate wanting to assign group employees to the UK who will not meet the requirements for the Skilled Worker route, it may be possible to bypass holding a UKX or SSW licence. Holding a SSW licence may however be beneficial for cases where a transferee cannot meet the requirements for a Skilled Worker visa for any reason.

Other sponsorship options

If an overseas business does not intend to become established in the UK but has significant contracts with UK-based clients, then the UK-based client may agree to obtain or use an existing Service Supplier or Secondment Worker sponsor licence to facilitate the short-term presence of the overseas business’s personnel. For further information on these options, see our earlier article here.

This article is intended to provide a high-level overview only. If you need more detailed information about the immigration options available for international businesses, please get in touch with a member of our Immigration Team.

Related Item(s): Immigration

Author(s)/Speaker(s): Supinder Singh Sian, Andrew Osborne, Li Xiang, Hennie Shin,

The Covid-19 pandemic caused many employees to ask if they could work from “home” from an overseas country. Two years on, it’s clear that the wish to work abroad – either on a temporary basis, or in some cases indefinitely – is part of a permanent sea change in working practices.
Technology makes it possible – but this Inbrief explains the potential legal issues and how to avoid the traps.

Text:

Please click ‘download files’ to read the full inbrief.

The content includes:

• Tax and social security implications Immigration implications

• Intellectual property, confidential information and restrictive covenants

• Employment law and data privacy implications

• Employers of Record

• How to minimise the risks

Tax and social security implications

If an employee is only working overseas temporarily, from a UK perspective, the UK employer should continue to deduct income tax under the PAYE system in accordance with the employee’s PAYE code. Matters start to become more complicated where a stay becomes extended, or even indefinite. Employers should always bear in mind the figure of 183 days in a country in a 12 -month period – this is generally the tipping point for tax residency, often together with employer obligations to operate withholding (see further below). Even before this threshold is reached, there are traps for the unwary.

If it is anticipated that the employee will be working overseas for at least a complete UK tax year, they may apply to HMRC for a No Tax PAYE code which, if issued, will authorise the employer to pay the employee without PAYE deductions. In addition, the employer should continue to deduct employee national insurance contributions (NICs) and pay employer NICs.

It is important to consider whether the employee’s stay in the host country – regardless of duration – creates risks of income tax or social security liability in that country, or even the risk that you (as the employer) are regarded as having created a “permanent establishment” there for corporation tax purposes. In order to understand the position, it will be necessary to establish the rules in place in the relevant host country. We briefly outline the issues below.

Income tax may be payable in host country

The starting point is that the host country has primary taxing rights over the employment income that the employee earns while physically working in that country. However, if there is a double tax treaty (DTT) between the UK and the host country, the employee may be exempt from income tax there if certain conditions are satisfied including:

The employee is not a tax resident in the host country under the DTT. If the employee is tax resident in the UK and in the host country under each country’s domestic law, their residence status is determined in accordance with the DTT by reference to their personal circumstances.

The number of days the employee is present in the host country over a 12-month period (however briefly and irrespective of the reason) must not exceed 183 days.

The UK has a DTT with most countries, including all 27 EU countries and most other major world economies. In practice, this means that a short stay abroad in many locations is not going to result in the employee becoming liable for host country income tax.

Remember, though, that employees who have already spent other periods in the host country in the same 12-month period (e.g. visiting family) may reach the 183-day threshold sooner than you think. Also, the full details of the conditions can differ from DTT to DTT, particularly the period over which the 183-day test must be satisfied.

In addition, the employer and/or employee may still have obligations in the host country even if the DTT applies. For example, the employer may need to register with local authorities as an employer and/or report on the income that is being paid to the employee. It is therefore important to understand the local position.

If the employee does become subject to tax in the host country but remains UK tax resident, they will remain subject to UK income tax on their worldwide income but should be able to obtain credit for some or all the tax they pay in the host country. They will, however, need to complete the appropriate tax declarations, which could be a complex process. You will need to decide the extent to which you are willing (or not) to help the employee with this.

Social security position depends on agreements in place

The social security position is complex. The general rule is that employee and employer social security obligations arise in the country in which the employee is physically carrying out their duties. There are, however, exceptions.

Where employees are working in the EU (other than Ireland), there are exceptions for both multi-state workers (employees who are working in two or more countries) and “detached workers” (UK employees who are temporarily seconded to work in the EU or vice versa).

Broadly speaking, if a UK employee is sent to work in an EU country, UK employee and employer NICs can continue to be paid, and no social security will arise in the EU country, provided that:

• the stay will not exceed two years; and

• the employee has not been sent to replace another detached worker.

Depending on the circumstances and subject to local advice, it is likely to be necessary to obtain a certificate of coverage from HMRC confirming the position.

The UK has negotiated a separate social security agreement with Ireland, which also contains exemptions both for multi-state workers and detached workers. The detached worker exception under the Irish agreement could potentially be for longer than two years.

The position in Norway, Switzerland, Iceland and Lichtenstein is currently more complex as there are special rules for detached workers in these countries and multi-state workers may not be covered at all. Further information can be found in our article Posting employees to the EU, EEA or Switzerland? Don’t forget the social security position.

Outside the European Economic Area (EEA) and Switzerland, the position will depend on whether there is a reciprocal agreement between the host country and the UK. In countries where there is a reciprocal agreement, such as the USA, Korea and Japan, it is possible for an employee to remain within the UK system and not pay local social security contributions for up to five years (depending on the country), if the employee has a valid certificate of coverage.

In other countries, where no agreement exists, such as China, India and Australia, the UK employer must continue to deduct employee UK NICs and pay employer NICs for the first 52 weeks of the arrangement. There may also be a liability to pay social security contributions in the host country and, again, local advice should be sought. In any event, as arrangements become extended or even indefinite it will always be important for the employer to keep income tax and social security arrangements under review. A point may be reached at which, either by legal compulsion or in some cases as the result of a positive choice, it is sensible to transition the employee permanently into the host country system.

Risk of creating a permanent establishment

In some situations, there will be a risk that the employee’s activities or presence in the host country will create a permanent establishment for the employer in that country. This would be the case if, for example, the employee has a sales or business development role and is habitually exercising an authority to conclude contracts in the name of the employer while in the host country. Local rules may also provide for a more expansive definition of a permanent establishment.

Careful consideration should be given to this issue in circumstances where the employer or one of its affiliates does not already have a permanent establishment in the host country. If a permanent establishment is created, the profits attributable to that establishment would be subject to corporate tax in that country. It would also mean that the income tax exemption in the DTT would not apply.

While this may be less of a problem if you already have established operations in the host country – we are aware of a number of employers which permit employees to work overseas but only where there is an existing establishment to which they can be transferred in order to address this issue – it could be a real headache if you do not.

Assuming the working-from-home arrangement is only short term, it would be difficult for the tax authorities to argue that a permanent establishment had been created. The longer the arrangement continues, however, the greater the risk – particularly if the employee routinely negotiates the principal terms of contracts with customers which are simply “rubber-stamped” without amendment by employees working in the UK.

Immigration implications

If an employee wishes to work from any host country, you will need to consider what restrictions may be in place. For example, if they want to work in Hong Kong but do not have permission to stay there indefinitely, they should not undertake any work without permission – even for a limited period and even if the employing entity is not a Hong Kong entity.

Advance immigration permission may not be required for business visits, although this will sometimes depend on the employee’s nationality and the immigration regime of the host country. Depending on the employee’s activities, it may be possible to characterise their stay as a business visit – for example, if their activities are limited to those typically undertaken during business trips (e.g. meetings and training). However, restricting an employee’s activities in this way is unlikely to be practical for many employees and, in general, the longer an employee stays in the host country, the more difficult it will be to characterise their stay as a business visit. In most countries, productive work itself is prohibited as a business visitor, but limited exceptions may apply.

In certain countries, if the employee’s work can be said to be “incidental” to the purpose of their overall stay, it will not pose an issue from an immigration perspective. This could be the case where an employee works remotely from their holiday destination for a short period in order to extend their break. Where this exemption applies, it is helpful to consider whether the employee is planning to work from the company’s office in the overseas location (as opposed to their own accommodation) as this could weaken the argument that their work is incidental to the purpose of their trip. Aside from this, whether the employee attends the office could also impact on the employer’s insurance cover if the employee has an accident while abroad.

Following the end of the Brexit implementation period, British citizens no longer automatically have the right to work in the EEA and Switzerland as was the case previously (unless they are also a citizen of an EEA country or Switzerland). A Schengen visa is unlikely to be helpful in this case as it only permits certain limited business activities and not “work”. Accordingly, British employees wishing to work from the EEA or Switzerland will need to apply for the correct immigration permission from the country to which they are travelling. This will typically need to be applied for outside of the host country, before the employee travels.

Many employers have introduced policies permitting employees to work from an overseas location for a short period (such as up to one month) as long as they can show they have the right to work there – most obviously, because they are a national of that country. While this will generally be fairly low risk, it is important to remember that immigration law compliance may require additional steps to be taken – for example, in the UK employers are expected to carry out document checks and retain certain records of employees’ right to work status.

You may also need to consider any immigration issues that could arise on the employee’s return to the UK. For example, EEA and Swiss nationals and their family members should consider whether to secure settled or pre-settled status in the UK under the EU Settlement Scheme before they travel overseas. They also need to understand whether the absence may break the continuity of their residence for acquiring or retaining settled status. All non-British/Irish nationals should consider whether their absence from the UK may affect their visa, or their eligibility to apply for other types of status in future where absences are assessed, such as settlement or naturalisation as a British citizen.

Intellectual property, confidential information and restrictive covenants

The location of an employee should not impact the ownership of any intellectual property (IP) that they create, provided their employment contract has appropriate provisions covering this. So if they are, for example, developing a patentable product or registerable design, provided their employment contract stipulates that all IP rights in any material developed in the normal course of their role are owned by the employer, the place from which they develop the product or material should not have an impact.

The UK legislation generally provides that any IP created by an employee, in the usual course of their employment, belongs to the employer. So, if the employment contract states that the employment contract is governed by English law and is subject to the jurisdiction of the English and Welsh courts, the employer can rely on the UK legislation if the IP provisions are not so explicit in the contract.

The situation becomes trickier when there is no employment contract in place, or if the contract does not state the jurisdiction and local law that will apply. In these circumstances, the employer may have difficulty if there is a dispute over the ownership of the IP in material the employee has created while working abroad. The employer may be able to argue that the dispute should be governed by English law and determined in England and Wales, enabling it to rely on the employer-friendly legislation mentioned above.

This may be the case if the employer is a UK company and the product/ material was for the UK market. The employee, or even a third party looking to claim ownership of the IP, may however argue that it should be governed by the legislation and jurisdiction of the host country.

It all depends on the circumstances, such as the role of the employee, the material they have created and how they have developed the IP in issue. For certainty and protection against problems arising, it is advisable for employers to clearly set out in employment contracts that all IP in any material created during the course of the employee’s employment is owned by the employer, regardless of from where the employee is working.

Confidential information

One aspect of intellectual property that often gets overlooked is confidential information. Wherever an employee is working from, the importance of protecting information important to a company remains (e.g. customer data or trade secrets). In fact, greater practical measures are often needed when an employee is working from somewhere other than their private home or the company’s office.

For instance, if the employee is working abroad from a second home, or from a hotel poolside or other public place, they should continuously ensure that their laptop and work are fully password-protected and secured. Employers should consider security measures such as laptop privacy screens, minimising (or totally preventing) working in public locations and requiring loose papers to be kept locked away when not in use. This is important not just for the protection of confidential information but practically. If the employee has their phone/ laptop stolen, it will not be as easy for the employer to get replacement items to them if they are working in a jurisdiction where the employer has no office or base.

Restrictive covenants

Employers who are concerned about the competitive threat an employee may pose following the termination of their employment will also need to consider how the overseas working affects the enforceability of any non-compete, non-solicit and non-deal provisions in their contract.

An employee who remains employed on their UK employment contract can still in principle be sued under that contract in the UK courts, and an injunction awarded which has extra-territorial effect (provided the contract does not contain any outdated limitations on the geographical area to which it applies).

There may however be additional complexities in terms of effecting service on that individual, and potentially also with the individual arguing that the employer can only take enforcement action against them in the country in which it has been agreed they may work.

For these reasons, and particularly where overseas work is extended or indefinite, it may be advisable for the employer to consider transitioning the employee on to a local employment contract containing covenants which meet relevant local legal requirements (which in many European countries will include payment during the term of the restraint).

Employment law and data privacy implications

In addition to the tax, social security and immigration implications explained above, there are various other employment law and data privacy considerations.

Mandatory employment protections may apply

If employees live and work abroad, even for short periods, they can become subject to the jurisdiction of that other country and start to benefit from the applicable local mandatory employment protections. These may include minimum rates of pay, paid annual holidays and – perhaps most importantly in the event of a dispute – rights on termination. What protections, if any, an employee acquires will depend on the country in question as well as the duration of their stay.

If an employee is planning to stay in the host country for an extended period, the employer should consider transferring them onto a local employment contract. This approach will ensure that the employer is complying with any local requirements and that important provisions such as those relating to confidentiality and post-termination restrictions are fit for purpose.

Be careful about transferring data

If an employee’s role involves processing personal data, this could give rise to data protection issues. The employer needs to be comfortable that it is not breaching any data protection laws by transferring the data to the employee and that they have technical and organisational measures in place to protect the data and keep it secure. This may involve, for example, reviewing the electronic equipment being used by the employee to ensure that it meets the required standards.

Local health and safety protections may apply

UK employers have a duty to protect the health, safety and welfare of their employees, which includes providing a safe working environment when they are working from home. If an employee works from home abroad, you should also ensure that it is compliant with any local health and safety requirements. For example, in the Netherlands, employers must provide employees with the equipment needed to ensure a safe working environment, which in some cases might involve purchasing or contributing to the cost of relevant equipment.

Employees will also need to comply with applicable public health guidance (e.g. quarantine periods), both in the host country and on their return to the UK.

Regulatory implications

For regulated firms there are additional considerations when deciding whether employees may be permitted to work from home overseas. These can vary across sectors and may depend on the individual circumstances of each case (e.g. the nature and seniority of the role being performed).

For financial services firms key practical considerations will be whether the employee can carry out their role effectively and compliantly from overseas, and whether the firm can appropriately:

• monitor, supervise and oversee the relevant employee;

• comply with its internal policies and procedures; and

• continue to satisfy its regulatory obligations.

Further, as part of their conditions for authorisation, financial services firms are required to:

• be capable of being effectively supervised by their regulator(s), which includes consideration of the way in which the firm’s business is organised (e.g. structure and geographical spread);

• have appropriate non-financial resources (including sufficient human resources in terms of quantity, quality and availability); and

• be managed in such a way as to ensure that their affairs will be conducted in a sound and prudent manner.

As well as these high-level requirements, financial services firms will have in place policies and procedures implementing a range of more detailed requirements ranging from overarching systems and controls to business specific requirements. During the recent pandemic, the FCA highlighted the importance of requirements in the following areas:

• Market trading and reporting: the need for all relevant communications, including voice calls, to be recorded when working outside the office and that all steps should continue to be taken to prevent market abuse.

• Information security: the need to ensure that adequate controls are in place to manage cyber threats

Against this backdrop it is perhaps unsurprising that financial services firms tend to be particularly resistant to requests related to overseas remote working arrangements.

UK solicitors working overseas can raise similar issues. For example, law firms must ensure that they can demonstrate how their professional and regulatory obligations are being met, particularly as regards supervision. Following the end of the Brexit implementation period, under the UK-EU Trade and Cooperation Agreement, UK solicitors may be entitled to provide services in certain EU member states on a temporary basis using their home country qualification but individual solicitors and those employing them will always need to check the position in the relevant EU member state to ensure they are complying with applicable national law. In addition, law firms should ensure they have appropriate professional indemnity insurance in place to cover advice being given from outside of the UK.

Employers of record

The shift in working practices has created a major upsurge of interest in and usage of so-called “employers of record”, also sometimes known as Professional Employer Organisations (or PEOs). This is a third-party organisation, akin to an employment business, which takes on the formal responsibility of employing the employee while overseas and accounting for tax, social security and other applicable local filing requirements. Using an employer of record or similar can be a way of minimising or mitigating the risks faced by the employer.

Employers considering this option should, however, carefully scrutinise the proposed engagement terms to understand exactly what protection is being offered and assess what gaps might still exist in the event of a dispute. For example, an employee might still be able to sue you in a local labour court or tribunal in the event of a breach.

Employers will also need to consider whether the arrangement allows them enough control over someone they regard as “their” employee: the absence of such control may make the arrangement less attractive for some organisations.

In employment relationships where ownership of IP created by the employee is important, or the employer has particular concerns about being able to protect its confidential information or impose post-termination non-compete restrictions, the employer will need to consider whether this can be achieved effectively in circumstances where it is no longer employing directly the individual working for it.

Employers should also be cognisant of the fact that many countries operate strict licensing regimes for employment businesses, or have laws restricting the “lending of labour”, and failure to comply with these requirements can have adverse consequences for the end user employer as well as the operator: is the employer of record fully compliant with these requirements?

How to minimise the risks

Undoubtedly, the pandemic has brought about a major culture shift when it comes to the location from which work is done. Employers are increasingly opting to be flexible and seeking to accommodate requests to work from home overseas. Nonetheless, you will also want to minimise the risks as much as possible.

Depending on how many requests you expect to receive, you should consider developing a policy to ensure that these situations are dealt with consistently and fairly.

The key practical steps for minimising the risks are as follows:

• Only accept requests if the employee’s role can be effectively performed remotely and carried out lawfully from the country in question.

• The shorter the period the employee is working abroad, the smaller the risks are likely to be. Consider only approving requests for a short, time-limited duration where the employee’s expected return date is clearly documented.

• For any arrangement of an extended duration (or even short duration, depending on your appetite for risk) always take expert local advice on any tax, social security, immigration and employment obligations you may have in the host country. The employee may also need their own advice.

• Be aware that the employee’s ability to participate in company benefits such as pensions, private healthcare, income protection and life assurance may be adversely impacted by a move abroad. You should address this upfront with them.

• Much will depend on the identity of the host country and the employee’s nationality.

• Check what data processing the employee will be doing and that this can be carried out lawfully in line with your usual policies.

• Check relevant insurance policies, such as those covering employees if they have a work-related accident or any company property that is provided to employees (e.g. laptops and phones). Determine whether these are adequate or if you need to take out more extensive cover.

• Agree the terms of any overseas working arrangement and record them in writing. While the detail will depend on the circumstances typical provisions include:

• The employee will be liable for any additional income taxes or employee social security which may be charged because of their decision to work for a period in an overseas location (with the employer being authorised to make additional deductions or seek reimbursements, if necessary, for this purpose).

• The employee will be responsible for any personal tax declarations that may need to be made.

• The employment contract remains subject to UK law and jurisdiction (subject to a possible review date for longer-term arrangements at which you might consider transitioning them to a local contract).

• The employee is continuing to work solely for the UK business.

• Any IP created by the employee will be owned by the employer.

• The employee does not have the authority to enter into contracts with local customers while in the host country and should not hold themselves out as having such authority.

• The employee takes responsibility for ensuring they have the necessary technology and arrangements in place to enable them to work effectively.

• The employee accepts that they are working from home at their own risk and that the employer will not be liable for any loss they suffer due to their request being approved.

• The employee must comply with all applicable public health guidance, both in the country to which they travel and the UK.

Type: Inbrief

Related Item(s): Employment, Reshaping your workforce, Remote working overseas, Remote & flexible working, Global Mobility

Author(s)/Speaker(s): Colin Leckey, Rosie Moore,

Attachment: Remote working overseas June 2022