South Africa: the growth in foreign remote working

Following on from the covid-19 pandemic, employers across the globe are contending with a new phenomenon – the employment law implications when employees want to continue working for them, but from another country.

According to an Owl labs study, 16 per cent of global companies are fully remote. Meanwhile, since 2009, the number of people who work from home has risen by 159 per cent. For many reasons, people across the world would prefer to work remotely, people often feel more productive when working from home and benefit from increased time with their families. People often choose to work remotely from foreign jurisdictions for increased flexibility and freedom, while many employees report increased income when working for foreign companies.

Asides from the covid-19 pandemic, two of the main reasons behind a soaring of remote work is the fast advancements in technology that enable people to do their work from anywhere in the world. The increasing number of people who value flexibility and a good work-life balance when looking for new job opportunities.

As remote working from foreign jurisdictions will continue to soar even as we ostensibly move out of the pandemic, it is likely employers will to continue to value this as a means to attract and keep the best possible working talent.

Although employers would understandably wish to accommodate their key talent by allowing them the flexibility to work from abroad, there are legal risks. After all, there are three main employment law issues that employers could run into when an employee asks to work from a foreign jurisdiction.

Firstly, the employer may have to address an additional compliance burden in the host jurisdiction and carry higher costs as a result. If the employment relationship breaks down, the employment law regime of the host country may apply.

The employer will also need to give careful thought to how remote working impacts the benefit schemes it has in place and how the employee participates in these schemes. Related to this, the employer’s South African based employees could also take issue if the impression is created that certain employees are being unfairly favoured.

When foreign law applies

From a compliance perspective, in addition to various tax law considerations, additional obligations may arise if employees working remotely by their own choice are required to receive certain compulsory benefits in the host country.

For example, the company could find itself having to register with government bodies in the foreign jurisdiction in question for social security and compensation for injury on duty, which can be challenging when the law in the other country is not clear and the company does not have a presence in that country or any administrative infrastructure to assist with the necessary compliance obligations.

Furthermore, some benefits payable in South Africa potentially cannot be continued overseas, such as a South African retirement fund and medical aid contributions. Those cannot be offshored, so what will happen if they are written into the employee’s contract?

Employers should also consider practicalities such as differences in working hours and public holidays, which could become sticking points down the line. The United Kingdom’s bank holidays, for example, do not necessarily coincide with South Africa’s public holidays. How would the employer in South Africa respond if the employee in the UK wants bank holidays off?

If things go wrong

Then there is the possibility of the employment relationship going sour, potentially triggering the host country’s dismissal law regime. The employer may face potentially costly and protracted litigation in the other jurisdiction, without knowing the law and without having the infrastructure in-country to defend the claim. In the UK, which like South Africa is considered employee-friendly, workers can bring a tribunal claim free of charge, making it relatively easy for disgruntled employees to do so.

The risk of an unfair discrimination claim could occur if a company is perceived to be allowing only certain employees to work from abroad. Fairness and consistency are key in South African employment law.

These potential legal obstacles do not mean that employers should avoid international remote working arrangements.

The point is to be aware, to go into such arrangements with your eyes open and in a considered way because such arrangements can be quite hard to undo. It’s possible to reduce and mitigate the risks, however, bearing in mind that it may not be possible to negate them altogether.

Avoid a contractual right

A South African employer may take to reduce the employment law risks associated with international remote working. First, obtain legal advice in the jurisdiction from which the employee will be working. Second, enter into updated contractual arrangements regulating the remote working relationship.

Such a contract should make clear the remote working relationship is not a contractual right but a concession to the employee – one that is subject to review. Although in reality once the arrangement has been in place for a while it may be difficult to unwind.

Remote working in this instance is really to accommodate the lifestyle choice of the employee, while the employer should be as specific as possible about when and how the arrangement will be reviewed. For example, whether the employee is required to work in accordance with South African working hours and holidays.

While a remote working arrangement could offer exciting opportunities for employers and employees alike, it is crucial for employers to carefully consider the risks that a permanent cross-border remote working arrangement could have, before agreeing to it.

Helen Wilsenach is Head of Employment and Benefits at Bowmans bowmanslaw.com