Pre-COVID-19, only around 7% of US employees worked remotely, with that number rising to 64% since the pandemic began. But, does working remotely need to equate to sitting on your sofa in a button-down shirt and pyjama pants? Or can your employees freely roam the globe, with their trusty laptop to keep them connected to the office, making lemonade out of a seriously sour 2020?
It’s More Complicated Than You Think
According to the NY Times, for workers without heavy ties to home, the pandemic was often seen as an opportunity, “a moment to grab destiny and bend employment to their favor.” Unfortunately, the realities of working for a foreign employer in another country are not so simple.
First, there’s the practicalities. Travel restrictions due to the pandemic are complex, and in many cases your employees may find themselves unable to enter certain countries. For example, there is currently a travel ban on Europe for US citizens, taking the entire continent off the table for remote US workers. As restrictions are continually under advisement, it’s important to check the current guidelines carefully before organizing any travel.
More important still, are the tax considerations. Some employees may think they can rely on the Foreign Earned Income Exclusion, a law that applies to anyone living and working outside of the US for a full 330 days out of any 12 month consecutive period. However, this does not apply to US-sourced income, so in the situation of working remotely during COVID-19, it is unlikely to apply. The foreign-earned income exclusion is “ the intermittent fasting of taxes,” says Alexander Stylianoudis, the general counsel at WiFi Tribe, a group that helps facilitate travel for 900 digital nomads. “Everyone talks about it, and everyone does it wrong.” The number of mistakes he has seen since the pandemic has multiplied, Mr. Stylianoudis said.”
Simply put, in the vast majority of situations, employees cannot work while abroad on a tourist visa. The complexities of work permits, tax treaties, compliance, and benefits take much more time to work through than it takes to click ‘buy now’ on SkyScanner.
All Is Not Lost! Some Countries are Making it Easy
Especially in tourist-heavy destinations that have struggled since the outbreak of the Coronavirus, some countries are leveraging the wanderlust of foreign employees to create relocation schemes that jump the hurdles of working abroad.
Some, such as Aruba have created short-term allowances, offering 90 days of remote work on nothing more than a valid passport. Others have opened up substantial opportunities for anyone looking to live abroad while working for their existing foreign organization, including the ability to enroll children in school in the host country.
Remember, your employees must look into each of these relocation schemes carefully, as each will have different guidelines for issues such as health insurance, and minimum earnings. For US citizens for example, it’s important to remember that Medicare does not cover your medical expenses when you are abroad, except in extremely limited circumstances, while some Medigap policies do cover emergency services in foreign countries.
Educate your employees, especially during COVID-19, where there is a real risk of quarantine or illness. It’s essential that they look into the health insurance and medical coverage information for any country that they are considering visiting.
Here are a few examples of relocation schemes, alongside their conditions for eligibility:
Antigua and Barbuda: Workers must prove that they earn at least $50,000 a year and that they can support themselves as well as any family members joining them. A single person will need to pay a fee of $1,500, and have medical coverage for the duration of their stay up to 2 years, but will not be required to pay any income tax to Antigua and Barbuda, as long as the home country (where the company is based) does not have an entity in the host country, (where the employee is working remotely).
Cayman Islands: Also offering a 2 year stay, this scheme allows employees to live and work in the Cayman Islands, as long as they make $100,000 per year, or $150,000 for a couple. If your employees are bringing children, they must make $180,000 per year. High-rollers – get packing!
Mexico: This one year visa is unique in that it can be renewed three additional times, making it possible for an employee to live and work from Mexico for 4 years without paying income tax, as long as they do not seek employment from Mexican companies. The earnings for this scheme are lower than many others, although there are still minimum income quotas to keep to. Employees will need to show that they have a monthly income of more than $1,620, and an overall bank balance of more than $27,000.
Iceland: Do you make $88,000 per year? If so, you might be interested in Iceland’s new scheme for employees working remotely, allowing anyone to stay up to 6 months, as long as they meet the financial income and healthcare status requirements. The cost of living in Iceland is more than 30% higher than in the US, so the country is looking for high-income employees to gain the benefits on their tourism industry. See here for more info.
Hawaii: The “movers and shakers” program is a new remote work program offering free round-trip tickets to 50 applicants. The goal of the program is to bring remote workers who pledge to contribute to local nonprofits.
Dubai: Now offering a visa for remote workers, workers and their families can now live and work in Dubai for up to one year. To qualify, applicants must earn a minimum of $5,000 a month and have valid medical insurance. To learn more click here.
Estonia: The “Digital Nomad Visa” allows remote workers to live and work in the country for up to one year. To qualify, workers must prove they can work remotely and earn a minimum of $4,130 per month.
Czech Republic: Long term business visas are being offered for remote workers who wish to stay in the country for 90 to 120 days. See here for full details.
Other countries offering long-term working relocation schemes for 12 months or more, include Barbados (details here), Mauritius, Georgia (details here), and Dubai (here). For residents of Southern California, you may be interested in the non-lucrative visa scheme offered in Spain, where applicants can be granted long-term stays if they meet the requirements of the program.
Whichever relocation program your employees choose, it’s important to make sure you’re fully apprised of any small print or terms that can impact your company.
For example, Greece has recently announced a similar relocation scheme, but unlike the tax-free options above, the terms state that employees can live in Greece with a 50% reduction in taxes, as an incentive for up to 7 years. As Greece’s tax rate is currently 44% on earnings over 40,000 euros, and US taxes will always still apply on US-sourced income, your employees will need to decide for themselves whether this is worthwhile. A program like this may also incur internal costs for your company, as the scheme states it “will only apply to new positions created in Greece in 2021.”
Managing Complex Workforce Arrangements with Papaya Global
As a complete workforce management solution covering more than 140 countries around the globe, Papaya is uniquely placed to provide advice and support when guiding remote workers through the ‘new normal’.
Our automated SaaS platform is an end-to-end solution for employee management anywhere in the world. Our HR Center of Excellence can give expert advice on how to handle cross-border employment, as well as when to leverage alternate employment models such as contracting or EOR solutions.
Whichever options you choose, our platform makes sure that you are seamlessly compliant with local regulations, laws and tax obligations, up to date with salary expectations and mandatory benefits, and armed with all the information you and your employees need to make intelligent decisions about work/life balance.
Get in touch here to schedule a consultation.
