Introduction
For employees, working from anywhere provides a large degree of freedom and flexibility, enabling them to spend time in their home or in a third country suitable to their personal and family circumstances. For employers, allowing employees to work from anywhere provides access to an extended global talent pool and reduced office/property costs. However, there are a number of implications that the employer must consider before permitting employees to work remotely or cross border.
1. Terms of employment contract
It is necessary to amend the employment agreement to reflect the terms of employment that will change with remote or cross border working. The Act requires that an employment contract to provide for the place of work and the hours of work. Where any terms of employment change, the employer shall, in consultation with the employee, revise the contract to reflect the change and notify the employee of the change in writing. Additionally, the Act requires that where there is a change to the employment contract, the employer shall give to the employee a written statement containing particulars of the change. This statement shall be issued within one month of the change.
2. Tax
Employers should assess whether the arrangement may result in the employer being deemed to have created a permanent place of establishment in the overseas jurisdiction, and thereby potentially creating a taxable presence. A permanent establishment is formed when a non-resident person conducts business activities in another tax jurisdiction over a given period leading to a taxable presence in that territory. The longer an employee stays in the foreign country while working for a Kenyan employer, the higher the risk of Kenyan employer to be found to have a permanent establishment. Where a permanent establishment forms, the non-resident person shall be subject to tax on the proportionate income that will be accrued in or derived from the business activities carried on in in the foreign country. Some examples of tax obligations that may accrue are:
- corporate income tax;
- Pay As You Earn tax;
- withholding tax ; and
- VAT.
The employer should also consider where the employee’s income will be taxed. This is dependent on whether or not there are any double taxation agreements in place with the foreign country that prevents double taxation of income. The status of Kenya’s Double Taxation Agreements is available on the National Treasury’s website (link here). Additionally, some tax treaties have provisions on the number of days cross border workers can earn income in the foreign country without a tax obligation arising. For additional consultations on tax and permanent establishment, we can refer you to a tax advisor.
3. Jurisdiction
The employee working in a foreign jurisdiction may be entitled to the benefit of mandatory employment rights as provided for under the local labour laws such as minimum wage, leave entitlement, housing allowance, social security contributions requirements, national insurance fund contributions etc. This is regardless of the employment contract having a clause identifying the governing law and jurisdiction. The applicable protections are dependent on the country. For example, a Kenyan employee is entitled to a minimum for 21 leave days. This may be more than the foreign country’s statutory entitlement. It is important for employer to be aware of the minimum conditions of employment that would be applicable to the employee.
4. Immigration
The employer should confirm whether the local immigration laws of the foreign country allow the employee to work remotely from the foreign country and if not, whether a work permit will be required.
. For most jurisdictions, a foreign national working remotely from a host country, must have appropriate entry visas or a work permit. This is even where the work is performed entirely for use outside of the foreign country’s jurisdiction. If a visa, work permit, or residence permit is required, the employer should make sure these are obtained before the employee starts working remotely.
An employer should also note that for a work permit to be issued in some foreign jurisdictions, they may be required to register a foreign branch office or a subsidiary.
5. Social Security
The employer should determine whether social security contributions will still continue to be remitted for the employer even when they are residing outside of Kenya. The Act provides for instances where an employee ordinarily resides in Kenya but is employed outside of Kenya by an employer with a place of business in Kenya. Such an individual shall still be considered and employee and the employer shall still be required to remit contributions on their behalf to the National Social Security Fund.
6. Additional considerations
- Confidentiality and data protection – The duty of confidentiality and the duty to protect customers’ personal data shall still apply to the employee regardless of their work location. Additionally, the employer should note that remote working increases the risk of data breaches and cyber-attacks. This is because most of the work is done online. The employer should conduct a risk assessment and put in place risk mitigation measures such as:
- amending the employment contract and the company’s policies;
- conducting employee trainings; and
- installing software in employees’ computers or laptops that can limit the sharing of company information.
- Discrimination
The Employment Act prohibits discriminatory practices and requires an employer to promote diversion and inclusivity at the workplace. Therefore, even as the remote working and/or cross border working arrangement is implemented, the employer should ensure that there are no unjustifiably disadvantaged groups. The arrangement should be applied to all employees consistently and equally.
- Health and safety
Employers have the same health and safety responsibilities for people working at home as for any other worker. They should conduct a risk assessment of the employee’s home working setup and also providing training to the employee for any safety issues that can arise.
