As “workcations” grow in popularity, dozens of countries worldwide have introduced specific visas catering to location-agnostic workers.

The desire to work abroad has grown exponentially since the covid-19 pandemic, with an estimated 35 million people globally now considering themselves “digital nomads”, according to a 2023 report from MBO Partners.

But while digital nomad visas make it easier to work across borders, and boost local economies, they can present challenges for businesses, particularly in terms of compliance and employee wellbeing. 

“A complex interplay of employment laws, immigration requirements, tax and social security rules, cybersecurity threats, international sanctions, and health and safety regulations shape the risk profile,” Eversheds Sutherland’s Audrey Elliot tells GML.

So, what are the essential steps businesses should take when granting employees the flexibility to work nomadically?

You can’t obtain a visa which allows you to hop around lots of different countries to work

Defining digital nomadism

The first step in crafting any policy is to clearly define the term “digital nomad”. While some visas specifically cater to this type of worker, not all are as flexible as they may first seem. 

A digital nomad generally refers to someone who works remotely while travelling. But, in reality, nomads are still subject to country-specific employment, immigration, and tax rules.

“The location where an individual is deemed as legally working can significantly affect the options and requirements for certain benefits, highlighting the critical need for businesses to navigate this issue diligently,” says Elliot.

When employees are approved to work overseas, they should be issued a contract variation letter outlining the compliance steps required to maintain the arrangement. 

Businesses must be mindful that most nomad visas are only applicable for temporary stays, so it is essential to clarify that a digital nomad arrangement involves an employee working from one country at a time, for a defined period, rather than moving from one country to another. 

“You can’t obtain a visa which allows you to hop around lots of different countries to work,” says Lewis Silkin’s Amy Nevins. “You have to obtain country-specific visas. As such, even though countries refer to the visa as a ‘digital nomad visa’, it should probably be better referred to as a ‘digital remote worker visa’.”

She explains: “Logistically, a policy which allows an employee to work across numerous countries and be truly nomadic is going to be incredibly difficult to implement and manage. 

“So, when an employer is talking about implementing an overseas remote working policy, this generally means someone who wants to work from one country temporarily for a period.” 

As more countries introduce digital nomad visas, it will be important for businesses to remember that securing a visa is merely the first step

Compliance with local laws

When allowing employees to go nomad, businesses must consider the local legal landscape. This includes complying with immigration laws, tax regulations, social security rules, and more.

A well-drafted policy should specify which countries employees are eligible to work in and include processes for ensuring compliance.

“We are witnessing an ongoing rise in location-agnostic working, powered by technological advancements. As more countries introduce digital nomad visas, it will be important for businesses to remember that securing a visa is merely the first step,” says Elliot.

“Employers must be vigilant about other legal and practical considerations, to ensure that such arrangements are beneficial for the business and safeguard the wellbeing of their employees.”

With employees working remotely across multiple time zones, maintaining engagement, motivation, and alignment with company goals becomes more challenging.

“Initiatives, processes, and policies that underline the company’s culture and values may need to be reinvented to maximise their effectiveness in a remote environment,” Elliot notes.

Employees should also beware of any restrictions that may arise from working in a foreign jurisdiction. For instance, it may be challenging to access benefits such as medical insurance or retirement savings, as different countries have different legal requirements. 

These gaps in coverage could expose the company to risks if not properly managed.

The arrangement risks creating a permanent establishment for corporation tax purposes, with risks of fines and significant unexpected tax expenses

Why allow nomadism?

Amid a rise of in-person working mandates, some employers may wonder why they should allow staff to work remotely from abroad – and, given the various legal risks, especially in locations where they don’t have a physical presence.

First, digital nomads have higher satisfaction levels with their work than most other workers, according to research from MBO Partners. In line with earlier research, 80% of digital nomads reported being highly satisfied with their work compared with 59% of other workers.

From a cost perspective, many digital nomads are also very satisfied with their income because they are often working in low-cost locations, arguably making it easier for employers to negotiate on pay and benefits.

In addition to talent attraction and retention, employers can also benefit from a digital nomad’s personal growth and upskilling – either through their learning of new languages or gaining local market knowledge and connections that could lead to future business expansion.

Tax and social security

Tax and social security regulations are perhaps the most complex aspect of managing a remote workforce that operates internationally. Although some countries offer digital nomad visas with special tax breaks or exemptions, others do not. 

“Where the digital nomad is working in a location where the employer does not have an existing legal presence, the arrangement risks creating a permanent establishment for corporation tax purposes, with risks of fines and significant unexpected tax expenses,” Elliot warns.

Before allowing an employee to work abroad, businesses should seek specific tax advice. Many companies use cross-border agreements or hire contractors to navigate these complexities, but these arrangements should be carefully reviewed to avoid creating long-term obligations.

Health and safety

Health and safety is another critical factor when supporting digital nomads. Workers’ compensation, health, and liability insurance rules can vary dramatically from one country to another. 

Strict workplace rules that may affect working hours should also be considered, especially if firms expect nomads to work at night due to time zone issues. 

“It should be expected that the obligation to comply with this legislation will fall on the overseas employer and therefore it will not be enough to make a blanket statement in a policy that the employee must work safely and comply with local health and safety regulations,” says Nevins. 

“Employers may also consider preventing employees working from a country that is particularly dangerous – if it’s unstable, a warzone, or a country with sanctions.

“However, any restrictions on countries should be carefully considered to avoid exposure to potential discrimination complaints,” she adds.

An employer needs to be clear on where its workforce is and if the management and ongoing compliance rests with HR

Data protection 

When employees travel internationally, data protection becomes a critical concern and employers must ensure that their policies are suitable for a remote workforce.

“From a UK standpoint, organisations are going to still be data controllers under UK GDPR and, therefore, retain responsibility for the security of personal data regardless of their employees’ location,” Nevins explains.

Employers should include specific measures in their policies to protect sensitive data, Nevins continues, such as mandating the use of virtual private networks (VPNs), enforcing multi-factor authentication for devices, and ensuring devices are secured when not in use

For the transference of personal data, if the employee is in a jurisdiction with an adequacy decision or if the data remains within the organisation, the issue may not arise. 

However, in other cases, safeguards like standard contractual clauses (SCCs) should be implemented, and conducting transfer risk assessments (TRAs) is advisable to assess potential risks, such as government surveillance or limited data subject rights.

Additionally, tracking employees’ locations may be necessary for tax, immigration, or regulatory compliance. But any tracking should comply with GDPR principles and prior to monitoring, employers should carry out a Data Protection Impact Assessment (DPIA), advises Nevins

She adds: “An employer needs to be clear on where its workforce is and if the management and ongoing compliance rests with HR, they need to have sufficient processes in place to monitor this and note when employees should be returning.”