Navigating Workation Policies in Ireland: A Guide for Payroll and HR Professionals

In the ever-evolving landscape of remote work, the concept of "workation" has gained significant traction. A workation combines work and vacation, allowing employees to work remotely from a holiday destination. A workation doesn’t require taking annual leave, so it can be a great way to spend time with family and friends abroad or enjoy a new destination after work. It’s a great way to enjoy a change and break beyond your annual leave. 

This flexible working arrangement can boost morale and productivity and can be a great bonus for prospective employees considering a move to your business. Workations are a wonderful way for employees to use their time diligently and explore the world. At SD Worx, we’re passionate about workations, and encourage our employees to use their time to the fullest.  

When offering workations, it’s important for businesses to remain fully up to date with regulations, as workations can present certain legal, tax, and HR challenges - especially for companies based in Ireland. It’s very important to remain compliant with the requirements of other countries to support initiatives like these. 

 

A workation involves employees working from a location outside their usual place of work, often in a different country. For Irish employers, this raises several legal considerations: 

Employment Law Compliance: 

When an employee works from another country, they may be subject to the employment laws of that country. This can include working hours regulations, minimum wage, health and safety, and employee rights, which is the employer's responsibility to ensure. It is also crucial to consult local employment laws in the destination country to ensure compliance and avoid legal disputes. 
 

Right to Work and Immigration: 

Employees must have the right to work in the destination country. This may require obtaining the appropriate visas or work permits, which might require the support of their employer. Employers should also verify the immigration status of their employees to prevent any legal infractions. Be aware that giving an agreement for an employee to work abroad requires due diligence, particularly in terms of long-term planning for the larger company. 

Data Protection: 

If an employee's role involves processing personal data, this could raise data protection concerns. The employer must ensure that transferring the data to the employee does not violate any data protection laws or breach contracts with customers and third parties. 

The General Data Protection Regulation (GDPR) restricts transferring personal data outside the EEA unless the destination country provides adequate data protection. Therefore, additional technical and organisational measures may be necessary to safeguard the data. This could include ensuring that all devices are updated with the latest operating system updates and software/antivirus updates or confirming that any locally stored data is securely backed up

 

Taxation is one of the most significant concerns when employees work from another country. The tax implications can be multifaceted: 

Tax Residency: 

If an employee is working overseas temporarily, the Irish employer should continue deducting income tax under the PAYE system. However, complications arise when the stay is extended or becomes indefinite. 

Employers should be mindful of the 183-day rule, as spending this amount of time in a country within a 12-month period often triggers tax residency and may necessitate employer withholding tax obligations. 

It’s crucial to assess whether the employee’s stay in the host country, regardless of its length, could create risks of income tax or social security liability there, or even result in the employer being seen as establishing a “permanent establishment” for corporation tax purposes due to the employee’s activities. To understand the specific implications, employers must familiarize themselves with the relevant rules in the host country, or bring an expert on-board who can elucidate the process. 

Double Taxation: 

Double taxation occurs when an individual or a business is taxed on the same income in two different countries. For instance, if an Irish resident earns income in another country, that income might be subject to taxation both in Ireland and in the foreign country. Becoming a tax resident in another country can lead to double taxation unless there is a double taxation treaty between Ireland and the destination country. 

Ireland has Double Taxation Agreements with many countries, which can provide relief from double taxation and define the number of days an employee can work abroad without becoming a tax resident. 

Payroll Taxes: 

Employers may be required to register and operate payroll in the destination country, adhering to local tax laws and social security obligations. This can complicate payroll processes and increase administrative burdens. 

Corporate Tax Implications: 

If an employee working abroad constitutes a "permanent establishment" in the destination country, the employer could be subject to corporate taxes there. This depends on the nature and duration of the work performed abroad. 

 

In Ireland, the law does not prescribe a specific number of days an employee can work abroad. That being said, many companies have internal policies which outline exactly how and when workation days can be used.  

Often, these agreements can allow for up to 183 days of work in a foreign country within a tax year. 

 

To effectively manage workation requests, HR and payroll departments should consider implementing the following steps: 

1. Develop a Clear Workation Policy: 

• Outline the eligibility criteria, application process, and approval requirements. 
• Specify the permitted duration and locations for workation, considering legal and tax implications. 
   

2. Consult Legal and Tax Experts: 

• Seek advice from legal and tax professionals to navigate the complexities of cross-border employment. 
• Ensure compliance with local laws and international agreements. 
   

3. Monitor and Document: 

• Keep detailed records of employees’ workation periods and locations. 
• Monitor the duration of stays abroad to manage tax residency risks. 
   

4.  Communication and Training: 

• Educate employees on the legal and tax implications of working abroad. 
• Provide training to HR and payroll staff on handling workation arrangements. 
• Be willing to support employees with any tax difficulties

 

Workation offers a really unique blend of work and leisure, giving employees a fantastic blend of work-life balance. The flexibility offered by workations, especially in the later Summer and early Autumn months is greatly appreciated by employees seeking to explore further flung destinations or extending time with faraway family. By developing robust policies, seeking expert advice, and maintaining diligent records, HR and payroll professionals can ensure compliance and facilitate a seamless workation experience for their employees.