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South African employers must approach foreign remote working with their eyes open

1 June 2022

Employers worldwide are grappling with a new trend – the employment law implications when employees want to continue working for them, but from another country.

Remote working from foreign jurisdictions has become increasingly popular during the COVID-19 pandemic and is a trend that appears likely to stay as a way for employers to attract and retain their best talent.

‘It is understandable that employers would wish to accommodate their key talent by allowing them the flexibility to work from abroad. However, there are legal risks that the employer could inadvertently trigger,’ says Helen Wilsenach, Head of Employment and Benefits at leading African law firm Bowmans.

She says there are three main employment law risks that employers could run into when an employee asks to work from a foreign jurisdiction.

‘First, the employer may find itself shouldering an additional compliance burden in the host jurisdiction and carrying higher costs as a result. Then, if the employment relationship breaks down, the employment law regime of the host country may be triggered,’ says Wilsenach.

‘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 the host country’s labour laws come into play

From a compliance perspective, in addition to various tax law considerations, additional obligations could 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 the government bodies in the foreign jurisdiction in question for social security and compensation for injury on duty, which can be tricky when you do not know the law in the other country and do not have a presence in that country or any administrative infrastructure to assist with the necessary compliance obligations,’ says Wilsenach.

Another complicating factor is that 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 to them 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 (UK’s) bank holidays, for example, do not necessarily coincide with South African public holidays. ‘How would the employer in South Africa respond if the employee in the UK wants bank holidays off?’

What 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,’ says Wilsenach. In the UK, which like South Africa is considered employee-friendly, workers can bring a claim in the UK Tribunal free of charge, making it relatively easy for disgruntled employees to do so.

Back in South Africa, 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,’ Wilsenach says.

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,’ she says. ‘It’s possible to reduce and mitigate the risks, however, bearing in mind that it may not be possible to negate them altogether.’

Avoid creating a contractual right

Wilsenach says there are two critical steps a South African employer can 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.’

In this contract, it should be made clear that 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.

‘Avoid creating an express contractual right. Remote working in this instance is really to accommodate the lifestyle choice of the employee,’ she says, adding that 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,’ Wilsenach concludes.