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How can employers respond to the rise in demand for remote and overseas working?

Published on Friday, 25 Jun 2021

Introduction

A recent survey from the Chinese University of Hong Kong suggests that nearly 60% of people aged 15-30 want to leave the city, and that 25% of university-educated young Hong Kongers plan to leave within the next 5 years. With the potential outflow of talent combined with changes in working caused by COVID-19, what steps can employers consider taking to maintain or improve workplace retention?

Remote working has been adopted by many employers globally in response to the health and safety challenges posed by the COVID-19 pandemic and, for many, it has proved to be a popular change to traditional ways of working. As remote working has become widely accepted throughout the region, both employers and employees have been attracted to the mutual benefits. For employees, it means having more independence over their working location and flexibility over their working hours. For employers, there are obvious tangible benefits in terms of reducing office space and lowering operational costs, as well as creating a forward-looking culture.

However, working from home as opposed to in a traditional office environment has brought about a number of operational and legal challenges. This article looks at some of the key issues employers should consider from an employment law perspective.

 

Can employers require their employees to work remotely?

There are no statutory provisions in Hong Kong which allow employers to compel their employees to adopt remote working arrangements. Whether an employer can do so is ultimately a matter of contract.

The employment contract will normally provide that the employer has the right to decide where the employee will be based for the performance of their contracted job duties and obligations. The existence of such a clause generally will allow the employer to require its employees to adopt remote working arrangements when necessary. If the employment contract does not include this flexibility and/or specifically refers to the employer’s business premises as the work location, any change to a remote working location will, strictly speaking, require the employee’s consent by way of a written addendum. In practice, at least to date, most employees have been amenable to requests or instructions to work from home.

 

Working from overseas

Remote working from overseas is also an accelerating trend. Employers are increasingly dealing with cases of ‘stranded’ employees who are unable to return to their home country due to changing travel restrictions and quarantine requirements, or employees who want to work from overseas locations for an extended period (often to see family members who they may not have been able to see for an extended period). Originally thought to be a temporary issue, this is now no longer the case and employees/employers are faced with the question of whether to make such arrangements permanent or whether to accommodate requests to work overseas for extended periods beyond a normal annual leave break.

It is crucial for employers to specify in the employment contract (or at least a side letter) what arrangements will apply. The written terms should address issues such as governing law and jurisdiction, accrual of dual employment entitlements, as well as immigration and taxation consequences. Employers should assess whether the employee is able to claim local statutory entitlements in the offshore jurisdiction and, if so, ensure the written documentation includes protections to mitigate this risk. If the employee is a national of the offshore jurisdiction, the employee may have a right to work remotely from there. However, if the employee only holds a visitor visa or otherwise does not have the right of the aforementioned, the employee is unlikely to be able to do so until they have satisfied local immigration requirements.

From the employer’s perspective, tax and regulatory issues may arise, with permanent establishment tax risks varying by factors such as location, length of time spent in the jurisdiction, whether the employer has an entity in that jurisdiction and the activities the employee would carry out while there. Employers should observe the existence of any double tax treaty between Hong Kong and the offshore jurisdiction. The presence of employees working there and their duration of work may create issues in relation to permanent establishments and attract local salary or corporate taxes. Employers are therefore recommended to review the situation on a case-by-case basis and seek legal advice.

 

Insurance implications

Employers in Hong Kong are required to have in place an insurance policy that covers the cost of any liabilities incurred as a result of accidents and injuries in the workplace. Employers should consult their insurance provider as to whether remote working arrangements will affect their current insurance policies or whether any amendments need to be made.

On the other hand, employees continue to be under an obligation to promptly notify the employer of any accident or injury they might suffer while working from home, and to let the employer know in advance if they have any health and safety concerns about working remotely.

 

Electricity, internet and other expenditures

There are generally no legal requirements for employers to pay for any electricity, internet or other expenditures in a work-from-home scenario, although an employer may want to exercise its discretion given the current COVID-19 climate. Employers who do want to offer something are taking a variety of different approaches including for example paying actual costs incurred by employees, or paying a monthly/ one-time stipend to employees in a specified range.

It is also important to note that certain fixed payments may attract tax liabilities resulting in additional financial liabilities for employers. Allowances are also likely to fall under the definition of “wages” and thus have a knock on impact on the cost of various statutory entitlements.

Employers are therefore advised to clearly stipulate the company approach to these expenses in the terms and conditions of the employment contract or remote working policy.

 

Data security and confidentiality

Preserving the security of personal data and confidentiality of information has been a central challenge for employers looking to adopt remote working, particularly those in regulated sectors. Employers should conduct their own risk assessment before implementing any work-from-home arrangement, as employees will be accessing or transferring personal or company confidential information through their home network and/or own devices. If a work-from-home policy is adopted, employers should include provisions relating to preserving confidentiality and privacy at all times and notwithstanding the fact employees are not in the workplace. Guidance from the Privacy Commissioner should be factored into data security remote working policies.

Employers should also ensure their IT software and security systems are up to date and proper technical measures are adopted to minimise relevant risks. They may also want to consider implementing basic guidelines on how to make use of, and behave during teleconferencing on platforms such as Zoom and Teams. Such guidelines may cover technical issues on hosting virtual events, managing and controlling meetings, use of customised backgrounds, recordings, cameras and dress codes.

 

Culture and engagement

While there are obvious potential benefits to remote working for those employees who enjoy more independence over their working hours, remote working also results in physical distancing and an increased sense of social separation. Employers, therefore, need to be equally mindful of the potential challenges faced by having a less integrated workforce, and ensure that employees receive proper support in terms of mental health when adjusting to changes in home-based working style and demands.

 

Takeaways

Remote and hybrid working can have benefits for both employers and employees. However, having a considered and documented approach to remote working can help to set expectations, manage risks and lay the groundwork for successful new ways of working. It is prudent for employers to have a formal remote working policy that addresses the key issues set out in this article, and so that requests for varied working locations are not handled on an ad-hoc basis or without consideration of the potential impacts such changes to working arrangements can have.

 

Written by: Helen Colquhoun