Mr Jamin McKee (left) returned to his home country, New Zealand, in May due to his father’s declining health and working remotely from there for four and a half months.
Remote Work Abroad: Challenges of Overseas Policies
Each week, TODAY’s long-running Big Read series delves into the trends and issues that matter. This week, we look at the implications and ramifications of overseas remote work for work structures and policies. This is a shortened version of the full feature, which can be found here.
- As borders reopen and families reunite, employees who have gotten used to remote work over the past months are starting to contemplate the possibility of doing that while overseas
- This has been made possible by the accelerated digitalisation across almost all industries, which enabled employees to work away from the office during the pandemic
- However, bigger questions have to be resolved if longer-term overseas remote work is to become commonplace
- In particular, some laws and policies governing areas such as taxation, work benefits, company-employee relationships and foreign manpower would require a rethink
- The Ministry of Manpower is studying the implications and opportunities of remote work, and reviewing whether any legislative changes are necessary
The Personal Story of Mr. Jamin McKee
SINGAPORE — When Mr Jamin McKee found out that his father’s health was worsening, the Singapore-based New Zealander asked his then-employer in September last year if he could return to his home country to spend time with his family and work remotely from there. The Employment Pass (EP) holder, who has been trying to gain permanent resident (PR) status for the past few years, said that his request to work remotely was rejected. The firm wanted him to take no-pay leave instead.
“They wouldn’t let me (leave Singapore) for extended periods of time, even though my work could be completely done remotely,” said the 25-year-old account manager.
Taking no pay leave was not an option for him as he would have to be in New Zealand for the medium to long-term period — too long for him to go without drawing a salary. He thus quit his job after a year to join a Singapore-based tech media firm in November last year. His new company is flexible in allowing him to travel and work from overseas, as long as he gets his own health insurance back in New Zealand.
Remote Work Post-COVID-19: The Global Shift
As borders reopen and families reunite, employees who have gotten used to remote work over the past months are starting to contemplate the possibility of doing that while overseas.
TODAY reported earlier this week that some Singapore firms are looking at allowing their employees to work temporarily from overseas for up to six months. This has been made possible by the accelerated digitalisation across almost all industries, which enabled employees to work away from the office during the pandemic. For Singaporean investor Ray Chong, Thailand will be his “ base” from next month, as he plans to fly there and work remotely for about three to four weeks. Mr Chong works for a venture capital firm based in China, which also has a Singapore entity. However, his entire team is based in China and so it makes no difference where he is working as he would have to meet them virtually anyway, said the 33-year-old. Indeed, as many countries come to terms with living with Covid-19 and begin to reopen their borders — despite the fits and starts as new virus strains emerge— the world is once again becoming their oyster for people such as Mr McKee and Mr Chong.
“Technically it makes no difference, I can just (do my work) anywhere I want,” said Mr Chong.
COVID-19 A Game Changer For Remote Work
Mr Chong is half right. On paper at least, many employees can uproot themselves and relocate to anywhere in the world with an internet connection, and still do the same work for their companies. However, such an arrangement, especially if it is for the longer term, can be complex for companies and policymakers. Given that having employees work remotely overseas are still very much a work in progress, some questions remain to be answered: To what extent is remote work overseas a viable option? Would it be possible to work remotely abroad not just for a few months, but indefinitely?
Factors such as taxation and labour laws mean that prolonging the period where one works remotely overseas for a Singapore firm will come with complications.
The Complexities of Taxation and Labour Laws
Mr Chris Woo, tax leader of accountancy firm PwC Singapore, pointed out that one cannot expect to stay in a foreign country indefinitely without resident obligations, such as paying taxes and observance of labour laws, coming into play sooner or later. He added that this is why visitors to a certain country are generally allowed to be there only for a limited period of time and have to be issued work or employment passes, or visas if they wish to extend their stay. The idea of remote work is not new: For years, companies have been engaging freelancers based overseas or outsourcing certain functions, including call centre and technology support services, to workers abroad.
However, Covid-19 has been a game changer.
As it forced industries to digitalise most, if not all, of their operations. As a result, remote work is now viable for a lot more job functions — prompting more workers to embrace it for various reasons
These extend to issues such as tax and labour legislation, employment benefits and Central Provident Fund (CPF) contributions. On a broader front, countries will also need to grapple with the implications for their foreign manpower policies, among other things.
These extend to issues such as tax and labour legislation, employment benefits and Central Provident Fund (CPF) contributions. On a broader front, countries will also need to grapple with the implications for their foreign manpower policies, among other things.
Tax and Labour Laws: The Legal Complications
Staying in a country for an extended period of time would invariably lead a person to be subject to its tax and labour laws, said tax and employment experts. However, the lines are not always clearly drawn and depend on many different factors, such as whether the employee still has to pay taxes in Singapore while working remotely overseas. Mr Mark Addy, a partner at KPMG here, said that in general, whenever a Singapore company has employees working in foreign countries, it “runs the risk of being liable for corporate income taxes in those countries by virtue of creating a ‘permanent establishment’ or taxable presence there”. Mr Woo from PwC Singapore said that there are various factors that determine if a Singaporean who works remotely is considered to be “legally working” in another country and thus, under the jurisdiction’s tax and labour laws. For example, it matters if a country has a tax treaty with Singapore, which broadly sets out rules on whether they will be liable for personal tax. The number of days that people can stay in the country before they are liable to be taxed varies from country to country, and depends on the treaties.
One such treaty is the Avoidance of Double Taxation Agreement (DTA),
which according to the Ministry of Finance website, helps to minimise the double taxation of income arising from cross-border business activities. According to the Inland Revenue Authority of Singapore’s (Iras) website, Singapore has DTAs with nearly 100 jurisdictions. According to the Inland Revenue Authority of Singapore’s (Iras) website, Singapore has DTAs with nearly 100 jurisdictions. Mr Vikna Rajah, who heads the tax, trust and private client practices department at law firm Rajah & Tann, said that these agreements help to “ascertain the allocation of the taxing rights of the income he or she earns” between Singapore and the country the person is working remotely at. Nevertheless, these treaties have an “exemption threshold”, said Ms Dion Thai, Ms Dion Thai, a global employer services tax partner from Deloitte Singapore. Beyond the threshold, which differs depending on country, the person will have to pay tax to both jurisdictions.
“The employee who undertakes a remote work arrangement may end up in a situation where he or she is subject to tax in both the country of employment and the country where he or she is working remotely, and there will be situations where double tax cannot be mitigated or avoided,” she said.
While exceptions had been granted at the height of the Covid-19 pandemic, most countries have stopped or scaled back on tax concessions for such remote work arrangements.
Staying in a country for an extended period of time would invariably lead a person to be subject to its tax and labour laws, said tax and employment experts. However, the lines are not always clearly drawn and depend on many different factors, such as whether the employee still has to pay taxes in Singapore while working remotely overseas.
There are also labour laws in foreign jurisdictions that may come into play. Ms Charmaine Neo, the head of employment practice and investigations practice at WMH Law Corporation, gave the hypothetical example of a Singaporean employee employed by a Singapore company posted to work in the United Kingdom.
“Your contract is under Singapore law… but it you work in the UK they may have different working hours, and even things like different minimum wage laws,” she said.
“Even though your (employment) contract may be perfectly legal under Singapore law, the fact that you are working in the UK itself could also render you or your company to potential exposure to liabilities for laws in that country.” KPMG’s Mr Addy said that to mitigate such risks, companies need to ensure that they “plan accordingly and put in place proper policies and guidelines for employees wishing to take advantage of remote work arrangements”.
One way of doing so is to ensure that the company has an official legal presence in the overseas country that the employee is being deployed to. Mr Woo said that options include employing the worker under a satellite branch of the office when they are there, or transferring the worker to a sister company based in that country.
Should these two options be unavailable, firms can also register the employee under an employment agency or “professional payroll companies” which can act as a proxy for the Singapore employer, said Mr Derrick Teo, group CEO of the Elitez Group of Companies, which provides human-resources-related consultancy services. In these cases, the employee will be considered a full tax resident of the foreign jurisdiction and be solely under the tax and labour laws there.
Employment Benefits and CPF Contributions for Overseas Remote Workers
HR experts whom TODAY spoke to said that by and large, it would be cumbersome for a firm to provide those working remotely overseas with the full slew of benefits granted to its Singapore-based workers. These benefits include restrictions on working hours, healthcare benefits and insurance. Ms Carmen Wee, a veteran HR practitioner, said that for most short-term remote working stints, companies and employees come to a common understanding that there will be no benefits provided. This will be tricky, however, when overseas work is done on a longer term. “If it is a permanent (overseas) role, the HR contract has to be written according to the (foreign country’s) legislation… it has to be tied to the social security pension and welfare benefits of the country,” she said. As this is a cumbersome process and better done by an entity that is situated in the foreign country, Ms Wee said that a “fundamental” decision has to be made as to whether the job “has to be done overseas”. One solution that may be tempting to employers is to recast their permanent staff working remotely as freelancers, where the worker will not receive any benefits and will be doing project-based work. Mr Teo said that while this may seem like an easy way out, it can backfire.
“(Employers) may not have the assurance that this person will always be able to work for them every workday, because freelancing by definition is project-based,” he said.
He added that as freelancers, some people may be concerned about an unstable income, which may fluctuate according to the number of projects on their plate. Economist Walter Theseira, from the Singapore University of Social Sciences, said that while it is true that companies do not need to provide benefits to freelancers, the latter, in turn, can also “work ‘at will’ and can generally quit their work with little or no notice, and owe considerably fewer duties to the firm”. When it comes to CPF contributions, the experts interviewed said there is no need for employees working remotely to do so. The CPF Board website states that CPF contributions “are not payable on wages given to your employee who is employed to work overseas”. Ms Neo from WMH Law Corporation noted that while CPF is “generally not payable for employees working overseas”, the pandemic has shown that employers and employees are moving towards more flexible working arrangements that may encompass remote working. “I definitely agree that the authorities should look further into whether the current legislation supports such a framework to give employers and employees more clarity,” she said
When it comes to CPF contributions, the experts interviewed said there is no need for employees working remotely to do so. The CPF Board website states that CPF contributions “are not payable on wages given to your employee who is employed to work overseas”.
FOREIGN MANPOWER
The prevalence of remote working due to the pandemic has also given rise to some thorny questions, especially amid the perennial debate of local-versus-foreign manpower.
After all, remote work is sought not just by Singaporeans who want to live overseas while working for a Singapore company — but also by Singapore-based employers themselves.
These firms now face fewer obstacles to hiring foreign workers remotely given that much of the workforce in many parts of the world has adapted to working from home. And many firms may be tempted to do so, especially when it is cheaper to pay these workers compared with their Singaporean counterparts. This could have ramifications in terms of how companies view the Government’s foreign worker quota, which is calculated based on the number of Singapore citizens and PRs a firm hires. Ms Neo said that foreign workers who work remotely would not count as part of a company’s foreign worker quota, since “the rationale for the foreign worker quota is to regulate the number of foreign workers in Singapore”. Agreeing, Assoc Prof Theseira said that employment laws “generally do not address the issue of employers purchasing services from foreign providers”. This is not a new phenomenon, he noted, with firms buying services from foreign call centres and technology support services. The issue that Singapore, as with the world at large, faces now is that the practice is becoming more widespread with the pandemic.
“What has changed is that the scope and scale of services that can be effectively delivered remotely have expanded due to advancements in technology, meaning more jobs and roles are potentially offshorable than before,” Assoc Prof Theseira added.
In October last year, Yio Chu Kang Member of Parliament Yip Hon Weng filed a parliamentary question on how the Singapore workforce will remain competitive with remote workers in the region willing to work for lower remuneration. In her reply, then-Manpower Minister Josephine Teo said among other things that the authorities are studying the issue. Responding to TODAY’s queries, a Ministry of Manpower (MOM) spokesman reiterated earlier this week that it “continues to study the implications and opportunities of remote work”. “We will also review whether adjustments to legislation or regulations are necessary,” the spokesman added. Experts cautioned that if left unchecked, this phenomenon could have repercussions for the Singapore workforce. Said Mr Teo from the Elitez Group of Companies: “If this becomes an increasing trend, then the stark reality for many Singaporeans, especially the young graduates, is that they must be aware that they are no longer competing with other local workforce members… They’re competing on a global scale.”
