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Businesses offering flexible working overseas could find themselves in hot water, says RSM UK

Businesses that are allowing employees to work flexibly overseas could find themselves in hot water if they are not aware of the tax requirements, says RSM UK.

According to RSM UK’s latest ‘The Real Economy Report’, a third (33%) of businesses have allowed existing employees to work remotely outside of the UK in response to staffing challenges. Labour shortages are being felt across the board, with well over three quarters (88%) of businesses finding employee turnover a challenge.

Of those that have offered hybrid working options to attract or retain employees*, 31% of businesses have set restrictions on the length of time employees can work abroad. While this suggests that some businesses are considering the tax risks associated with working overseas, it also raises concerns over the two thirds of businesses with no restrictions in place that are perhaps less aware of the tax implications. Further considerations for businesses include employment law, social security, cyber security and immigration rules.

Businesses are also looking overseas to source labour. Of those that have taken on labour from outside the UK due to staffing challenges**, over half (52%) have increased the amount of overseas labour that they’ve taken on in the last year. The vast majority (79%) of these international workers have been sourced from the EU.

Kevin Duffy, RSM UK’s regional managing partner in the North West, said:

‘Business owners in the North West continue to tell us that the labour market remains tight. Scarcity of resource in many industries means that clients are increasingly turning to sourcing staff from overseas.’

Thomas Pugh, economist at RSM UK, said:

‘The labour market looks set to remain tight for the foreseeable future, as high sickness levels and a challenging demographic outlook combine to reduce labour supply. One way firms are dealing with this is by recruiting more labour from overseas, but this will be difficult for many industries.

‘Firms will have to concentrate on upskilling their current employees and creating effective incentive schemes to retain staff. In addition, businesses that invest in productivity enhancing automation will find themselves in a much more competitive position once the economic upturn comes in 2024.’

*170 respondents
**132 respondents