Payroll and Remote Employees – What You Need to Know

Having remote workers offers a range of benefits to your business. This includes helping you expand into new locations or find lower cost ways of running the business.

There are challenges to overcome too, however, including dealing with payroll when the employee is outside Ireland. This is because employees outside Ireland are likely to be subject to different legislation, tax rates, and more.

Income Tax

How you treat income tax will depend on where the employee lives. This is easiest when the employee is from a country that has a Double Taxation Agreement with Ireland.

Double Taxation Agreements ensure workers are only taxed once on their income. In the case of an Irish business employing a worker in another country, this means taxing the worker at Irish tax rates. This makes payroll for remote employees more straightforward.

Ireland has 73 Double Taxation Agreements currently in place. The countries where they are in effect include Canada, Belgium, China, France, Hong Kong, Germany, India, Japan, Italy, New Zealand, the Netherlands, Singapore, Portugal, South Africa, the UK, Spain, and the US.

Income tax can get complicated when the employee is in a country where a double taxation agreement is not in place. You should get professional advice in these situations.

Employment Laws

You will also need to look into other employment laws which may impact your business when employing a foreign worker (you may also need to get professional advice). This includes minimum wage laws as well as laws that restrict overtime.

The rules regarding maternity and paternity leave may be different in the employee’s country too, plus there may be laws covering pensions, healthcare plans, and other benefits that differ from Irish laws.

Independent Contractor Vs Employee

If you are treating the foreign worker as an independent contractor rather than an employee, you will need to check local rules. In some countries, for example, the authorities might decide your independent contractor is actually an employee.

Do You Have a Remote Worker or Are You Starting an Operation in a New Location?

Another thing you will need to consider is will the employee’s country regard what you are doing as a new operation or branch of the business. Obviously, the difference between employing a remote worker and opening a new branch will have both compliance and tax implications.

There will be additional rules to comply with opening a new branch, for example, plus you may be expected to pay business taxes on profits generated in the remote worker’s country.

This problem arises when you believe the worker is a remote employee, but the authorities regard them as running a new operation. This may happen, for example, if the employee conducts transactions directly with customers rather than going through your main office.

Being aware of this can help you avoid problems. That said, the rules around this issue are not always clear, so get advice if you are unsure.

Whatever advice you need running your business, tax, payroll, or accounts, please contact Gilroy Gannon today. A member of our team is ready to help.

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