In this webinar, an expert in global HR, payroll, accounting, and compliance discusses:
For US companies seeking to expand their operations internationally, European markets offer immense opportunities. Yet, in order to make the most of them, it is vital to understand the numerous laws and regulations that exist, as well as how they differ from country to country. Historically, the UK, Ireland, and the Netherlands have been the most popular corporate expansion destinations. Find out why this is the case, and what impact Brexit could have on business in Europe.
Top European Destinations
I wanted to start off with why companies have always regarded, and certainly in the last 20 to 30 years, Ireland, Netherlands, and the UK as the top destinations in terms of US companies entering into Europe and establishing their operations.
Let me start with Ireland. Ireland back in the 80s did establish a policy where they lowered aggressively their corporate income tax rates to attract international companies to their country, with the objective of expanding their employment base. So they had a special rate for free trade zones of 10% and they lowered their corporate tax rate to 12.5%.
This was very specifically targeted towards the US, and as you may know, Ireland has become a top destination for parking profits in terms of US companies. In conjunction with this, they established the Industrial Development Authority, which was their job creation. You will see IDA Ireland has offices here around the United States, where they not only offered tax incentives to actually establish operations in Ireland, but they also actually gave you contributions to hiring employees there with a sole goal of increasing the employment rates in that country.
With this, Ireland became the jumping off point for many US countries entering into Europe and very much became where US companies would translate, localize, internationalize their products and services to distribute throughout Europe. So, very much where, if you are looking for or really need these types of services, where US companies establish their base.
The Netherlands has always been, for centuries, Europe’s distribution hub. Rotterdam remains the largest port in Europe and many products are brought into the Netherlands and distributed throughout the continent. Very business friendly, they obviously have been trading with other nations for many centuries and they are very efficient, very focused on remaining the hub in terms of product distribution throughout Europe. The population is 90% English speaking. They obviously do really orientate themselves to welcoming US companies, join and basically expand their operations in Europe.
The UK has always been Europe’s financial capital. London is very much where we have gone, in terms of if you needed to finance and expand, or if you had associations needing financial capital. UK is most aligned with the US in terms of business practices. This very much came about after the Thatcher era where obviously, there was a move away from unionization and very much towards business-friendly operations. Today, it still remains that the legal framework and tax framework is very much oriented similar to what the US implements.
Very much the topic of the hour, which seems to change on an hourly basis in the UK at the moment, is what is really going to happen with Brexit. As you know, two years ago the UK decided that they were going to leave the European Union and has spent the last two years trying to discern how that is going to happen. It is still very unclear today how that is going to happen.
The sticking points have been around whether it is going to be a closed union, still with the EU, or its not. Particularly in terms of the customs union, the ability to trade, and move goods and services throughout Europe is really where the concept has come from. So, this fear, uncertainty, and doubt have really affected trade prospects for the UK as a whole, particularly with obviously the EU.
It has really led companies to rethink their strategy because many countries have the UK as their European hub and really where they employed the main body of personnel and then had sales offices throughout Europe. So, in this, the trend has been very much that companies that have used the UK have seriously thought of, in the last two years, how to shift their resources, what are their future plans, what do they intend to do, and really what are the implications in the long term.
So, at this point obviously, it has been going on for two years, there’s definitely been this inertia about the fact that nobody can really decide what is going to happen, but every company has treated it from the perspective that the UK is going to leave and that if they want European operations to be in the EU, then they have to move them.
This has very much led to companies already moving their resources, already changing their plans, and really the UK has become a stand-alone. Particularly affected obviously is immigration and customs checks. You all would have seen in the news about the fact that, if by March 29th there was no Brexit deal, then they expect all borders with the EU to be closed and there would be major problems getting in and out of the UK because nothing was decided.
So supply chain, and really how companies operate and do business with the UK and the rest of Europe, is creating a lot of uncertainty and people are very concerned about what is going to happen. You will have seen today that the UK has applied for a 3 months extension to still try and figure out what is going on.
This has also led to a lot of political division in the UK. There is still the potential, because Scotland has actually voted to stay in the EU and the UK voted to leave, has led to the possibility of a break up of what’s going on in the UK and certain countries may leave the union and separate.
Right now, the sense seems to be that the UK will still be aligned with the EU directives and the labor laws and statutory requirements will operate in the EU and will still have a close association. But until we get a final decision, nobody really knows. So right now in terms of Brexit, companies have made that decision, they have separated. But still, obviously, the UK is the third largest economy in Europe, so as a standalone country to go into it is still very attractive. However, as a jumping off point and where you want to establish your European operations, there are varied concerns about that and it is very much separated.
Right now, the preferred destinations that companies have migrated to, in terms of their European headquarters, have tended to be Ireland, Netherlands, and Germany.
Ireland obviously because their pro-EU approach to supporting companies with their distribution of products services, from the localization, internationalization standpoint, Netherlands from the distribution standpoint of products, and Germany from the banking perspective because most of the companies have actually moved their banking operations there. So very much still up in the air, very much nobody really knows what is going to happen in terms of whether there will be another referendum, or whether it will be a hard Brexit or soft Brexit. And really critical in all of this is Ireland and Northern Ireland and what is going to happen there.
So, overall when you are going into these 3 countries, more from a general perspective, obviously they have some strict laws as to definitions of what is a contractor and what is not a contractor and what is full-time employment what is not full-time employment. You will see some discussion later about some steps in Ireland to make this criminal if you don’t employ people correctly.
So really right now, yes, there’s still the potential for an independent contractor, you have to be very cognizant of obviously how many hours these people work for you and what is the nature of their work they are doing for you. There is also a concept of a Professional Employment Organization or Employer of Record where companies, like ourselves, have legal entities in these countries where we can employ people on your behalf and they work for the PEO company, however, they are actually working at your direction, as the US company. So that is definitely a possibility.
There is a concept of a Non-Resident Employer where you actually register in the country to be a Non-Resident Employer which entitles you to hire people from the US company. And then, there is obviously incorporating a wholly owned subsidiary and entering into the country permanently. So those are your options.
In terms of employment contracts, obviously, there is labor laws and statutory requirements in all of these countries. They are very onerous. There is no such concept of employment “at will” because they are governed by the labor laws in each of these countries. So, this very much dictates work time regulations, and how much time you are allowed to work, termination protection, amounts of severance, garden leave and things of that nature, and the consequences of breaches. In terms of benefits, obviously, a lot of countries have statutory benefits which are the national health insurance, pension plans, and things that are run by the states.
There is still a possibility of supplemental benefits such as life insurance, disability insurance, private medical insurance, meal vouchers, daycare vouchers, things that really attract and retain employees to stay with your company and that can be procured, and can be supported and obviously that is the type of thing we do for our clients.
Payroll, obviously you have to have locally compliant payroll systems. The taxes vary in every specific country, so you have to have a compliant system that is up to date from a payroll taxes perspective and a statutory benefits perspective. You obviously have to process and set up the payments for the payroll, the payroll taxes, statutory benefits, and do the ongoing, quarterly and annual filing that are associated with it.
We also provide, not only the payroll systems but hire to retire services. So, in terms of making sure that you onboard people correctly, you are doing the immigration requirements correctly in terms of work permits, and what is required in terms of checking that they have the right work in the country, and then the ongoing benefits administration, hire to retire, and workforce visibility in terms of your HRIS as well as your payroll systems.
Legal, Compliance, & Tax Considerations
So, as I said, in terms of legal entity set up, the possibilities here are: the Representative Office, the Liaison Office, which is typically short term and you are going into a country for one to three years, you are exploring the market, you intend to really only do research there, and so its not meant to be for a long term perspective. You can certainly open a branch. Branches are still subject to income taxes, they do alleviate the possibility of having to do the annual compliance requirements from a company perspective. Although, they have become less popular recently because they come with a downside of not entitling you to have employment law protections in the country.
Wholly owned subsidiaries. Obviously, one-hundred percent ownership that you would incorporate yourselves and maintain, and then I’ve already discussed the Non-Resident Employer requirements.
Certain other countries like the Netherlands do require you to have a local national as a resident director so there are some requirements in terms of how you go about that. Certainly, it is tricky from the perspective of making sure you could move quickly getting the registration for the payroll taxes and statutory benefits. Without those, you really can’t start employing people and onboarding them through the payroll services.
Statutory accounts depend on obviously the size of the operation and how much revenue and expense you are incurring in the country. And then there are requirements for quarterly and annual VAT filings, as well as annual income tax returns. So they are typically done in conjunction with your accounting services.
Things to Know: Ireland
So, topical things that are coming up here in terms of specific focuses that each of the countries are looking at. You will see here that we have got the Employment (Miscellaneous Provisions) Bill, which was recently introduced and was really addressing that whole independent contractor or temporary worker philosophy. They are now making it a criminal offense not to enter into employment contracts with employees if they consider that is how they should be designated.
They can’t be classified as self-employed or independent contractors, so really it’s focusing in on the whole definition of what is self-employment, much as you would have here in terms of whether an Uber or a Lyft driver is really self-employed, or whether they should be classified as employees. So, bringing in some very onerous provisions around that.
Redundancy packages in Ireland have become very much more lucrative in terms of the amount of compensation, particularly if you have worked for longer than 12 months for a company. So very much focusing on the fact that it’s like the entitlements when you do hire someone full time, enter into the employment agreement. To get out of those packages is going to really cost you, especially based on the extent of the time they work with you. And then they are also introducing concepts of increasing paid parental leave and annual leave in terms of really addressing the issue of the work time and personal time relationship and the balance that you should be experiencing in your life in terms of how much you work.
Things to Know: UK
So in the UK, immigration right now is very much topical in terms of what’s going on. The UK is a very popular destination for EU citizens to actually live and work, and right now there is no work permit requirement. They have introduced legislation that will allow the EU citizens to have a “settled status” entitlement if they are already living and working there, which does entitle them to stay indefinitely. However, there are still discussions about the provisional tax implications of that will be and whether they will have entitlements for a lot of the state benefits. Right now that is a very topical subject. It is still very uncertain and dependent upon what’s going on.
They have introduced some new taxes starting from April 6, 2019, that there is a requirement in terms of more detail around that payment status. This is not only for full-time workers but also for temporary workers and people who are deemed to be self-employed. The national living wage, very much in line with the US, is being increased. This is actually higher than in the US at the moment. And then there are movements towards increasing the entitlements in terms of family policies and what you can look forward to in terms of parental leave and disability and things of that nature. There are requirements in the UK that have been brought in around publishing executive pay gap and also gender pay gap considerations. So very topical in terms of the whole debate about how much the male and female workers are paid and what are the differences.
Things to Know: Netherlands
In the Netherlands, again, there’s very much this focus on short-term contracts, fixed-term contracts, which can be a year renewable, or indefinite contracts, and how that definition is really derived when you enter into the employment agreement, because obviously, what they want to focus on is that employment is indefinite and shouldn’t be a fixed renewable, which is stopping a lot of the work in terms of the amount they are paid, that they are not entitled to so much as there used to be.
Also, in terms of the work-life balance, there’s legislation that has been announced where workers can actually disconnect from the employment environment and are in this position where they will not be required to respond to emails, phone calls, and messages from managers and employees outside of work hours. So, very much legislating that this needs to happen. The Dutch tax system is changing. Many of you may have heard of the thirty percent ruling. If you are an expat working in the Netherlands, you are allowed to have thirty percent of your earnings not taxed. That rule is being modified and changed. Right now it’s up to 8 years and it’s being modified to only for 5 years, and things are changing there. And again, there is a more business-friendly focus in terms of attracting companies, changing the tax rates and lowering them for companies doing business in the Netherlands.
So, that’s the summary of the highlights of the things we should be thinking about, and what’s happening in these different countries.
What are the legal requirements to set up an entity in the UK?
For US companies, the legal requirements for setting up an entity in the UK are similar to those in most of the other European countries. If a company wants to incorporate there, they will be incorporating the legal entity as a wholly owned subsidiary. Additionally, there are considerations regarding certificates of incorporation, articles, bylaws, as well as authorized directors. It is required that companies have the necessary documentation to display that these directors are allowed to act on behalf of the company and that they are legally residing in the US. These documents are typically in the form of passports, utility bills, or items of that nature. Finally, questions about beneficial ownership of the company and Know Your Customer (KYC) requirements may arise. In these cases, companies must be prepared to provide certain information about their shareholders.
Are there any virtual employer schemes available in the UK and/or Ireland that would enable smaller companies to team up in order to achieve economies of scale in sourcing employment benefit packages?
The availability of these company pooling schemes essentially depends on the specific brokers that are providing them. There are situations where this pooling is made available to companies. In fact, we work with some of the major brokers like Mercer, AJ Gallagher, and Lockton, who have access to schemes like this. Essentially, if you are interested in pursuing a company pooling scheme, we would recommend working with brokers that can facilitate getting you access to them.
Can you provide more information about contractors in Ireland?
As discussed in the Ireland overview, this issue has become an area of focus. Recently, it has become very hard to hire people as self-employed, or independent contractors in Ireland. The regulations are pushing employers to enter into employment contracts and to treat all employees as direct employees. While there is still the PEO (Employer of Record) option, where employees are hired on your behalf, contracting in Ireland will remain a challenge. Overall, employers will need to be very careful with regards to contractors, as the violation of these regulations can be deemed a criminal offense.
What type of tax obligations do companies in Ireland have?
The tax obligations are similar to those present in the other EU countries. All companies must register for income taxes and must file their income tax returns on an annual basis. Companies that do not need to generate revenue out of Ireland treat their entities in the country as cost-plus-repair entities. These companies pay income taxes on the amount determined by the markup percentage for the country. Other companies are interested in parking their profits in Ireland due to the low tax rate in the country. In this situation, since revenue is generated in Ireland, there is a VAT that is charged on all goods and services produced in the country. Companies must file their quarterly and annual VAT returns, recording accurately, the revenue realized, less the expenses of the associated VAT.
What are the key differences between an employee and a contractor in the UK, Ireland, and the Netherlands? What key laws pertain to these classifications?
As we discussed, the laws are changing. In each of these three countries, there has been a movement away from the concept of self-employed, or independent contractors. There is a very strict definition in terms of the amount of time and the nature of the work that these types of employees are allowed to perform. Additionally, in the Netherlands, there is a concept of fixed-term, as opposed to indefinite, contracts. This makes it increasingly difficult for companies to hire anyone as an independent contractor. There are labor laws covering all of these hiring classifications and requirements, but essentially, hiring someone as a direct employee is a lot easier. With that being said, in direct hiring you are making a much more onerous commitment, so careful consideration must also be taken in that sense.
Is it possible for UK employees to continue working in the UK without a permit?
UK citizens have a right to work in the country and do not need a work permit. However, for US citizens working in the UK, permits are required. Additionally, if a company incorporates a legal entity in the UK, then it is required to obtain an immigration sponsorship license that allows it to sponsor foreign employees that are working in the country. Typically work permits are associated with a company, but they are transferrable if you do obtain them. If you incorporate a legal entity in the UK and obtain an immigration sponsorship license, you can transfer employees, who have certain valid work permits, to come and work in the country.
What documentation must be provided to confirm UK citizenship? What are the steps necessary to request a work permit?
To confirm UK citizenship, birth certificates, British passports, and items of this nature must be provided. Employees in the UK must demonstrate that they were born and raised in the country, or that they have the right of the UK laws, which dates back to when certain people were entitled to UK citizenship who lived within the Commonwealth. In terms of work permits, once a company acquires an immigration sponsorship license, they can apply for a Tier 2 work visa on behalf of the employee. They must submit documents providing background on the employee’s country of citizenship, job description, and the entitlements. There is also a process that must be undergone to detail whether the employee has specialized talents, or whether they are a key employee, so the company will not have to open the position to other applicants.
One of our biggest questions is around VAT. Could you give us some insights into when and where it should be charged?
VAT is charged at the point when either the title of the goods passes, or when the services are performed. This is reflected in a commercial invoice that goes to the client. At this point, the VAT is reportable, and after it is realized, it must be paid. However, the specific details of the payment timing vary depending on the country. For example, in the Netherlands, there is an alternative option where companies are allowed to bring goods and services into the country and defer payment of the VAT on those goods and services until they’ve actually been realized. This is very beneficial as it removes the immediate VAT burden upon entrance to the country. Due to these sorts of variations in VAT laws in different countries, we highly recommend having a VAT expert in every country you do business in.
What aspect of Brexit will have the biggest impact on business?
The answer to this depends on what Brexit eventually becomes. If it is a hard Brexit, where customs and immigration between the UK and the rest of Europe are disrupted, and the flow of goods and services through the supply chain are impacted, then that will cause serious problems. From an immigration perspective, the UK and EU would be totally separate and UK citizens would be treated as non-EU citizens wherever they go. In all cases, the UK would be a completely separate country. However, it would likely have an arrangement with the EU that is similar to that of Norway or Switzerland.
What impact is Brexit going to have to local and expat employees in the Netherlands and the UK?
In the UK, legislation has been introduced regarding the concept of “Settled Status”. This means that EU citizens who are currently working and residing within the UK would have the capability of staying in the country, and continuing to work there, legally post-Brexit. The long term effect that this is going to have on taxes and benefits is yet to be determined. Contrarily, the status of UK citizens working in EU countries is still undecided. If it is inevitably a hard Brexit, then UK employees would require work permits and their ability to work would be impacted. In the case of a soft Brexit, there will likely be accommodations made to allow the UK employees to continue to work in the EU countries. Finally, if we end up with a referendum where the UK decides to stay in the EU, then there will be no change.
What is the expected post-Brexit VAT regime in the UK?
The VAT regime in the UK is very specific in terms of the amounts of withholding, filing requirements, and returns. As it is specific to the UK, I would not expect it to change. What potentially will change is the recoverability of goods and services that are shipped overseas into the UK from countries like the Netherlands. It’s likely that there will be changes made to the cross-border allowances in terms of the VAT, though this is still up in the air, and nothing has been finalized yet. Now with the extension through until at least October 31st, there’s still much to be decided.
In preparation for a hard Brexit, what recommendations or advice could you give for setting up a pan-European business that includes the UK? What input could you give on hire and fire, protecting employees, supply chain, and trademarking?
A hard Brexit situation could potentially seriously impact the UK’s ability to do business with the rest of Europe. In terms of a hard Brexit, where there is no customs union or no immigration agreement between the EU and the UK, there is the potential to have full immigration checks and full customs requirements implemented around the movement of goods and services throughout Europe from the UK and coming into the UK from Europe.
In terms of employment, that will not change too much given the fact that the UK has implemented the equal rights directive. It is enshrined in UK law, which will not change drastically as a result of the Brexit.
How is Brexit going to affect companies' treasury management across Europe? Are banking fees going to be affected? Impact on SEPA (Single Euro Payments Area)?
From a banking system standpoint, I think the banking systems in the UK and across Europe are globally connected. There are separate systems and fees agreed upon in terms of how the global banking systems are moving money and the associated fees. Obviously, the UK is dealing with a different currency than the rest of Europe, but I still see the UK participating in SEPA and I see them very much a part of the European money movement and settlement schemes.
What are the probationary periods in these countries? What are the employer requirements when an employee resigns or is terminated?
In all 3 countries (UK, Ireland, and Netherlands), typically you have anything from a 30 to a 90-day probationary period. Some do allow up to 6 months, though that’s not typical. 90 days is very typical as it relates to the employer requirements. In regards to resignations and terminations, provisions are typically very well laid out in the employment agreement in terms of what the effect is.
Specific labor laws do vary country by country. Ireland has just introduced more legislation around the definitions of what is a fixed-term contract as opposed to temporary employment and what the definition of a full-time employee is. There are changes being made that are very specific to each country.
In light of Brexit, are companies avoiding, or moving out of, the UK? If so, where are they relocating to?
Companies have typically used the UK as a hub to establish their centralized European operations and then have extended operations to other European countries. So Brexit is definitely affecting this. In terms of where they are moving or relocating to, it really does depend on the industry of the company, and what they are looking for. There has been a lot of buzz around Ireland as being a popular destination, in addition to the Netherlands, and Germany specifically for the finance industry. It really comes down to what companies see as the benefits of moving to a specific country. But the exodus has been occurring over the last 2 years as many companies have already committed to relocating or have already moved.
What are the significant compliance requirements in Ireland?
Ireland is very similar to the UK in regards to compliance requirements, whereas the Netherlands is more onerous in its requirements, especially the requirements of the resident director. Ireland is more typical in regards to requiring local national representation on the board of directors.
From a labor law standpoint, Ireland has adopted the acquired rights directive and also they have introduced very stringent rules in terms of the definitions of temporary and full-time workers. Company law requirements are very similar to many other European countries in terms of the annual compliance requirements with the tax regime and income tax returns filing that need to be followed.
What are the standard working hours in these regions? How do they handle overtime (cultural acceptance, pay, TOIL)?
The standard working hours varies country by country. France has the lowest at 35 hours a week. The difference from France to other countries is that they don’t require you to actually track and report the hours.
From the overtime perspective, it very much depends on the employment contract and the type of work that is being done. There are union influences to some extent still in the Netherlands, Ireland, and the UK. It depends on whether you are subject to collective bargaining agreements in your industry and what definitions are in place in terms of the time that you spent there. There are things of that nature but it does vary country by country.
What impact will Brexit have on local and expat employees in the UK and the Netherlands?
I don’t see any changes in the UK or the Netherlands in terms of local employees as they are subject to the local labor laws and statutory requirements. There are discussions about creating temporary statuses in the UK to allow EU citizens to be entitled to live and work in the UK, which is still a work in progress.
From the Netherlands perspective, they are likely to adopt the EU approach for UK citizens working in the Netherlands. This will have some tax implications, such as the 30% rule, to govern UK employees who are working there.
Though this is still uncertain at the moment, Brexit will most definitely affect expat employees in both the UK and the Netherlands.
What are tariff implications of a no deal Brexit?
The UK has already published a listing of the tariffs on the different types of goods and services that they expect if there is a no deal Brexit. The EU’s approach is very much still being debated. In the case of a hard Brexit, It will depend on whether they start to treat the UK as if it is a totally foreign entity in terms of tariffs on their goods and services or whether there is some sort of customs union arrangement. So at this point, it’s still very much uncertain.
How will Brexit impact foreign entities?
It depends on whether you have a legal entity setup in the UK and if you continue to operate and do business there. From a trade perspective, it has the potential to impact all supply chain interactions including the movement of goods and services between the UK and Europe.
In regards to situations with non-resident employers in the UK, employing people and continuing to pay the payroll taxes and statutory benefits should still be a viable option, allowing businesses to continue to operate there.
In regards for those who have a standalone legal entity in the UK, Brexit shouldn’t affect doing business in the UK, rather it will likely impact these entities doing business with the rest of the European countries.
How does Denmark compare to the three nations discussed?
Denmark in regards to its size is very much like Ireland. It is known as the happiest country in the world and is a full EU member. The labor laws are stricter here than in the UK, Ireland, and the Netherlands.
In terms of doing business there, because it is a small country, it tends not to be a popular destination in terms of an EU hub. However, it does from a business perspective, have a lot of potential but is not considered to be a top destination for US companies.
To work in the Netherlands, do employees have to be citizens of the Netherlands or just residents in the country?
In order to be legally employed in the Netherlands, someone must have the right to work. Citizenship gives them this right. Some people do acquire the right through marriage, through their parents, or something of that nature. Being a resident does not necessarily entitle you to work there. Essentially, the Dutch government must recognize that you have the right to work or you need a work permit to be able to work there.
Will EU citizens currently working in UK branches need work permits after Brexit?
As of now, there is the definition of having a status which specifically would allow EU citizens to continue to live and work in the UK while paying local payroll taxes and statutory benefits. This is the vision for the short term. Longer term, they are still trying to work out what the provisions would be in terms of EU citizens working there.
Can you transfer 100% of the shares of one UK entity into another UK entity of common ownership without any tax liabilities or consequences - assuming the value of the shares are unchanged?
I think in this particular case you need to take advice from tax counsel given the whole concept of what the evaluation of the company is. It is not really a question of transferring the shares, but rather regarding the underlying assets that would be taken from one legal entity to another, the ownership shares, and the tax implications this creates.
I’d definitely recommend seeking tax advice for this specific question.
How will Brexit affect local bank accounts and foreign currency risk?
There are no anticipated changes from the UK’s participation in the overall bank settlement systems given the pound is already a separate currency from the Euro which is not adopted by all European countries.
In terms of local bank accounts and the foreign currency risk, given a hard Brexit situation, the risk lies on whether or not the economy will be affected. The question is whether the currency will fluctuate dramatically potentially leading to lost currency value which would no longer be backed by protections of an EU membership. This risk is very much tied to the UK economy and the UK economy is going to be affected depending on the nature of the Brexit that occurs.
We will be setting up a UK subsidiary and understand that visiting overseas employees must be tracked and are subject to income tax and NIC obligations in the UK. What procedures are used by other foreign companies with small UK subsidiaries to comply with this requirement?
I think what you’re are trying to understand is whether the employees who are visiting are actually working and require a work permit to do so, in which case they would be subject to the UK income tax requirements and NIC obligations. In this case, I think it is more of a question on what they are intending to do and if you are intending them to actually work for the company in the UK and whether they are very much participating directly in the business, in which case then there is a requirement to track them. If they are visiting and they have a right to perform such work then they would need to be tracked.
If a company wanted to station two employees in Ireland for less than a year, what are the registration and payroll tax requirements?
If they are employed directly by the company and they are moving there to work, and do have the right to work, you can certainly commence a payroll service and register for payroll taxes and statutory benefits, and pay payroll taxes and statutory benefits for the period of time they are in the country. When they leave you can terminate the employment and they would leave and return to their original location of employment.
It can be less than a year but if they are living and working on behalf of the company, they must have the right to work, in which case you would have to pay the payroll taxes and statutory benefits.
Can you provide more detail on what a redundancy plan is? Where is the line between what Global Upside provides and what an accountant and a solicitor provides?
Essentially redundancy plans deal with the termination of employees for business reasons. These depend upon the country and the number of employees involved.
Regarding the concept of garden leave, employees are entitled to take a certain amount of time off while they are waiting to terminate, in which they can consult with their attorney or solicitor as appropriate. It is an involved process, of which we have experience managing all aspects at Global Upside.
The legal question is often governed by the employment agreement and to some extent by the employment law requirements and regulations. In the case of the UK, this is governed by TUPE regulations and collective bargaining agreements, which will affect the specifics of the severance depending on the number of employees involved.
Global Upside can assist with setting up redundancy plans and the calculations of what the number of payouts to terminated employees should be. From a human resources standpoint, we can help determine the specifics based on the number of employees involved and determining what legal representation needs to be paid for and provided, both on the side of the employee and with the company. We can help facilitate this process to ensure compliance with the country’s requirements (in the case of the UK including TUPE regulations) and outlining what employees are entitled to and ensuring severance is calculated correctly.
We have employees in Germany, which falls under our UK entity. Are there actions we can take right now to prepare for Brexit?
UK entities that are registered as a non-resident employer in Germany should not be affected for payroll taxes and statutory purposes. From that perspective, it is just ensuring the continued compliance with the payroll taxes and statutory benefit requirements in Germany, in addition to performing the necessary filings. At Global Upside, we have clients who have US subsidiaries who are registered the same way. From this perspective, as long as you are in compliance with what the German labor law and statutory requirements are there should be no effect. Certainly no effect in the short term, and I would doubt there is going to be any serious effect in the long term.
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