The employer's guide to managing nomad workers

Digital nomads are people who work remotely while traveling. Whether in their hotel or hostel, a co-working space, an internet cafe, or on a beach, digital nomads work anywhere with a reliable internet connection.

Being a nomad can have numerous benefits for employees, such as boosting their mental health and providing opportunities to travel and explore. For employers, offering location flexibility can improve retention rates and attract talented workers.

However, you should note the potential drawbacks and legal risks, specifically when it comes to following employment laws, ensuring employees hold appropriate visas, and filing taxes.

By considering the issues covered in this article and using the helpful tips within, you, too, can succeed in the global marketplace with employees who can legally travel and work in almost any country.

Importance of keeping digital nomads compliant with tax and employment law

Employing internationally and avoiding the risks of noncompliance means understanding the international employment laws of each country where your company is hiring.

Every country also has unique tax codes, among other employment regulations, with their own tax rates. These tax laws require companies to withhold taxes from employee paychecks for their income taxes. Employer and employee contributions of varying percentages based on monthly earnings also need to be made to social security and pensions, work injury insurance, and unemployment insurance.

Employment laws, which are the set of statutes governing how employers must treat employees and employee rights, are different around the world. Employing any worker requires the employer to be aware of the local labor laws where the employee resides.

Employment laws may cover, among other elements of employment:

• A minimum wage that may be based on the industry and the role of the worker, set nationally or regionally

• Standard working hours and overtime rules

• Various leave entitlements such as annual leave, sick leave, and maternity leave, among others

• Non-discrimination laws

• Termination protections, such as a minimum notice period and severance compensation

Risks of misclassifying an employee

Many of the protections and benefits above are usually only provided for payroll employees, not independent contractors. However, contractor misclassification can occur when a company treats their workers as if they are employees — as in an employer/employee relationship — yet fails to provide employee benefits such as overtime, leave, and health insurance. This misclassification can result in fines and penalties.

Tip: Are you misclassifying employees as contractors? Use Remote’s Contractor Misclassification Calculator to find out!

Obtaining the right visas and permits

Visas are another subject to consider in order to remain compliant. Digital nomads who generally travel from country to country may stay for months at a time. Thus, a longer-term visa may be required to legally work in a country. These days, many countries offer special digital nomad visas for just such workers.

What is a digital nomad under the law?

Digital nomads are often self-employed or independent contractors, but they may also be employees on a company’s payroll while crossing international borders, provided that the company has a global employment provider up to the task.

Wherever they work, nomad workers must obey the local laws, including tax, labor, and immigration laws. Employers need to ensure their employees are working legally and that taxes are paid properly, whether the employees work from their home country or are nomadic. 

In response to the recent trend of remote work, some laws are being updated — particularly immigration laws. Many countries have been allowing remote workers to stay there to boost the local tourist economy. In these countries, remote work visas are available, allowing individuals to enter the country and work remotely for a certain amount of time.

For example, Spain offers a digital nomad visa that allows foreign nationals to live and work in the country for up to a year (extendable to five years) as long as they meet certain requirements.

The benefits of offering the ability to work as a digital nomad

Chase Warrington, Head of Remote at Doist, is not just a leader of remote teams — for a few weeks every year, he lives the digital nomad lifestyle himself.

"In my case, I spend 1-2 months per year traveling in my camper van and working from remote locations around the world. Not only am I grateful to my company for embracing this, but I also find that the change of scenery to be incredibly powerful for my creativity. A change of scenery is good — and this change is the antithesis of going to the same uninspiring cubicle every day. I wake up excited that I get to work with a view of the Pyrenees or take my lunch break to go swimming in the Mediterranean. I find this to be necessary for my productivity now, not a hindrance on it - as crazy as that might sound."

Just 16% of white-collar employees would consider a role that doesn’t offer remote work.

Offering the ability to work as a nomad worker is one reason potential candidates will choose your company over another. However, flexible work arrangements isn’t the only consideration for employees. Companies also need to offer competitive benefits beyond health plans and a good salary.

With the right global partner and the proper planning, digital nomading can be a benefit that your company offers to attract top global talent. Your digitally nomadic employees can be productive, communicate with ease, work legally in the countries they travel to, and maintain a healthy work-life balance.

Did you know? When you hire with Remote, we can help you navigate visa acquisition processes and local labor laws with ease. Plus, our team of global experts will ensure your company remains in compliance. We even offer special protections for your intellectual property.

The importance of establishing the correct right-to-work entitlements for digital nomads

Governments have adapted to the rise in the popularity of remote work by creating remote work visas. They’ve done this, in part, to encourage a rise in tourism and the economic boost that comes with it.

Corporations are adapting as well, allowing their employees to choose where they want to work, provided that the employees can work there legally and have a stable internet connection. As long as workers and companies obey local laws, the individuals who wish to travel and work can do so either for short visits or extended stays.

Ensure that your nomad workers have the right-to-work entitlements before they start working in another country to avoid legal complications.

Unique relocation challenges with remote work

Equality in the workforce is always paramount for the best employee experience — as well as the avoidance of legal issues for the employer. However, each country has unique requirements that can be easy to overlook if you aren’t used to employing digital nomads. 

There are laws for minimum wages, minimum leave entitlements, probationary periods, overtime rules, and numerous other statutes and legal requirements. These change each time an employee crosses a border.

At-will employment and cross-border implications

The US has (except for Montana) the legal concept of “at-will” employment. This means employers are generally not required to provide reasoning or notice for terminations beyond a few protected circumstances. 

If a remote employee from the US went to work remotely from Italy, their employment contract would need to be changed since Italy has termination protections that American employees do now. If that person were to go to Mexico, the contract may need to be changed again to reflect their newly acquired right to a 13th-month bonus payment.

Not all laws apply to all employees in all situations. An employee taking a one-week vacation generally doesn’t receive new protections under another country’s laws. However, knowing the difference can save you thousands of dollars — and not knowing can cost you dearly.

Labor laws in many countries may be lacking as far as remote employment goes. In some countries, employers are required to provide the equipment for a home office as well as a safe work environment, even if the employee works from their own home. This includes the requirement for safety inspections, which seems to conflict with the employee’s right to privacy.

Legal ramifications for remote work

As far as the requirement to provide a home office, will the employer be held legally responsible if the employee can’t get an internet connection at their home? 

There are still many questions on these topics, and some legal frameworks leave something to be desired by way of updates relating to remote work and digital nomading.

Employee relocation can be a challenge but as the world becomes more connected and remote working and relocating becomes more popular, employers must keep up.

What are the visa requirements for digital nomads?

Visas, or work permits, are the documentation given by a government allowing a foreign national to stay in a country and work for a certain amount of time. Without a visa, a remote worker would not be able to legally visit or work from a country for an extended duration.

Similar to employment legislation, every country has its own rules on visas. Some countries have agreements with other countries to allow their citizens to work without a visa. For example, a country in the European Union (EU) may allow anyone from an EU country or Switzerland to stay and work there, exempting them from needing a rotation of various work permits. However, non-EU citizens would need to be approved for a visa to stay and work in a new country.

What are the differences between a tourist visa and a digital nomad visa?

The differences between a tourist visa and a digital nomad visa mainly depend on the duration of time the visa holder can stay in the country. Tourist visas are typically available for one to six months, and should suffice for short visits unless that visa prevents the person from working while present in the country. Digital nomad visas can allow for longer stays of a year or more and allow the visa holder to work.

In 2022, the ETIAS authorization, or European Travel Information Authorization System, introduced a requirement for visa-free, short stays in the Schengen Area — a group of 26 countries in Europe. ETIAS is mandatory beginning in May 2023.

Nomad worker visa requirements

Employment with a local company in the country where the remote worker is traveling is not permitted by either a tourist visa or a digital nomad visa in most cases. To work at a European company, non-EU citizens would need a national work permit or, if eligible, an EU Blue Card.

In some countries, it is illegal to work remotely from another country using a tourist visa. Thus, it is important to research the work permit requirements for every country on the travel itinerary of nomadic employees.

Tip: Don’t have the in-house expertise to juggle employment laws in dozens of countries? Don’t worry — Remote has you covered in dozens of countries around the world.

Some governments ensure tax obligations of digital nomads are met by updating legislation. With the increasing trend of remote employment, some governments are increasing their focus to enforce tax laws regarding remote workers and digital nomads.

What countries have the best incentives and programs for digital nomads?

Around the world, countries are creating incentives and programs to entice remote workers, including offering remote work visas.

When choosing the best location to work remotely, consider these qualifiers:

• Cost of living

• Fast and reliable internet connection

• Safety and quality of life

• Transparency of government

• The openness of the local population

• Attractiveness: nature, cities, cultural, and historical locations

• Incentives for remote workers, such as visas and cash bonuses

Remote has put together a customizable tool to help digital nomads discover the best destinations for remote work. You can customize your personal list by a variety of factors, including the cost of living, quality of life, and infrastructure, to see which cities and countries are right for you.

Where do digital nomads pay taxes?

Where remote workers pay taxes is largely the responsibility of their employers. That said, employees should still know their tax rates and where to file annual taxes.

Employers withhold taxes from employees’ salaries and pay them to the tax authority in the employee’s home country. Employees generally file and pay their own taxes, but employers are still responsible for a variety of tax responsibilities, even as employees travel.

Here’s what you should know when it comes to managing taxes for independent contractors and digital nomads:

Taxes based on physical locations

The tax authority to which an employee owes income taxes depends on where the employee is physically located. Remote employees working for US companies living in the US owe state and federal taxes. Non-US employees working remotely in foreign countries for US companies owe income taxes to their government. US employees who live overseas and earn income are subject to the Foreign Earned Income Exclusion.

Tax considerations for independent contractors

Independent contractors are paid by invoice and file their own taxes, with no withholding from their client companies. Companies paying contractors also do not make employer contributions to Social Security or other programs on behalf of the individual and are not required to provide statutory benefits in most cases.

Contractors sometimes lack the same protections as employees, such as the requirement for a minimum wage, overtime, or leave entitlements, but this is not always the case. For these reasons, it is essential to classify all workers properly and to work with an international contractor management tool to stay compliant.

Local tax considerations for nomad workers

Employees may pay income taxes in their city, state, or region in addition to national taxes. Any employee considering relocating should research local tax rates.

Employers hiring international remote workers should be familiar with the local tax rates and payroll taxes of the countries in which those employees will work. In many cases, companies will want to use an employer of record (EOR) service to employ workers on their behalf as employees travel.

How to ensure compliance when managing nomad workers

Moving can be stressful. This is true not just for an employee but also for the employer. Immigration, digital nomad visas, and other issues can complicate the matter further. Although every situation is unique, you can simplify things by learning more about how relocation works, which things to look out for, and how to properly complete the paperwork.

Here’s how you can maintain compliance when managing a team of digital nomads:

Fulfill requirements for visas and immigration

For your employee to be able to legally work in a foreign country, specific immigration rules must be followed. Your business could face legal issues if the employee breaks the law, even if the employee personally takes compliance seriously and the law was broken unknowingly.

Understand how international taxation works

The country where your business operates will expect a portion of the company’s revenue. It gets complicated when your company has employees who operate in numerous countries.

Physical residency and tax residency are not always the same thing. Corporate taxes and income taxes can start to get complicated. Normally, tax treaties between countries dictate where and when taxes are paid by businesses. However, it can get tricky when digital nomads work in different countries for long periods.

Get familiar with permanent establishment risk

“Permanent establishment” is a tax term that determines whether a company is subject to corporate taxes in another country. It can be triggered for a variety of reasons, such as having a physical presence in a country, making strategic company decisions in another country, or having a sizable portion of sales revenue from the country.

Having remote workers in a country is not necessarily going to trigger PE status, but you should still understand the risks of permanent establishment and plan accordingly.

Comply with local employment laws

Every country has unique labor codes, all of which must be understood and followed for every country where you have employees. Noncompliance with local labor laws, including misclassification, can result in potentially expensive consequences such as fines and penalties.

Establish a legal entity

If your company plans to have several employees in one country and plans to have a long-term presence there, your company may want to invest the time and effort to establish its own legal entity. This could be a long and expensive process, however — and doing so places the full responsibility of compliance squarely on you.

Once you have your entity, you would still need to process your own payroll and manage the legal work and benefits. Owning an entity does offer cost savings and greater control, provided you have the resources, infrastructure, and demand to keep it running.

For most companies, though, opening entities to allow digital nomads to travel is unnecessary and expensive. In most cases, an employer of record is the easiest way to simplify global hiring, manage your employees’ visas, and stay ahead of any potential employment challenges.

Remote’s EOR services can help you build an international team with ease while keeping your company compliant with the law, no matter where your employees may go.

Did you know? Remote only offers employer of record services in countries where we own our own legal entities. There are no third parties to mishandle your data or provide a bad employment experience for your staff. When researching which employer of record service to use, choose one that owns ALL of its local legal entities and does not outsource your valuable employees to a third-party provider.

Including nomad workers in your company’s culture

Hiring remote workers offers numerous benefits — access to a wider talent pool, cost savings, and cultural diversity, to name a few. But you may have concerns about how doing so affects shared workplace values.

Here’s how you can include digital workers in your company’s culture:

• Hire the right talent: Cultural fit involves finding candidates whose values and beliefs align with the company’s. It plays a key role in employee retention, as employees who are a good cultural fit are also more likely to stay. Define your company culture and hire nomad workers who share similar values.

• Encourage open communication: Keeping teams aligned can be challenging, especially when workers are in different time zones. Regularly update your team about company updates and project deliverables. Encourage nomad workers to share any feedback or discuss any challenges they’re facing.

• Recognize their efforts: Employees aren’t recognized enough. Just 26% say they’ve received recognition for their work in the past seven days. Take the time to acknowledge and appreciate your team’s work. A simple shout-out or award can help your team feel valued and heard.

When incorporating nomad workers into your company, make sure to acknowledge any cultural differences to promote an inclusive work environment. This includes accommodating different time zones, respecting cultural norms, and celebrating upcoming holidays in their respective countries.

Why you need a digital nomad policy

Fourteen percent of digital nomads report that their employers aren’t aware they’re nomadic, and 18% say their company doesn’t have an official digital nomad policy.

As previously mentioned, having digital nomads working in different countries could trigger a permanent establishment, which means your company may have to pay taxes in that country.

Setting up a formal digital nomad policy still gives nomad workers the flexibility to travel and work in other countries, but it does so in a legal and compliant manner. For example, you could have a policy that restricts how long digital nomads can spend in a single foreign location to avoid the risk of permanent establishment.

You can also have policies around:

• Work hours and availability

• Performance expectations

• Communication tools and protocols

• Data security practices

• Required equipment

Be sure to consult with a legal expert to review your digital nomad policy and ensure it complies with relevant employment laws. Communicate this policy to your team and allow them to ask any questions.

Where are the world’s best destinations for remote work?

There are a growing number of countries that are making it easier for nomad workers to live and work. Some of the best destinations that offer digital nomad visas include:

• Spain

• Portugal

• Italy

• Croatia

• Germany

These countries offer remote visas that let remote workers stay in the country for an extended visit to work remotely for a foreign entity. Some of these countries offer great locations to work and live, including places with low rent, reliable internet access, and natural areas.

The easy way to minimize risk and stay compliant while employing digital nomads

Digital nomadism can make things challenging, especially with short-term stays and multiple locations — but for employers who want to hire and retain the best talent, offering digital nomadism as a perk is a brilliant move.

Remote is an owned-entity employer of record that can help you hire, onboard, pay, and manage employees in countries all around the world. That means Remote can legally hire local employees on your behalf, ensuring your company stays in compliance.

For existing employees who wish to experience the nomadic worker lifestyle, Remote offers the Remote Relocation Program to help them broaden their horizons and work across borders.

Have a question about how our platform works or want to see a demo? Get in touch with our team to see how Remote can help you manage your team of nomad workers.