The employer's guide to managing digital nomads

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. Offering employees the chance to be nomads may help to expand their horizons and allow them the flexibility to work where and how they want. But what does employing digital nomads look like from the company’s perspective, and why would a company choose to do so?

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, the ability to experience diverse cultures and settings across the globe, can improve employee retention rates and attract talented workers who typically operate as freelancers. Happy employees mean higher morale and improved productivity — a plus for any organization.

Flexibility is arguably the #1 factor affecting employee engagement and retention now, and nothing epitomizes embracing flexibility to the fullest than allowing your team to work as a digital nomad. - Chase Warrington, Head of Remote at Doist

Remote work and the digital nomad lifestyle can be beneficial to employees and employers. That said, you should note the potential drawbacks and legal risks, specifically when it comes to digital nomad compliance.

• Employers must be sure to follow the local employment laws and tax regulations.

• Every employee on the payroll must have the legal ability to work in the country where they travel by possessing the appropriate visas, which they must not overstay.

• Tax issues may arise, including contributions to Social Security and other social programs, which both employees and employers make. Taxes can vary depending on where employees are citizens and where they travel.

Employers can and should allow for digital nomading as an employee benefit while mitigating the risks of non-compliance. Remote helps businesses employ thousands of workers all over the world — not to mention our own international team! — which makes us experts when it comes to digital nomad employment. 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

Compliance is a topic that encompasses several elements, including:

• Compliance with local labor laws

• Nondiscrimination statutes

• Intellectual property laws

• Data privacy laws

• Compliant employment contracts

• Employee classification

• Tax obligations

• Work permits

Each country has its own laws and regulations regarding each of these elements of compliance, with some laws and noncompliance consequences clearer than others. Employing internationally and avoiding the risks of noncompliance means understanding the specifics of the 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

Many of the above protections and benefits 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!

Visas are another subject to consider to remain compliant. Visas, or work permits, are documents that prove the legality of an individual who is a foreign national to stay in a country that is not their home country on a short or long-term basis.

Travel visas are short-term visas that may allow for a quick trip of a few weeks. 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 work while they travel, using Wi-Fi in hotels, co-working spaces, or anywhere they can get a connection to work. They are often self-employed or independent contractors, but they may also be employees on a company’s payroll while crossing international borders, provided that company has a global employment provider up to the task.

Wherever they work, nomads need to obey the local laws, including tax, labor, and immigration laws. Employers need to ensure that their employees are working legally and that taxes are paid properly, whether the employees work from their home country or are nomadic. The employer must remain in compliance with local laws wherever its employees may be.

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.

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 everyday. 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."

Offering the ability to work as a digital nomad is one reason candidates will choose your company over another. No company wants to create a hindrance to finding the best and most qualified candidates. To entice these talented individuals, companies need to offer competitive benefits beyond health plans and a good salary. Flexible working is one benefit that many employees consider a priority when seeking employment.

Offering digital nomadism can be a life changer. Whether digital nomadism allows an employee to move closer to family, to explore a new culture and expand their world view, to afford a better life for their children, or to simply offer the autonomy of location independence, the freedom of digital nomadism is hard to argue. - Darcy Boles, remote work advocate

Along with time flexibility, some employees may want to choose their workplace as well, which includes going from one country to the next — the basis of digital nomading. These employees may be just as productive as other employees who stay home.

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, and most importantly, work legally in the countries they travel to.

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

Employees around the world have been opting more and more to work from home. Since the Covid-19 pandemic, when most companies worldwide had to stop in-person business, many workers who began working remotely found they enjoyed the flexibility and freedom of working from home. This includes workers who want to stay in one place and those who want to be nomadic.

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 with a stable internet connection. As long as local laws are obeyed by both the worker and company, the individuals who wish to travel and work can do so either for short visits or extended stays.

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, employment laws differ by country, and 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.

For example, the United States has, except for the state of 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, because 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 made to a government-approved bank account.

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. 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.

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.

Legislation can sometimes adapt slowly to changes, including rapid shifts since the pandemic. Labor laws are constantly changing, however, and employers must always keep up with legal updates and changes to stay compliant. Employee relocation can be a challenge but as the world becomes more connected and remote working and relocating becomes ever more popular, employers must keep up.

If you can set your employees up for success, offering the ability to work as digital nomads can increase the remote work fluency for your company, increase engagement, and be a competitive advantage due to the transferable skills that exist in the digital nomad community. - Ali Greene, Co-Author of Remote Works

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.

Tourist visas are available usually for no longer than one to six months, depending on the country, and generally prevent the visa holder from working within the country. For longer periods, a work visa would be required. Depending on the country, the visa could last from a few months to up to one year and are, in some cases, extendable.

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. For short visits, typically up to three months, tourist visas should suffice, 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 Europe, foreigners can work on vacation while holding a tourist visa. Some countries in Europe exempt individuals from other countries for this requirement. For example, a country in Europe may exempt any foreigners who are from another EU country or Switzerland.

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.

A digital nomad visa is only required for remote workers if they stay longer than the maximum duration of their tourist visa (again, provided a tourist visa allows the person to work). Remote workers wishing to take advantage of a digital nomad visa will have to satisfy a few requirements, such as proof of income.

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 employee salaries and pay them to the tax authority in the employee’s home country. It is the employee’s responsibility to file and pay their own taxes in general, but employers are still responsible for a variety of tax responsibilities as well, even as employees travel.

The tax authority to which the 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.

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 that can help you stay compliant.

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 service to employ workers on their behalf as employees travel.

Key considerations for maintaining compliance when enabling digital nomads

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.

With our own globally distributed team in more than 65 countries, Remote is more than familiar with the ins and outs of cross-border compliance. Consider the following elements of compliance for managing 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 if a law was broken unknowingly.

• Understand how international taxation works. The basic concept is simple. 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.

• Stay compliant 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.

Offering this kind of benefit can offer huge retention benefits…The personal growth one can gain from traveling around the world can add new perspectives to the business and lead to a happier employee. - Jordan Carroll, Founder of The Remote Job Club

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 your 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.

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

There are a growing number of countries that are making it easier for digital nomads to live and work. 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, good internet connectivity, and natural areas.

Some of the best locations for remote work may include beaches, luxury resorts, and similar settings where remote work can comfortably be done. What's more, being outside and working in nature may be beneficial to the health and well-being of employees.

Having the flexibility to come and go as they please and clock in on the beach or anywhere in the world can help to improve the work/life balance of digital nomads. This is just one more reason among many for employees to relocate and work remotely around the world.

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

Employing remote workers in other countries has its risks and rewards for both employees and their employers. There can especially be potential complications when the remote worker is a digital nomad. Digital nomadism can make things even more challenging 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 and easily hire local employees on your behalf, ensuring your company stays in compliance and allowing you to access the full range of the world’s talent. When flexibility can make the difference between hiring the right person and leaving an empty seat on your team, Remote is here to help.

If you have existing employees experiencing wanderlust, Remote offers the Remote Relocation Program to help your digital nomads broaden their horizons and work across borders.

The world of work is changing, and today’s talent doesn’t always stay in one place. Make the most of this opportunity to stand out to great employees and welcome digital nomads into your team. With their unique perspectives and in-demand skills at your side, your company can thrive in the new age of work.