Australian businesses commonly open offices in other countries and establish overseas joint ventures. Along with hiring overseas employees, they often send their Australian management staff overseas to assist with running a foreign branch of the business. However, there has recently been a trend towards staff remaining in their home country and working via phone and the internet. If working from home is acceptable in Australia, why can’t that home be overseas? This article will examine the requirements and responsibilities of Australian employers when hiring employees who live overseas.

Australian Legal Requirements

The Fair Work Act 2009 (the Act) governs the employer/employee relationship in Australia. However, it not only applies to employees within Australia but, in some circumstances, it will also apply to overseas employees. To be considered an Australian employer, you must:

  1. be a training or financial corporation formed within Australia;
  2. be an entity incorporated in one of the states or territories of Australia; and
  3. carry out work in Australia and have central management and control in Australia.

The definition of an Australian-based employee includes an employee:

  1. whose primary place of work is in Australia; or
  2. who is employed by an Australian employer, regardless of their geographic location.

Traditionally, this final clause applies to the staff of Australian employers who were sent overseas to:

  • open a branch office;
  • set up an overseas manufacturing plant; or
  • establish an overseas joint venture.

But what about employees who are originally based overseas? Are they also considered Australian employees? The answer is most likely yes.

Nowadays, with the increased access to the internet and flexible work arrangements, businesses are not viewing the geographic location as a barrier to employment. Instead, businesses are looking to hire based on qualifications and suitability, rather than geographic convenience.

While overseas employees may not have their primary place of work in Australia, they are still employed by an Australian employer and therefore will fall under the definition.

Which Country’s Employment Laws Apply?

If the Act applies to your overseas employees, it will mean that the National Employment Standards will apply. These standards cover a range employee protections, including:

However, difficulties may arise where the overseas employees of your Australian company are also subject to local employment laws.

For example, your Hong Kong-based software developer will fall under not only the Australian laws but also local Hong Kong employment laws.

Before engaging an overseas-based employee, check for local employment laws that might apply. You should also check whether any of the overseas laws conflict with Australian standards. These laws may include:

  • the right to terminate employment;
  • minimum wage requirements; or
  • additional benefits that you must provide to your employee.

Where the employee has different entitlements under the Act and local employment requirements, for example, different minimum notice periods, then the entitlement that is more beneficial to the employee is the one that should apply.

For example, in Australia, the minimum amount of notice of termination for employees who have been employed for under a year is one week. However, in the United States, there is no federal law that requires a company to provide notice. Therefore, if you have an employee who is based in the United States that has been working for you for under a year, you must provide one week’s notice of termination.

If you are thinking of hiring an employee that lives overses, you should understand both Australian and the relevant foreign requirements. You should cover these bases before you make any offers of employment.

Tax Requirements

Another issue that may arise is whether the employee will need to pay tax in Australia as well as their country of residency. You should confirm whether there is a tax agreement between Australia and the country where your employee lives. Australia has ‘double tax agreements’ with several countries which set out which country has the right to tax each type of income that the employee earns.

Under the National Employment Standards, Australian businesses also have superannuation guarantee obligations for its employees. This is unless they are non-residents for tax purposes and you subsequently must pay them separately for work done outside of Australia. Australian businesses may also be liable to pay superannuation on behalf of the employee. The employee’s country of residence may also require an employer to make superannuation contributions, further complicating the situation.

Key Takeaways

While it might be getting easier for local Australian businesses to use overseas employees, there is still a number of issues that an employer should inform themselves about before hiring an employee who will be based overseas. You should consider where:

  • the Act will apply to the employee;
  • your business will need to withhold income tax;
  • you will need to pay superannuation to the employee; or
  • you must award them with any additional employee entitlements

If you have any questions about hiring overseas employees, contact LegalVision’s employment lawyers on 1300 544 755 or fill out the form on this page.

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