The differences between workation and doing home office abroad

Mobile working has become a norm for many employees, especially since the pandemic. Cross-border workers frequently opt to work from home abroad, sometimes combining work and holiday. However, companies need to carefully consider the legal implications of this flexibility.

Strict legal framework conditions apply to "workation" or working from home abroad. It is therefore important to distinguish between these two terms.

What does "Workation" mean ?

The term "workation" is a combination of the terms "work" and "vacation". Workation takes place at the initiative of the employee. Whether the employer agrees to workation must be clarified on an individual basis. If there is general consent to workation, the duration of this must be determined. If a workation is less than four weeks, there is no need for action under labour law. However, it must be checked whether the employee is legally permitted to work in the holiday destination. Sometimes a residence permit or work permit is required.

Working within the European Union (EU) is not a problem for EU citizens due to freedom of movement. What needs to be clarified, however, are the labour law requirements in the holiday destination. Which working time and break regulations as well as which wage and salary regulations apply to people working in France, for example? HR managers and employees need to know the relevant requirements for the country in question.

Working abroad as a seconded employee

Social security is also a crucial aspect to consider. As a general rule, secondment is at the request of the worker, not the employer. Normally, this does not constitute a posting abroad, which would lead to problems of social security cover during the stay abroad. However, the European Commission has looked into the problem and established that Article 12 of Regulation (EC) 883/2004 applies and that an assignment should therefore be considered as a posting.

This in turn means that employees can generally be insured during an assignment abroad. Employers should therefore contact the relevant social insurance institutions (health insurance or federal pension insurance) to initiate the necessary applications. This will ensure that employees remain covered by social insurance while working abroad. Health insurance cover abroad must also be taken care of. If the employer agrees to work abroad, he or she undertakes to provide health insurance cover for the employee and accompanying family members in accordance with Section 17 SGB V.

The tax issue must also be clarified: Depending on the duration of the assignment and type of activity, issues such as permanent establishment for tax purposes or tax liability abroad must be clarified. A blanket application of the so-called 183-day rule should be avoided.

Temporary home office abroad

If employees want to work from abroad for their employer in Germany for longer than the duration of a holiday, i.e. in practice relocate their home office abroad, the duration and the specific geographical location are important. In the case of temporary work (less than six months) within Europe, the regulations for working within the EU, the EEA and Switzerland are relevant and largely unproblematic. However, it should be noted that the pandemic-related tax treaties - and their special regulations for cross-border commuters - have been cancelled.

New social security regulations for working from home abroad

However, you need to take a closer look at social insurance. This is because it depends on how much time employees spend abroad in the EU and how much at their place of work in Germany. During the pandemic, it was important to the EU countries, especially Germany, to reduce the social security consequences of border closures and the associated work from abroad to zero, even though the legal framework for this was lacking. Special regulations were created for this purpose, although they were only valid until 30 June 2023. According to this so-called pandemic special regulation, an expansion of the activity in the country of residence did not lead to a change in social security law.

In order not to restrict the free movement of workers and to provide companies with administrative relief, it was therefore necessary to adapt the conflict-of-law rules of EC Regulations No. 883/2004 and No. 987/2009 on social security to the new world of work.

Since 1 July 2023, there has therefore been a new Multilateral Agreement on teleworking abroad - specifically on cross-border teleworking in application of Article 16(1) of Regulation (EC) No 883/04. The Multilateral Framework Agreement of the European Commission introduced on 1 July represents an exception to the 25 percent rule, so to speak. According to this, employees teleworking abroad could only remain in the domestic social security system if the activity in the country of residence did not amount to less than 25 per cent of the total weekly working hours. From 25 per cent teleworking in the country of residence, the social security law of that country applies.

Special case: Home office in third countries

It often happens that the home office abroad is outside this scope of application and also outside the EU freedom of movement. A closer look must be taken here. Depending on the employee's nationality, for example, different requirements may apply. Even if the private purpose of the stay may be in the foreground, it must be taken into account that the employees perform work abroad - even if only digitally.

What distinguishes Workation from working from home abroad

Mobile working refers to working from any location using mobile telecommunication devices. Occasional work in the home office and abroad also falls under the term mobile working. At the same time, there is still regular, possibly predominant, activity at the employer's place of business (in Germany).

Workation is a form of mobile work - always in the context of dependent employment in a company or institution. Workation is of a temporary, short-term nature without any increased duty of care on the part of the employer.

When working from home, employees have a permanently set up computer workstation in their private home. Theoretically, it is also possible to split the workplace between the company workplace (in Germany) and the home workplace (abroad). The place of work is wholly or partly, but in any case necessarily abroad. As a rule, the work at the foreign home workplace is intended to be permanent, meaning that the employer has an increased duty of care towards employees working abroad.

No right to work from home abroad

Incidentally, there is no general right to work outside the company headquarters, not even for a workation. If the employer allows this, the type and scope of the activity should be defined and, if possible, limited in time. A choice of law is also recommended, although this only applies to a very limited extent in international situations. In this case, the time frame in particular plays a decisive role. The applicability of German labour law is less critical if employees only work abroad temporarily, but the focus of the activity and the employment relationship remains in Germany.

Attention for permanent home office abroad

If employees want to go abroad permanently for personal reasons and work from home for their German company, companies need to be careful. Working from home abroad is no longer of a temporary nature and leads to legal changes. If employees work exclusively abroad, the usual place of work and the centre of gravity of the employment relationship are also abroad. A choice of law and supplementary agreement under German labour law are generally no longer sufficient in this case.

To minimise the effort involved, some companies make use of the option of a self-employment agreement. In this case, the employees concerned are regarded as freelancers and no longer as employees. However, the company no longer has the right to issue instructions in this case. In addition, the activities of the employees would always have to be examined with regard to possible provisions on bogus self-employment in the country of employment. It would also have to be generally examined what obligations this constellation entails for the employer.

Whether working or working from home abroad: additional agreements should be set out in a contract.

The above-mentioned aspects are only part of what needs to be considered in connection with the concepts of workation and home office abroad. It is a very complex topic for companies and their employees, as residence, labour, social security and tax regulations must always be taken into consideration. However, in view of the challenges of the new world of work and the recruitment of new employees, this path can certainly be worthwhile for companies. Advice from experts on the subject of foreign assignments and workation makes it possible to gain a complete overview of the possibilities and to decide on the basis of this to what extent this attractive form of work can be realised.