Aliff Fazelbhoy participates in the IR Global Employment Working Virtual Series Home Work: The challenges of cross border remote working

Aliff FazelbhoySenior Partner, ALMT Legal, Advocates & Solicitors

The past year has witnessed a huge remote working experiment for many of the world’s businesses and their employees as a result of Covid-19. And, for many, these new working practices have become hugely complex depending on where in the world business owners and employees have suddenly found themselves. Almost overnight, people are in uncertain territory regarding issues involving employment law, tax, social security
and pensions, to name just a few.

FOREWORD BY EDITOR, ANDREW CHILVERS

What are the consequences for a business when an employee works from home on a semi-permanent basis, transferring their residence to another country?

Besides employment law, there are also tax and exchange control regulations that need to be considered. Exchange controls which govern foreign investment into India is governed by the Foreign Exchange Management Act or FEMA. FEMA has been interpreted to mean that a foreign company cannot employ someone in India unless they have a presence in India such as an office or a subsidiary. As an example of this, one of the overseas banks had an Indian employee who wanted to come back to India and work from here. This created a host of complications because you can’t have an employee here without having a presence. A way around this would be that the employee living here could become a consultant for the overseas entity but by this he forgoes some of the employment benefits. One then has to look at the tax issues and these depend more on residence than citizenship. Under the Income Tax Act, you are taxed in India if you are resident, irrespective of citizenship. Another issue that arises is withholding tax. Foreign employers who have people working from home in India need to withhold Indian tax on their salaries which will mean having to obtain a tax registration in India thus there are a lot of tax issues that need to be considered including the possibility of creating a permanent establishment (PE) for the offshore entity if some of its employees work from India. As everyone knows, many more people are trying to relocate to their home countries or their preferred place of work. These issues are going to create a lot of problems and pressure on the tax authorities to come up with clarifications, especially for non-resident Indians who are citizens of foreign countries and have been stuck in India during the pandemic.

Are there specific rules applicable to remote working in your country? How do they apply to domestic and foreign companies?

India, like the UK, doesn’t yet have rules on working from home. There are some rules around providing a safe working environment and that is provided for in many statutes such as the Factories Act and the Shops and Establishments Act. The only regulation that allows specifically working from home is the OSP, which is the other service provider guidelines under the Department of Telecom. This applies to outsourcing business processes and companies using leased lines and those kinds of services. Here it specifically says that remote agents are allowed to work provided they maintain the security protocols and keep all the data for at least one year. Before the pandemic, there were four labour codes proposed to be introduced that would combine about 20 labour laws into these four codes. These are now more or less final and due to become effective from April 1st. Whether there’ll be more detailed guidelines or not, we don’t know. One issue that is troubling a lot of our clients in a work from home scenario is estimating overtime. Most people are entitled to overtime if they work more than nine hours a day or 48 hours a week. If you’re working from home, how do you monitor that? That’s one issue that we’ve had a lot of queries on, and the other issue is whether employers are still obliged to give allowances such as travelling and food allowances.

Will companies have to provide new policies for remote working? Will this include providing employees with the necessary equipment and reimbursing costs related to remote work?

A lot of problems people have mentioned with regards to other jurisdictions are also here in India. The most common being broadband issues; people have smaller houses, especially in the big cities, often with large families. Consequently, privacy and space to work has become very difficult for many people. Therefore, many employees are keen to get back to the office. Since August, people have been going to office, but there were regulations for a few months saying offices should operate at between 10 to 50 percent capacity. For our Firm, the corporate department has largely worked from home for the past 11 months while the litigation team has been coming to office since July 2020. I think most of our staff are now looking forward to coming back to office on a more full-time basis. We however plan to continue a rotation policy for a few more months until everyone is vaccinated. Data protection is the biggest issue that’s going to face everyone across the world. How do you maintain privacy and ensure that computers at home are not misused or breaches don’t happen?

Companies will have to incur extra costs to build up these security systems but might be able to save a little bit on certain allowances like food and travelling given to staff who come to office every day