22 FAQs about remote working
- What legal issues should we consider when recruiting a remote salesperson?
- Should we employ a remote salesperson on a salary plus bonuses or as a self-employed worker on commission?
- Should the contract for a sales director based overseas be governed by UK law, the country in which they are based, or does it make no difference?
- Are there any legal formalities for employees who work abroad?
- How can we prove to HMRC that a self-employed sales 'consultant' is not an employee as HMRC claims?
- How do we prove that a non-executive director that does occasional consultancy work for us is not an employee?
- Should we be paying tax and NI for a sales director in North America in the UK or US?
- Do we have to make a redundancy payment to an employee that has been based abroad?
- How do we calculate the redundancy pay for employees who arrange their own working hours?
- What can we do about a damaging contract a travelling salesperson has agreed?
- What can we do if we suspect a salesperson of using client visits to sell goods on their own behalf?
- If an employee has an accident in a company car while on private business, whose insurance is liable?
- Can we replace our current company cars without consulting the salesforce?
- What should we do if a salesperson is clocking up improbable mileage on company business?
- Can we deduct excessive room charges from an employee's salary?
- Can we set subsistence payments off against tax? Is there a limit?
- Is there a limit on how far or how long our salespeople can drive in a day?
- Do the normal 20 minute breaks after six hours apply to people travelling on company business?
- Are we responsible for safeguarding the client information on employees' devices?
- Is it reasonable to make the use of a smartphone while driving a sackable offence?
- What can we do if we are banned form operating in a country because an employee has been accused of bribery?
- Can we dismiss a travelling salesperson who has a back injury that prevents them from travelling?
1. What legal issues should we consider when recruiting a remote salesperson?
Your salespeople can make or break your business, so it’s worth putting some thought into this if they’ll be spending time working remotely
- You need to establish what your sales person's duties will be. In particular, are you expecting them to concentrate on maximising sales, or do you want them to spend time and effort on developing your market? Who do they report to? And when?
- What powers are you going to give them? To what extent can they negotiate over price? How big are the deals they can commit you to? What sort of expenses are you willing for them to incur?
- Do you want to use them on an employed or self-employed basis (see 2)?
- If you are going to use them on a self-employed or freelance basis, what sort of restrictions (if any) are you going to place on their right to sell competing products or do business for rival firms?
- Do you want to pay them on salary (or retainer), or on commission, or a mixture of the two?
- What sort of benefits are you willing to provide - for example, by way of a company car?
- Will they be expected to use their own equipment (ie laptop, tablet, smartphone, etc) or will you be supplying them with kit?
- Where do you expect them to be based?
- Do you require them to report/account for their whereabouts on a daily/weekly basis?
- Are you going to start off with a trial period, and if so, for how long?
- What restrictions (if any) will you attempt to place on them when they leave? If you want to introduce restraint of trade clauses, you must note them in writing, under the Commercial Agents Regulations. Are they limited in area, time etc, as required under these regulations?
You need a reasonably clear statement of expectations in case things go wrong, particularly as salespeople tend to get the kind of money that makes breach of contract a much more likely recourse than a claim for unfair dismissal. On the other hand, the more precisely you specify these matters, the more you tie your own hands. This really is an area in which you should take legal advice.
2. Should we employ a remote salesperson on a salary with bonuses or as a self-employed worker on commission?
There are arguments for and against, in both cases.
If you employ someone on a salary-plus-bonus basis:
- you can make it a condition of their employment, that they do not work for anyone else
- you should have much better control over how they use their time - for instance, the extent to which they spend time on keeping existing customers happy, as opposed to chasing new ones (or vice versa)
- depending on how much you are prepared to pay in salary, the overall package is likely to be much cheaper
On the other hand:
- you are committed to paying a salary, whether or not there are results to justify it
- you will have to spend time and money on managing your salesperson, which both of you may find irksome
- you may end up with vicarious liability for some of their actions. For example if they cause an accident whilst visiting a customer's premises for you, you will generally be responsible for any injury, damage or loss arising from the accident
- the employee will be entitled to more extensive employment rights, including protection against unfair dismissal
If you use someone on a self-employed basis:
- you may not have to pay anything (possibly not even selling expenses, depending on the contract), until sales have been made
- what you pay will be directly related to sales made
- the individual will have limited rights compared to that of an employee
On the other hand:
- whatever volume of sales is made, it is likely to cost you far more than the same volume sold through an employee, even after allowing for the hidden costs of employment (holiday pay, sickness pay, etc)
- a self-employed salesperson is unlikely to be working for you alone, so to some extent you will have to take your turn in using their expertise
- it will be more difficult to control what they are doing and how they are doing it
- you need to take into account self-employed agents’ rights within the UK and EU, including compensation when the agreement is terminated
Following recent rulings on so-called 'gig economy' workers, if you decide to take someone on a self-employed basis, it is vital that you ensure they are not, in fact, a worker and entitled to basic employment law rights. Take legal advice.
3. Should the contract of a sales director based overseas be governed by UK law, the country in which they are based, or does it make no difference?
Normal practice is to offer the worker the choice of jurisdiction. It may be the system of law with which the parties are most familiar. If no choice of jurisdiction is specified in the contract, then the contract is governed by the law of the country in which the work is generally carried out - in this case, probably Germany. Under the same convention, if one of the two states has better minimum terms and conditions - for example, on maximum working hours, annual holidays, health and safety at work, or discrimination - the fact that the employee has agreed to have his contract governed by the law of the other state does not deprive them of these benefits.
4. Are there any legal formalities for employees who work abroad?
Yes. If any of your employees are asked to work abroad for more than a month at a time, you must include in their statement of terms and conditions:
- the period for which they are to work outside the UK
- the currency in which they are to be paid while they are outside the UK
- any additional remuneration or benefits to which they are entitled because they are required to work outside the UK (for example, living accommodation)
- any terms and conditions relating to their return to the UK
It may also be appropriate to review the terms of their employment contract, and take into consideration the laws of the country in which the employee will work. Take legal advice.
5. How can we prove to HMRC that a self-employed sales 'consultant' is not an employee as HMRC claims?
HMRC may be coming down on you because the 'consultant' has not paid their tax bills, in which case you might have some difficulty in getting them to co-operate. Essentially you need to establish some or all of the following facts:
- you have no say in how they run their business
- you put no money into it
- they are responsible for the losses, as well as the profits
- you have no control over when they work for you, or where
- you provide them with none of the equipment they need to do their job
- they receive no regular payments; the bulk of the money that you pay them relates to their results
- they can substitute others to do their work
- they work for other businesses as well
This kind of situation - in which you could get landed with paying for their tax and National Insurance bills - underlines the importance of having a clear contract with self-employed salespeople. This should make it clear that the contract is a contract for services (self-employed) as opposed to a service contract (employed).
6. How do we prove that a non-executive director that does occasional consultancy work for us is not an employee?
A director (executive or non-executive) should always pay tax on their income as a director through PAYE.
If the director also provides consultancy services through a company (rather than as a self-employed consultant), it is possible that a different tax treatment applies. This is a complex area where you may need specialist advice.
7. Should we be paying tax and NI for a sales director in North America in the UK or US?
If your employee remains resident in the UK, as a UK employer you will be liable to deduct tax and National Insurance contributions (NICs), even though all or most of the duties are performed abroad.
If the employee becomes non-resident, you are no longer required to deduct tax and NICs. However, you will have to take advice as to whether local tax is payable.
If any income is taxed in both countries, then double taxation relief will apply, with any foreign tax paid being set off against the individual's UK tax liability.
8. Do we have to make a redundancy payment to an employee that has been based abroad?
Under UK law, you do not have to make redundancy payments for any employee normally based abroad. You may, however, be bound to make a redundancy payment under the terms of the employee's contract, or under local law. Take legal advice.
9. How do we calculate the redundancy pay for employees who arrange their own working hours?
You need to calculate their average weekly remuneration over a 12-week period ending with:
- the calculation date (if that is the last day of a week)
- the last complete week before the calculation date
You then follow the normal formula relating to age and length of service (unless their contract of employment specifies otherwise).
10. What can we do about a damaging contract a travelling salesperson has agreed?
Seek early legal advice. Depending on the circumstances, your best bet may be to repudiate the contract as soon as possible, in the hope of limiting any losses made by the other party in relying on it. But take advice, both on resolving this situation, and ensuring you do not get caught with this kind of vicarious liability in future.
11. What can we do if we suspect a salesperson of using client visits to sell goods on their own behalf?
An employee working remotely is bound by the express and implied terms in their employment contract just as much as one working under direct management scrutiny. The implied terms, though not spelt out, form part of every employment contract, and include the obligation on the employee to serve the employer honestly and faithfully, and not to enter into competition with the employer's business. So you need to investigate more thoroughly, and if there is evidence to suggest that your suspicions are correct, consider activating your disciplinary procedure.
12. If an employee has an accident in a company car while on private business, whose insurance company is liable?
That depends on the terms of the insurance policy. Where private use of a company car is permitted, the insurance policy will normally cover accidents on private as well as company business. If, however, the employee was not authorised to use the car privately, any insurance cover may be invalidated. In that case, you may have to worry about being sued by third parties, for neglecting to ensure that your employee observed your rules - in addition to worrying about the cost of repairing or replacing the car. Check your policy details and, if necessary, take legal advice.
13. Can we replace our current company cars without consulting the salesforce?
To begin with, check the terms of the relevant employees' contracts of employment. If the contracts are silent on this, your sales force may (in theory at least), be able to argue that you are breaching terms established by custom, even if never spelt out. If in doubt, consult a lawyer about the situation, with a view to ensuring that your terms and conditions make it quite plain in future that the choice of company car is yours.
14. What should we do if a salesperson is clocking up improbable mileage on company business?
Ask them to account for it. If they can’t do it, then consider commencing action under your disciplinary procedure. If there is still no satisfactory explanation, issue a written warning. It is unreasonable to expect your salespeople always to travel from one appointment to another by the most direct route, but if there is a variation in the mileage of more than, say, 25%, they should expect to be asked to account for it.
15. Can we deduct excessive room charges from an employee's salary?
Unless there is a specific clause in the contract, entitling you to make deductions from the employee's salary for personal expenditure incurred, the answer is no. Ask the employee in question to account for the bill, and if necessary, to come up with suggestions as to how they intend to reimburse the excess. If there is no satisfactory explanation, and no proposal for reimbursement, you may want to consider disciplinary action. Either way, you should probably establish guidelines on subsistence expenditure, to curb the risk of a similar situation developing in future.
16. Can we set subsistence payments off against tax? Is there a limit?
Any payments 'wholly and necessarily' incurred for the business can be set off against the corporate tax bill. This includes subsistence payments - both accommodation, and the cost of meals while away from home. There is no limit, though HM Revenue & Customs (HMRC) might start asking questions if the hotel bills were quite obviously disproportionate to the success of the business and the standing of the individual running them up.
You can reimburse employees for routine business expenses like business travel. Provided you are only reimbursing the actual costs paid, these expenses payments do not need to be reported to HMRC as a benefit in kind, and employees are not liable to pay tax on them.
17. Is there a limit on how far or how long our salespeople can drive in a day?
There are no restrictions on car drivers' hours, as there are on the hours of lorry and bus drivers (where maximum working hours in a week are now limited to 60, and average hours to 48, over a four-month period). However, employers have a duty to ensure the safety and welfare of their employees, and a responsibility to ensure others are not put at risk by their work activities (the RAC reports that up to 1 in 3 road crashes involves a vehicle being driven for work).
So employers are under a duty to ensure, for instance, that work vehicles are properly maintained, and their drivers are not put under unacceptable pressure by unrealistic schedules. They are potentially vulnerable if, for instance, they contact their drivers by mobile phone (with the drivers themselves now vulnerable to a potential fine of £1000 - £2,500 in the case of a lorry or bus driver - and six penalty points, if they use a hand-held device; the same penalties apply if they use a hands-free version but fail to maintain 'proper control' of the vehicle). A driving ban could also follow.
The Department for Transport now suggests that the management of any organisation in which there are five or more employees driving on business should develop a policy on driving for work, as part of a move to integrate the management of this activity into the management of health and safety more generally. Such a policy would incorporate requirements for:
- risk assessment
- control measures to minimise risks
- maintenance of data records, to find out how well the policy is working
- reviews of such data, to fine-tune the policy if necessary
Examples of measures that could minimise risks include:
- eliminating journeys where possible, by teleconferencing, rescheduling deliveries etc
- ensuring vehicles are appropriate, and effectively maintained
- ensuring drivers are appropriate, ie fit to drive, legal (the Department suggests checking licences every six months), adequately trained (including training in first aid), and aware of the organisation's policies on mixing driving with drugs, alcohol, illness, stress, fatigue, speed, and the use of mobile phones
- introducing supporting measures (such as emergency planning, and incentives for safer driving)
These may sound like counsels of perfection, but in fact they require little more than is required anyway under the Management of Health and Safety at Work Regulations, which should include assessments of any dangers to employees travelling on business, with appropriate steps being taken to minimise the risks.
18. Do the normal 20 minute breaks after six hours apply to people travelling on company business?
There is an exemption from these Working Time Regulations requirements for those involved in long travelling, however, they have to be given 'compensatory rest' when it is feasible. Since employers are responsible for the safety and welfare of travelling employees and third parties who might be affected by their actions, it makes sense to insist on regular rest periods for travelling employees, as well as those in the office.
19. Are we responsible for safeguarding the client information on employee's devices?
Yes, it is your responsibility to ensure this information does not fall into the wrong hands. You need to impress upon all your staff the importance of not losing their laptops, mobile phones, personal organisers or memory sticks - especially if they contain information on identifiable individuals. They should keep them secure at all times. These issues should be covered in your cyber security and data protection policies with which your salespeople should be familiar.
20. Is it reasonable to make the use of a smartphone while driving a sackable offence?
Yes. 'Anyone who causes or permits any other person' to use a smartphone while driving is guilty of an offence under the regulations banning the use of hand-held mobile phones. 'Using' a mobile includes using it as a SatNav (unless it is kept in a cradle and is left untouched during journeys). It also includes activities other than taking and making calls - such as switching off the phone alarm - and even when the car is stationary but in traffic. So you would certainly be liable if you required an employee to use one while driving. You could also be liable if you failed to forbid employees from using them under those conditions. Your disciplinary rules should demonstrate that you are taking the regulations seriously.
21. What can we do if we are banned from operating in a country because an employee has been accused of bribery?
The use of bribery abroad is an offence under UK law, so you have presumably made it plain to your employees that you don't allow it. Your first step should be to set up an investigation. If the investigation suggests that the charge is justified, you ought to refer the matter to the police, regardless of any disciplinary action that you may take against the employee.
22. Can we dismiss a travelling salesperson with a back injury that prevents them from travelling?
Incapacity to do the job - on medical or any other grounds - is a potentially fair reason for dismissal. So in theory it is possible to dismiss an employee fairly on this ground, but only if you follow the appropriate procedure.
However, this is not the only consideration. It is possible that the salesperson would be regarded as disabled for the purposes of the Equality Act 2010. If so, you would be legally obliged to carry out an assessment as to whether any ‘reasonable adjustments’ could be made, to ensure they were not placed at a disadvantage. You might also need to be wary of committing ‘indirect discrimination’ if you have a rule or policy that applies to all your other salespeople, but disadvantages the salesperson with the back injury.
There are other factors to consider, such as the effects of dismissal on any entitlement to receive benefits under a permanent health scheme.
In view of the very substantial compensation that can be awarded to employees unfairly dismissed in such cases, it will pay to obtain legal advice before taking any decision to dismiss.