Newsletter: March 12, 2024

Welcome to the latest edition of our newsletter! Our goal is to ensure that you are well informed and equipped with the latest information.

Read on to stay ahead, stay compliant, and set the course for success.

UK: Pivotal Year for Employment Laws

From working hours to holidays and leaves, multiple changes are on the horizon for labour laws in the UK. Post Brexit, the British government had initiated reforms to its existing employment laws and issued guidance for the same in January 2024. As EU supremacy ends, the government is set to address grey areas that might remain in its employment laws. Here’s what may change for employers through 2024.

April

The minimum wage will be increased to £11.44 per hour from £10.42, the largest ever hike and the first ever increase of over £1. The change aims to bridge the gap between “real living” and “minimum legal” wages in the country.

A new holiday system for workers with irregular working hours will be introduced. This entitles such employees to accrued holiday at the end of each pay period, at the rate of 12.07% of the hours worked. This can also be paid on a rolled-up basis.

July

A new regulation for the fair distribution of tips will be launched, especially impacting the hospitality sector.

September

A law that entitles employees to request for a predictable working pattern may come into force.

October

The Worker Protection Act, which mandates that employers take proactive steps to prevent their employees from being sexually harassed at the workplace, will come into effect. The Equality and Human Rights Commission will publish a Code of Practice, outlining the steps employers are expected to take.

Later in the year, the UK government might also pass the Data Protection and Digital Information Bill, while immigration laws might also be updated. Employers must stay updated to modify their processes accordingly and ensure compliance with the regulations as the year unfolds.

European Union Pushes Forward with AI Regularisation

The European Union plans to advance further toward regulating AI and algorithmic management. It is taking a proactive approach to fostering transparency and accountability for decisions made by AI-based algorithms.

The existing guidelines create a presumption of compliance, giving a free pass to the installation, operation, and use of AI systems. This eliminates external regulators and allows for internal self-assessment by the provider. However, this raises a major concern since the responsibility of transparency and the right to information are vested in employers. This leaves employees and their representatives, who are directly and significantly impacted by algorithmic decision-making, out of the loop. The proposal aims to ensure protection and prevent exploitation of employee rights, especially those from vulnerable groups.

The EU is committed to allocating the necessary responsibility to individuals responsible for the development, implementation, and monitoring of AI systems with the aim of safeguarding individuals directly or indirectly affected by algorithmic decisions.

The EU has introduced pioneering regulatory proposals in three key areas:

1. Issuing directives to increase transparency in the use of AI across digital platforms by improving working conditions on the said platforms.

2. Refining the AI Act, which indirectly affects Labour Law Rules related to algorithmic management, especially for the AI systems classified as “high-risk.”

3. Introducing an AI Liability Directive, while adapting the regulations to account for the non-contractual liability of AI.

The first is the most crucial directive since it protects an employee’s right to seek explanations and demand re-examination by a human for all decisions made through automated systems that affect their working conditions. The third and latest directive aims to address the shortcomings of the AI Act to guarantee a higher level of protection against AI-powered algorithmic management by refining the claims process for damages to the employee in diverse circumstances.

The EU’s initiative aims to facilitate innovation while protecting individuals and their rights. However, the ultimate responsibility for ethical and compliant use of AI falls upon businesses that rely on technology for diverse processes.

Poland: Tax Implications for Companies with Remote Workers in the Country

The Polish Labour Code introduced changes to regulating remote work contract holders working for foreign entities in the country in April 2023. A more pressing issue for the authorities is to identify the kinds of employment arrangements that fall under the PE (permanent establishment) category and outline the tax implications for the respective businesses.

According to the Double-Taxation Treaties, “Profits of a company of a contracting state are taxable only in that state if the company continues with business in the other contracting state through a PE situated therein.”

The Polish Ministry of Finance does not have a well-defined outline for tax liabilities for a home office. Key considerations to assign PE status to a work arrangement include identifying whether the work location is at the disposal of the employer and whether profits are driven out of the state by the employer.

Usually, a PE arises when there is a “fixed place of business.” This means:

• There is a place of work.
• The place is fixed, and its use decided.
• The activity conducted at the place is not of a preparatory or auxiliary nature.

The above conditions often form a characteristic of remote work arrangements, where the employee operates from a home office. While each case needs to be dealt with individually, certain private rulings are used to make decisions in Poland, such as:

• Any place where an employee carries out sufficient work using the equipment provided or compensated for by the employer is considered a “place of business.”
• The intent of use is implicitly decisive if the employment contract indicates the permanent nature of the work to be performed.
• Whether the work performed in Poland is a part of the company’s business or coincides with the company’s objective will determine the tax implications.

The existence of a PE imposes several taxation, registration, transfer pricing, and social security requirements on a company from the very first day of operation. Therefore, considering legal and tax aspects is critical when hiring work-from-home employees.

Luxembourg Introduces New Telecommuting Law

The Social Security Common Centre (CCSS) of Luxembourg plans to enforce revised procedures for the declaration of work done outside the country. The big move comes after multiple cases of inadequate reporting of telecommuting work came to light. The regulator issued guidelines that modernize declaration to minimise reporting errors and improve the quality of data. It aims to harmonise administrative practices in an increasingly globalised work environment.

The reporting obligation is applicable under two distinct cases:

1. When telecommuting falls under the scope of European Regulations No. 883/2004 and No. 987/2009 (representing less than 25% of the working time).
2. When telecommuting falls within the framework of the employee agreement (representing between 25% and less than 50% of the working time).

The legislation urges employers to declare any telecommuting performed by non-resident employees, irrespective of hours spent commuting. The declaration will help regularise the remote work format and allow the CCSS to determine the appropriate procedures for different employee situations. The CCSS will invite the employee to take the necessary steps after it determines the applicable legislation.

However, employers of employees who spend less than 25% of all working time telecommuting and have submitted the declaration to their country of residence for the determination of applicable legislation (DLA) need not resubmit the declaration. The CCSS will consider the information to be transmitted adequately if an A1 certificate has been issued to the employee.

For all other cases, employers will be held responsible for reporting under the telecommuting obligations. They must inform the CCSS and ensure that all information has been transmitted regarding:

1. Employees with telecommuting time less than 25% of the working time and for whom no DLA request has been submitted.
2. Employees with telecommuting time exceeding 25% of the working time, according to the framework agreement. Employees cannot submit the declaration in such cases.

Businesses hiring remote workers must ensure that all reporting obligations are met, since the CCSS has also decided to push the agenda for penalisation in the case of non-compliance.