Remote Working – Employment Law Implications, Challenges, and Recommendations for Employers

How does remote work impact employment contract terms and benefits?

1. Working Location

Working location is an essential term of the employment contract. It often constitutes one of the key considerations for the candidate when looking for a new job opportunity or deciding whether to accept a job offer. Normally, required by law, the employment contract shall specify the working location, which may be detailed to an office address, or at least with the specification of the working city or country. With the increasing application of remote working mode, more frequently we see employees' home address specified as working location in the employment contract, or typical wording like “The employee shall work remotely from home”.

2. Governing Law for Employee’s Benefits

The remote working mode provides the feasibility for employers to hire talent across the entire country or even globally. However, a key consideration that may be overlooked is the jurisdiction governing the employment benefits and rights. When the employer's location and the employee's location are not in the same city or state/province, the issue of governing law arises, especially for those countries that have both national laws and state/provincial levels of employment laws varying by region.

By way of example, in Australia, the employee's actual working location generally determines which state's specific laws shall apply. For an employee who is hired by a company registered in New South Wales while physically working remotely from home in Victoria, the employment benefits, including public holidays, leaves (like specific long service leave entitlements), should be governed by Victoria's state laws in addition to the federal level standards.

In China, according to the relevant regulation, when the place of employment performance (actual working location) is different from the employer's registration place, the employment benefits like minimum wages, labor protection and leaves should be governed by the laws of the actual working location, unless the laws in employer's registration place is more beneficial to the employees and both parties agree on applying such.

3. Home Office Costs and Benefits Structure

When remote working greatly reduces the costs for a physical office, it brings up the issue of equipment and expenses for setting up a home office. Employers should take into consideration the employee's costs and expenses when deciding the employee's remuneration and compensation.

In some countries, Internet/phone allowances are considered as benefits in kind or non-taxable expenses; therefore, if the employers can adopt a reasonable salary structure, it will be more attractive to candidates.

Employment Law Challenges of Remote Working

There is no doubt that remote working is an outcome of today's digital era and an increasingly common online working mode with significant advantages for the employment relationship. It helps employers recruit employees without geographic limitations, as well as reduces administrative burden and costs of having a physical office. On the employees' side, it is more likely for them to work on flexible hours and achieve a work-life balance.

Unfortunately, facts have proved that remote working is a mixed blessing and the benefits of it are also accompanied by its corresponding challenges.

1. Right to Disconnect

Despite flexible working hours offering employees much more freedom, remote working in practice has been seen resulting in longer online hours, stand-by working culture, and intrusion into employees' personal lives.

Country legislations have reacted to those adverse impacts on employees' rights and well-being. The most noticeable change is the introduction of “right to disconnect”, which has been legally recognized in quite some countries. While the legal definition may vary under different jurisdictions, “right to disconnect”, in general, means that the employee has the right to refuse to respond to work-related activities or communications from the employer or third parties (like clients) outside of their prescribed working hours.

Quite a few European countries, for example, France, Spain, Portugal, and Ireland, have introduced laws to grant employees the statutory right to disconnect, with the aim of reducing out-of-hours work contact and safeguarding the employees' legal rights. In Asia, we have seen very few countries, among which include Australia, which have already revised their national law to implement the right to disconnect. Meanwhile, we expect more countries to join the trend. For instance, the Philippines and India have proposed relevant bills to codify such right.

2. Time Tracking and Overtime Pay

In addition to the right to disconnect, time tracking and overtime compliance are the other challenges arising from flexible hours of remote working. Employers may want to have an effective time tracking method to record the employees' working time to achieve day-to-day management purpose as well as working hours or overtime pay compliance. Especially for employees with whom the employer is not exempt from overtime pay obligations (e.g., “EA employees” in Singapore and Malaysia who are legally protected with regard to overtime hours and pay), time tracking is still necessary even under the home office situation.

However, in a home office setting, it is unlikely to implement a traditional “punch-in, punch-off” time tracking method for fixed hours, which deviates from the idea of flexible working. It then leads to challenges for employers to ensure the employees' work efficiency while balancing the employees' needs for flexible working.

3. Health and Safety Compliance

Lacking a physical office poses practical difficulties for employers as to managing employees in a unified space and complying with health and safety standards. If an injury is incurred during working hours, and the employee may be unable to prove that it is work-related as it happened at home, it may become a borderline case to claim a work-related injury, and consequently, whether the employee should be covered by the social insurance and/or the employer's liabilities.

4. Cross-Border Working and Legal Implications

In a broader context, remote working realizes the possibility of unlimited working locations and even cross-border employment. That is the reason “Digital Nomads” has been a buzzword in 2025. Today, it is entirely possible for someone to work remotely from Bali Island in Indonesia for an employer registered in the US.

However, there are a few implications or risks that the employer should be aware of. Working remotely from another country does not mean that the immigration requirements including the necessary work visa/permit can be bypassed. The employer should still make sure that the employee has the right to work in the host country.

The jurisdiction and governing law clauses should also be considered carefully under a cross-border working arrangement.

From a tax law perspective, there may also be a “permanent establishment” risk, which means the employee's activity in that country can be deemed as a corporate tax presence of the company in the home country. Therefore, the income generated from the other country will be subject to the home country's taxation. In the US context, an employee working remotely from another state may create income tax withholding or corporate tax obligations for the employer in that state.

Recommendations for Employers

1. Update Contract Terms

Employers should correctly document the remote working arrangement and relevant terms in the contracts to ensure that the benefits and obligations are explicitly agreed upon. The key terms include, without limitation to working location, working hours, home office expenses, salary structure and reasonable additional hours and availability outside normal working hours (though, this clause should be carefully reviewed, especially in countries where the right to disconnect is legally regulated).

Further, it is recommended practice to specify a term of the employer's right to adjust the working location to provide a contractual basis for the employer's autonomy, if onsite or hybrid working is expected in the future.

2. Establish Remote Working Policies and Provide Training

Companies that intensively adopt remote working in employment may consider establishing relevant work-from-home policies. As opposed to employment contracts which only contain the high-level legal terms, policies can be a more comprehensive measure to specify the management rules and employees' benefits.

In response to the employment challenges as noted above, the company policies may cover topics including working hours and overtime policy, home office and reimbursement policy, data protection policy, workplace health and safety policy, etc.

Another effective method to improve awareness of rights and compliance in a remote working employment relationship is to provide employee training.

For employees, the emphasis can be on working hours, expectation for work efficiency and right to disconnect, workplace safety, and data security etc. For managerial roles, additional aspects should be paid attention to, including overtime approval process and time tracking.

3. Stay Up to Date with Legislative Developments

Employment legislation continues to evolve in response to remote working practices. The right to disconnect, in particular, is a relatively new concept that intersects with working time, overtime, and employee well-being.

As more jurisdictions introduce or refine remote working regulations, employers should stay informed of relevant legal developments and regularly review their employment practices and documentation to ensure ongoing compliance.