As companies embrace the flexibility of remote work, it’s crucial to understand the distinction between a workation and a relocation to ensure compliance and clarity in handling workation requests.

For example, if an employee is planning to relocate, can they submit a request to cover their stay during the transition period, until they fully settle in the new country? Can this be treated as a typical workation request? The answer is no, and in this article, we’ll shed light on the reasons why.

A workation, by definition, is a temporary arrangement where an employee can work from a different location while retaining primary residency in their home country. For these requests, employees must confirm that they’ll maintain residency in their home country throughout the workation period. This confirmation allows companies to manage social security and tax obligations without the additional risk of establishing a Permanent Establishment (PE) in the host country.

In contrast, when an employee relocates, they are effectively moving their residence, which alters their legal and tax status. This shift means that the request can no longer be classified as a workation, as it involves more than a temporary work-from-anywhere arrangement. Attempting to process such relocations as workations can introduce significant risks and complexities, particularly concerning tax and social security compliance, and may expose the company to potential PE liabilities in the new location.

To avoid these issues, please ensure that relocation requests follow the appropriate procedures and do not fall under workation policies (even for brief arrangements if the employee will leave the company after relocation). If additional guidance is needed, we’re happy to connect you with local specialists to help navigate specific relocation legal requirements in the respective country.