Since the start of the Covid-19 pandemic, there has been a huge rise in the number of people becoming digital nomads as people were sent home from offices and decided to work from home abroad. As a result, it is critical for your HR team to establish a digital nomad policy. Digital nomads are those who embrace the technology-enabled lifestyle and location options while working for an employer located back in their home country or even in another nation abroad. If you were not required to work at your employer’s office and you could do your work remotely, why not do it from another country where you could enjoy better weather, lifestyle, a different culture etc… as long as you had access to high-speed internet.
What is a Digital Nomad?
This is a great question and the definition does vary a bit, but we prefer to call someone a digital nomad if they are remote workers who work online and even offline who live abroad in one or different locations for an employer back in the home country or country other than their location or country of citizenship. These global nomads use technology such as a laptop computer, course high-speed internet and communication tools such as Zoom or Microsoft Teams to work abroad with little or no difference from working in person.
These digital workers are not having to commute to and from the employer’s office and often stay in one location or move from one country to another for at least one year or more. It could be the Caribbean, Europe, Asia or South America – really just about anywhere it is safe and sound. In some ways, an expatriate who works for an employer back home can be considered a digital nomad or digital expat.
The Rise of Digital Nomads
Becoming a digital nomad was already increasing pre-pandemic, but as noted above, the pandemic just accelerated this trend. Even with Covid-19 gradually becoming endemic, this will become more and more popular for many individuals. Note that moving abroad does take some time, and courage and can involve a lot of planning and life changes. It may not be possible for some who have kids in school, pets and other responsibilities.
It has been widely reported that the number of digital nomads rose from over 3 million in 2019 to over 6 million in 2020! Most digital nomads are highly skilled and as you would expect tech-savvy and educated.
The Lack of a Formal HR Policy is Risky
With the rapid rise in digital nomads who are off the usual human resources grid, a lot of companies have been caught off-guard without a formal digital nomad policy. In some cases, management would turn a blind eye to an employee who was working abroad instead of their home in the same city or informal arrangements were made. The importance of setting up a formal arrangement and nomad employee policy is critical as there are all sorts of potential duty of care, legal, privacy and HR pitfalls. While some global HR managers would be tempted to end the employment of some of these off-the-grid employees, the tight labor market often makes this impossible.
Potential Legal & Tax Concerns – Should be Addressed
It should be noted that digital nomads can potentially create a new “permanent establishment” for your company in the country where they’re working. This might expose your firm and even the employee to that location’s employment laws, tax, compliance and much more. We also have to consider that the digital nomad may not have permission to live or even work in that location as they might rely on a travel visa.
We recommend that employers seek both tax and legal advice for their digital employees. They can often help advise global HR managers on how to reduce your firm’s exposure to tax and legal issues that could really open a “can of worms”. Getting some legal advice on this issue is key.
Privacy & Security Issues for Global Nomad Employees
Many IT managers will lose sleep over the digital nomad locations and how to manage the risk of company intellectual property being hacked along with computer viruses and other threats. This is especially the case if the global employee is located in a country where IT risks are quite common and global communication and technology threats are commonplace.
You should consider this in your digital nomad policies, especially if the person will be using public wifi. Some experts will recommend a VPN app or service such as NordVPN and using the cloud to secure and backup data via an encrypted laptop. Passwords should be changed often along with up-to-date anti-virus software. Note that if your digital expat employee is located in a country where the risk of hacking is very high, you may want to re-think your IT risk and the employment of that expat.
What About Health Insurance Coverage for Digital Nomad Employees?
One of the biggest concerns for both human resource teams and the digital nomads is having adequate international health insurance coverage. While some locations may provide free healthcare to their local citizens, they more than likely do not provide it to expatriates and foreigners who are living or working there. Local medical care, especially in developed countries often favored by digital nomads, maybe lacking and not up to “first-world” standards. The duty of care issues will also keep HR managers up late so it makes sense to do one of the following:
- Advise your digital nomad to secure a comprehensive global health plan that will fully cover the employee and his/her family members living abroad. Our firm works with many digital nomads in securing an individual health plan that will cover them abroad and also back home, but these policies are subject to medical underwriting and approval. The rates can vary depending on the global nomad’s location, citizenship, age, health status, and much more. You may want to check that the plan will fully meet your potential duty of care to that digital nomad employee.
- Set up or add them to an existing group global health plan. These plans will have superior coverage and rates and depending on the plan, may also cover expat employees without any medical underwriting.