El Salvador 🇸🇻 #BDS_Article: The Complex Nature of Transnational Employment – A Challenge for Employers

Within the framework of transnational employment, these situations may prove difficult for both employers and employees, particularly concerning the legal and tax regulations that must be complied with in both jurisdictions.

One of the primary challenges lies in the uncertainty regarding applicable labor law. Each country's labor laws regulate key aspects such as working conditions, hours, wages, and social benefits. When an employee resides in a different country than the hiring company, the question arises as to whether the labor laws of the employee’s country of residence or those of the employer’s home country should apply. In many cases, there is no legislation governing this scenario, leading to potential legal disputes over which jurisdiction’s labor laws should prevail in the individual employment contract.

Additionally, tax complications may arise, as both the employee and the employer may be required to pay taxes in multiple jurisdictions. The employee may be subject to taxation in the country where they work, while the company may have tax obligations in its home country. This situation increases the risk of double taxation. To mitigate these issues, many countries have signed double taxation agreements (DTAs). However, these agreements are not always clear or universally applicable.

Another critical challenge is access to labor benefits, such as social security, pensions, and healthcare services. Depending on the labor laws of the employee’s country of residence, the individual may not have access to the same social benefits as local workers. This might create inequalities and, in some cases, negatively impact the quality of life of transnational employees.

Lastly, hiring employees in different countries may also expose companies to risks related to compliance with international labor regulations. Employers must ensure that their transnational employment model complies with all local employment laws and avoids practices that could be perceived as labor exploitation or discrimination.

In summary, the legal challenges of employees working in one country for a foreign employer are complex and require proactive legal management. Unclear labor laws, tax complications, and the issue of social benefits are just a few of the aspects that demand careful attention to ensure a legally secure and fair employment relationship for both parties.

One notable example of this type of models involves gig work through digital platforms, which have faced legal disputes in various countries regarding the classification of their delivery workers and drivers as independent contractors rather than employees. This classification impacts their labor rights and access to benefits. However, gig work is not the only industry using this employment model—many other sectors are also involved.

In this same line, it is advisable for companies considering this model of transactional work to seek legal counsel from labor and tax law experts to prevent potential legal complications.

Furthermore, it is imperative to recognize that labor law regulations require a deep modernization to reflect the realities of today’s employment relationships. As this type of work arrangements become increasingly common, there is a growing need for clear regulations that protect national workers' rights, particularly concerning social security, retirement , and wrongful termination protections.