Rules For Work From Home Employees: The 2026 Complete Employer Guide

Your CFO just asked why you're paying for office space in three countries when 60% of your team works from home. Your Head of Compliance wants to know if your remote work policy covers the engineer who quietly moved to Portugal last month. And your VP of People is fielding requests from candidates who want to work from anywhere.

Sound familiar?

Rules for work from home employees used to be a simple HR checklist. Now they're a strategic decision that touches tax exposure, regulatory compliance, and your ability to hire the best talent globallyRules for work from home employees used to be a simple HR checklist. Now they're a strategic decision that touches tax exposure, regulatory compliance, and your ability to hire the best talent globally - particularly as 32.6 million Americans (about 22% of the workforce) are projected to be working remotely by 2025. For mid-market companies with 200 to 2,000 employees spread across multiple countries, getting these rules wrong can trigger audits, create permanent establishment risk, or expose you to misclassification penalties.

This guide walks you through what your remote work policy must include, how to create one that works across borders, and how to avoid the compliance traps that catch growing companies off guard.

Key Takeaways For Rules For Work From Home Employees

Mid-market companies typically start needing a single, formal remote work governance framework once they exceed 200 employees because ad hoc manager-by-manager rules create inconsistent compliance controls across locations, according to Teamed's mid-market operating model guidance.

• Clear rules for work from home employees protect productivity, fairness, and compliance, not just company preference
• Requirements differ between Europe and the US, and between US states, so a single generic remote work policy is rarely sufficient
• Your policy must address eligibility, working hours, communication protocols, data security, equipment, and expense reimbursement as non-negotiable components
• Mid-market companies need consistent governance across contractors, EOR workers, and owned entities to reduce misclassification risk
• Expert guidance can clarify remote work compliance, tax risk, and permanent establishment without overloading internal teams

What Rules For Work From Home Employees Must Include

A work from home policy is an employer policy document that defines eligibility, working time expectations, communication standards, security controls, equipment and expense rules, and approval processes for employees performing their role from a home location.

Every policy needs to answer the same core questions, regardless of where your employees sit. Who can work from home? When must they be available? How do they communicate? What happens to company data on their personal network?

Here's what must be covered:

Eligibility and scope. Define which roles qualify for remote work and what "work from home employee" means in your context. Is it fully remote, hybrid, or occasional? Be specific about which positions require in-office presence and why.

Working hours and availability. State standard hours, any core hours for meetings, and how you handle time zone differences. For multi-country European organisations, a typical compliance review cadence for work-from-home rules is every 6 months because employment, payroll, and privacy requirements change frequently across jurisdictions, according to Teamed's policy governance recommendations.

Communication protocols. Specify primary channels (Slack, Teams, email), expected response times during working hours, and how employees should signal availability.

Performance standards. Output-based measures work better than activity monitoring for remote teams. A practical baseline for manager check-ins that supports performance management without surveillance is one documented 1:1 every 14 days for fully remote employees, according to Teamed's remote workforce operating norms.

Data security and confidentiality. A realistic minimum IT security control set for home working in regulated sectors is multi-factor authentication on 100% of corporate systems plus full-disk encryption on all company-managed endpoints, according to Teamed's compliance-first remote work standards.

Equipment and expenses. Clarify what the company provides, what employees must supply, and how reimbursement works. This varies significantly by jurisdiction.

Health and safety. Provide guidance on safe home workstation setup and how employees should report issues. In France, employers have a duty to protect employee health and safety that extends to remote work.

These minimum components apply to direct hires, EOR workers, and contractors, though the legal bases differ for each.

How To Create A Work From Home Policy For Remote Employees

Creating a policy that works across borders requires more than downloading a template. You need input from People, Finance, Legal, and IT before you start drafting.

Step 1: Define scope linked to business aims. Start with why. Are you enabling remote work to access talent in new markets? Reducing office footprint? Supporting employee flexibility? Your answers shape eligibility criteria and approval processes. that equates to an 8% pay raise for high-level managers according to workplace researchers? Your answers shape eligibility criteria and approval processes.

Step 2: Consult stakeholders early. Finance needs to understand tax implications. Legal must review employment law requirements in each jurisdiction. IT has to assess security controls. Line managers will flag operational concerns. Get them in the room before you write anything.

Step 3: Draft in plain language. Your policy should be readable by anyone in the company, not just lawyers. Cover each rule area from the previous section. Reference adaptable templates, but recognise that templates must be adapted for multi-country mid-market needs.

Step 4: Get jurisdiction-specific legal review. This is non-negotiable for companies operating across multiple countries or US states. What's standard practice in the UK may create liability in Germany or California.

Step 5: Roll out with training. Communicate the policy clearly, train managers on how to apply it, collect acknowledgements, and store everything accessibly. A defensible minimum standard for remote work compliance evidence is an annual policy attestation cycle where every remote employee re-acknowledges the policy once every 12 months, according to Teamed's audit-readiness checklists for regulated sectors.

Remote Work Expectations For Hours Communication And Performance

For mid-market firms operating across 5 or more countries, a workable policy structure is 1 global work-from-home standard plus country appendices for each jurisdiction, which Teamed recommends to reduce policy fragmentation while preserving local compliance.

Working hours and time zones. Define standard hours and any core hours when everyone must be available for meetings or handovers. Respect local working time rules, which vary significantly. In Ireland, working time rules apply equally to remote workers, so policies should include a method for recording working time where required.

Communication standards. Specify which tools to use for what purpose. Email for formal communication, Slack for quick questions, video for complex discussions. Set reasonable response time expectations during working hours, typically within 2-4 hours for non-urgent matters.

Availability requirements. Be explicit about when employees must be online for client calls, team meetings, or cross-timezone handovers. If you allow flexible schedules, clarify how employees should communicate their working patterns.

Performance measurement. Focus on outputs and deliverables, not hours logged. Define clear goals and milestones. Avoid presenteeism, which is measuring presence rather than productivity.

Professional environment. For client-facing calls, employees should have a professional background and minimise distractions. This sounds obvious, but it's worth stating explicitly in your policy.

Employer Obligations And Labor Laws For Remote Employees

Wage, overtime, and record-keeping laws apply equally whether someone works in an office or at their kitchen table. The location doesn't change your obligations as an employer.

Pay and overtime. Employers must track hours for non-exempt employees. Remote settings add complexity because you can't see when someone starts and stops working. Build time-tracking requirements into your policy.

Workers' compensation and unemployment insurance. These typically follow the employee's work location, not your company's headquarters. If someone works from home in California, California rules apply.

Benefits administration. Health insurance, retirement contributions, and leave entitlements may vary by state or country. Assess requirements before approving permanent remote work in a new location.

Pay transparency. Growing numbers of US states require salary ranges in job postings, including for remote roles. Check requirements in every state where you advertise positions.

European considerations. Some European countries recognise remote work rights and require written agreements covering equipment, costs, and health and safety. In the Netherlands, a written arrangement for remote work commonly addresses working hours, availability expectations, and expense handling.

Remote Work Laws For Employees Working In Another US State

When a remote employee lives and works in a different US state from your hiring entity, obligations follow the employee's location. This creates real complexity for European-headquartered companies hiring across California, New York, Texas, and other states without a local office.

Business registration. A new remote state may require you to register as a foreign entity and set up state payroll. This isn't optional, and penalties for non-compliance can be significant.

Tax withholding. You must withhold state income tax based on where the employee actually works, not where your company is based.

Wage and hour rules. Overtime thresholds, meal breaks, and rest periods vary by state. California requires daily overtime pay for work over 8 hours per day. Other states use weekly thresholds. Apply the rules of the employee's location.

Benefits and leave. State-mandated leave (sick leave, family leave, disability) varies significantly. What's required in New York differs from Texas.

Out-of-state policy addendum. Create a clear process for handling requests to work from a new state. A practical approval SLA for cross-border work-from-anywhere requests is 5 business days because payroll, withholding, and security checks usually require multiple internal sign-offs, according to Teamed's remote-work governance playbooks.

Rules For Work From Home Employees In Europe And The US

A work from anywhere policy is an employer policy framework that permits employees to work from locations outside their normal work country or region, subject to pre-approval controls for tax, payroll, immigration, and data protection compliance.

European and US approaches to remote work differ in fundamental ways. Don't copy-paste regional norms across your global workforce.

Written agreements. In Europe, written remote work arrangements are often expected or required, specifying conditions, equipment, and contactability. In the US, there's no single federal rule, but written policies are strongly advisable as best practice.

Working time and disconnect. Europe has stronger protections on working time limits and right to disconnect. A right to disconnect rule is a legal or policy requirement that limits out-of-hours work contactability expectations, typically by restricting employer communications outside working hours except for defined emergencies. The US offers more employer flexibility, bounded by wage and hour laws.

Equipment and expenses. More European jurisdictions expect employer contributions to home office costs. In the US, this is often discretionary, though some states like California require reimbursement for necessary business expenses. - specifically, only California and Illinois explicitly cover remote work-related expenses as of January 2025.

Harmonisation strategy. Set global principles of fairness and clarity, then add regional specifics where law or culture requires. Your UK employees and your California employees should feel they're treated equitably, even if the specific rules differ.

Remote Work Rules For Companies With 200 To 2,000 Employees

What works for a 50-person startup falls apart at 200 employees. Ad hoc manager rules create inconsistency and perceived unfairness at scale. Employees talk. They notice when one team allows permanent remote work while another requires three days in office.

You need a single documented framework with global principles and local appendices. This isn't bureaucracy for its own sake. It's protection against discrimination claims, audit failures, and the operational chaos that comes from 15 different interpretations of "flexible work."

Systems support. HR technology should track employee locations, working patterns, and eligibility. You can't manage what you can't see. A location-tracking rule that materially reduces accidental non-compliance is requiring employees to update their working location within 24 hours of any change in home address or work country, according to Teamed's remote-work operating guidance.

Visibility for stakeholders. Regulators, auditors, and enterprise customers scrutinise remote work controls. If you're selling to financial services or healthcare companies, they'll ask about your policies during due diligence.

Strategic alignment. Link your rules to office strategy, talent plans, and global growth. Remote work policy isn't an HR sideshow. It's a strategic lever.

How Mid Market Companies Align Work From Home Policy With Global Strategy

Your remote work rules should support your business strategy, not constrain it. Start from where you want to hire, which customer markets you're serving, and how much in-person collaboration your teams actually need.

Consider a hypothetical mid-market SaaS company headquartered in London with customers across Europe and North America. They want to hire engineers in Poland, sales reps in the US, and customer success managers in Germany. Each decision triggers different employment model questions.

Align with employment models. When does cross-border remote work prompt moving from contractors to EOR, or EOR to local entity? An Employer of Record (EOR) is a third-party organisation that becomes the legal employer for a worker in a specific country, running local payroll, statutory benefits, and employment compliance while the client company directs day-to-day work.

Choose an EOR when you need to employ someone in a country where you have no legal entity and the role requires employee-level control such as set working hours, internal reporting lines, or access to sensitive systems.

Finance considerations. Tax planning, transfer pricing, and permanent establishment risk all connect to where your people work. Your CFO should be part of remote work policy discussions, not informed after the fact.

Alignment steps. Map your current and planned footprint. Review employment models in each location. Update policy after strategic decisions are made, not before.

Managing Work From Home Rules Across Contractors EOR And Owned Entities

Contractor misclassification is a compliance risk where an individual treated as self-employed is determined by a regulator or court to be an employee, triggering back taxes, social contributions, employment rights, and penalties.

Your remote work rules must distinguish between worker types while maintaining consistent standards where appropriate.

Contractors. Set basic expectations on communication, confidentiality, and professionalism. But avoid controlling day-to-day work like you would employees. Don't mandate specific working hours, require attendance at internal meetings, or dictate which tools they use. Choose contractors only when the work can be delivered with high autonomy, milestone-based outputs, and without controlling daily working hours, tools, or detailed work methods.

EOR workers. These are employees in legal terms, employed by the EOR but directed by you. Align rules with local law and your EOR contract. They should receive the same treatment as your direct employees in terms of communication expectations and performance standards.

Owned entity employees. Full employment relationship. All rules apply. You have the most control and the most responsibility.

Universal standards. Communication responsiveness, confidentiality, and professional conduct can apply across all worker types. Specific working time controls should apply only to employees.

How Work From Home Rules Affect Remote Work Compliance And Tax Risk

Permanent establishment is a corporate tax concept where sustained employee activity in a country can create local corporate tax filing and payment obligations for the employing company even without a formal legal entity.

This matters because an employee working from home in a country where you have no presence can create tax obligations you didn't anticipate. Occasional home working is treated differently from long-term remote presenceThis matters because an employee working from home in a country where you have no presence can create tax obligations you didn't anticipate. Occasional home working is treated differently from long-term remote presence - OECD guidance clarifies that remote work under 50% of total working time in a 12-month period generally does not create a permanent establishment. A common mid-market control is a 30-day per rolling 12-month cap on working from a country where the company has no employing entity or EOR arrangement, because longer durations materially increase payroll, tax, and employment-law exposure, according to Teamed's cross-border remote risk framework.

Beyond tax. Your rules must also support data protection requirements. Across the European Economic Area, GDPR applies to remote work data processing, so employers must provide a lawful basis and transparency information for any monitoring or security tooling that processes employee personal data.

Build tracking and approvals. HR and Finance need visibility when someone starts working from a new country or state. Create a clear approval process before employees relocate, not after.

Rules For Work From Home Employees In Regulated Mid Market Sectors

Regulated sectors face heightened supervision, record keeping, data handling, and access control requirements. Your remote work policy must address these explicitly.

Financial services. Log communications, restrict personal device trading, maintain supervision standards. Regulators expect the same controls whether someone works from an office or home.

Healthcare. Protect patient data when accessing systems from home. HIPAA in the US and GDPR in Europe create specific obligations for handling health information remotely.

Defence and national security. Location restrictions may apply when accessing sensitive information, especially cross-border. Some work simply cannot be done from certain locations.

Evidence requirements. Regulators and enterprise customers expect documented rules and enforcement records. It's not enough to have a policy. You need to demonstrate you're following it.

Governance For Remote Work Policy Reviews Exceptions And Enforcement

Ownership. People or HR leads the policy, with Finance and Legal as core partners. Someone must own updates, exceptions, and enforcement.

Review cadence. Tie reviews to legal and strategic changes. Track multi-country and multi-state developments. For European operations, review every 6 months.

Exceptions process. Create a simple centralised review for requests like long-term work from a new country or atypical hours. A practical approval SLA for cross-border work-from-anywhere requests is 5 business days.

Enforcement. Fair, transparent documentation. Coaching before escalation. Avoid bias across teams and locations. In Germany, employee monitoring for remote workers must meet GDPR principles of necessity and proportionality, and works council consultation may be required.

Building Confident Work From Home Rules With Expert Guidance From Teamed

Remote work rules now span tax, legal, compliance, and workforce planning. This isn't a simple HR task anymore. It's a strategic decision that affects your ability to hire globally, manage costs, and stay compliant across jurisdictions.

Teamed combines strategic advisory with execution across contractors, EOR, and entities in 180+ countries. We help mid-market companies clarify cross-border remote work rules, determine when to set up entities, and align policies across markets without the fragmented advice that comes from working with multiple vendors.

If you're making decisions about remote work policy alongside entity timing, regulated sector requirements, or employment model selection, talk to the experts. One conversation can clarify what's actually required versus what vendors are trying to sell you.

Frequently Asked Questions About Rules For Work From Home Employees

How often should a company review its work from home policy?

Mid-market firms with distributed teams should review remote work policies every 6 months to capture legal changes and strategic shifts, ensuring coverage of every country and state where employees work.

What should we do if an employee quietly relocates to another state or country while working from home?

Establish a clear reporting process requiring employees to notify HR within 24 hours of any location change. If unreported relocation occurs, HR and Finance should quickly assess legal, tax, and payroll implications for the new location and decide whether to regularise the arrangement or require a return.

When does remote work in another country mean we need an employer of record or a local entity?

Long-term home working in a country without presence triggers employment, tax, and regulatory assessments. Using an EOR or later forming an entity is often safer than informal setups when someone will work in a location for more than 30 days per rolling 12-month period.

How should we apply work from home rules to independent contractors?

Set basic expectations on communication, confidentiality, and professionalism, but avoid controlling day-to-day work like employees. Mandating specific hours, requiring attendance at internal meetings, or dictating tools increases misclassification risk.

How much monitoring of remote employees is legally acceptable in Europe?

European data protection rules require proportionate, transparent monitoring. In Germany, works council consultation may be required before implementing monitoring tools. Get local legal input before using invasive tools or recordings.

How can mid market companies keep work from home rules consistent across multiple countries?

Use a global baseline policy with shared principles and local addenda for country and state differences. Assign clear policy ownership to maintain consistency and ensure regular reviews capture jurisdiction-specific changes.

What is mid market?

Mid market typically refers to companies with 200 to 2,000 employees or roughly £10m to £1bn revenue, where global employment and work from home rules become strategic HR and Finance priorities rather than simple administrative tasks.or