Overview
This situation occurs when an employee’s country of residence or work location does not match the country of the legal entity they are hired under.
To avoid confusion, here are the key concepts:
- Country of residence: the country where the employee lives.
- Work location: the country from which the employee actually performs their work.
- Legal entity: the company or legal employer that holds the employment contract (sometimes referred to as the employer of record).
This setup is common in remote-first companies, multinational organizations, or during periods of mobility.
When and why it should be used:
- An employee lives in Country A but is employed by a legal entity in Country B.
- An employee works remotely from Country A for a legal entity based in Country B.
- The employee is temporarily working from another country (short-term mobility).
- The employee has permanently relocated but remains employed by the same legal entity.
Whether this setup is legally or fiscally acceptable depends on local regulations. Factorial does not provide legal or tax advice.
Implications to consider
Having an employee working or residing in a different country from the legal entity can have implications in several areas:
- Payroll: payroll is usually linked to the legal entity, but local rules may apply depending on where the work is performed.
- Taxes and social contributions: obligations may arise in the country of residence or work location.
- Benefits: benefits eligibility and providers may vary by country.
- Reporting and compliance: local labor laws or reporting requirements may apply.
Factorial helps you record and organize this information, but it does not assess compliance or replace professional advice.
How to reflect it in Factorial
You can register this setup in Factorial by correctly completing the employee’s profile fields.
Step-by-step
- Go to Organization → People and open the employee profile
- In the Personal details section, set the employee’s Country of residence
- In the Work details tab inside the employee's profile:
- Select the correct Legal entity (the company that employs the person)
- Set the Work location, if applicable
- Review other related fields such as office, team, or work policy to ensure consistency
- Save your changes
Available fields and behavior may vary depending on your account setup. If you don’t see a specific field, contact your account administrator or the Factorial support team.
Tips and Best Practices
- Always keep country of residence, work location, and legal entity up to date, especially after relocations.
- Document whether the situation is temporary or permanent using internal notes or custom fields.
- Align internally with payroll, legal, or finance teams before confirming cross-border arrangements.
- Use consistent naming conventions for locations and entities to avoid reporting confusion.
If the employee appears under the wrong country in reports, check whether the report is based on legal entity, work location, or country of residence, and verify that all fields are correctly filled in.
If you can’t select the correct country or legal entity, make sure the country or legal entity has been created and activated in your company settings.
FAQ
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Does Factorial validate if this setup is legally compliant?
No. Factorial allows you to record the information but does not validate legal, tax, or payroll compliance.
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Can an employee have a different country of residence and work location?
Yes. Factorial allows you to register both fields separately if needed.
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Is this the same as expatriation?
Not necessarily. Expatriation often involves additional legal, tax, or visa processes, which are outside the scope of this article.