A workation — working remotely from a holiday destination — blends work and leisure in a way that traditional leave policies do not cover. Without a clear policy, workations create tax risks, compliance gaps, and confusion about whether the employee is working or on leave. A well-designed workation policy protects both the employer and the employee.
Key Takeaways
- Workations are not annual leave — the employee is working, just from a different location.
- The biggest risks are tax residency (triggering corporate tax liability in another country) and visa compliance (working without the right to work).
- A workation policy should set maximum duration (typically 2-4 weeks), approved countries, and employee eligibility.
- Insurance — both employer liability and personal travel insurance — must be verified before departure.
- Employees must have adequate internet, workspace, and time zone overlap with their team.
Tax and Compliance Risks
The number one risk of an unstructured workation policy is corporate tax liability. If an employee works from another country for more than a certain number of days (typically 30-183 depending on the country and tax treaty), the employer may create a permanent establishment in that country — triggering local corporate tax obligations and payroll reporting requirements.
Key thresholds:
- UK: 183 days in a tax year creates UK tax residency
- Australia: 183 days or habitual residence
- EU (typical): 183 days in a 12-month period
- US: varies by state for domestic workations; 183 days for international
For most workations (2-4 weeks), the tax threshold is not triggered. But if employees take multiple workations to the same country throughout the year, the cumulative total matters.
Visa compliance is the second major risk. Many tourist visas explicitly prohibit remote work, even if the work is for a foreign employer. A “digital nomad visa” is available in over 50 countries as of 2026, but standard tourist visas generally do not permit work.
What a Workation Policy Should Cover
A complete workation policy includes:
- Eligibility — who can request a workation (tenure, role suitability, performance)
- Duration limits — maximum consecutive and cumulative days per year
- Approved locations — safe countries (good internet, low risk, digital nomad friendly)
- Tax responsibility — employee must confirm they will not trigger tax liability
- Visa and right to work — employee bears responsibility for ensuring legal work status
- Time zone requirements — minimum overlap with core team hours
- Equipment — what the employer provides and what the employee must arrange
- Internet and workspace requirements — minimum speed, private workspace
- Insurance — the employer’s workers’ compensation may not cover international locations
- Emergency contact — who to contact in case of issues
How Leave Works During a Workation
A workation is work, not leave. However:
- Employees may choose to take annual leave during part of their workation — for example, working Monday-Wednesday and taking leave Thursday-Friday
- This is fine but must be tracked separately — work days are work, leave days are leave
- Public holidays in the workation destination do not apply (the employee’s home country holidays are what matter)
- Sick leave during a workation — if the employee is too ill to work, they must follow standard sick leave procedures
The key principle is: a workation is not a holiday. The employee is expected to be working during working hours.
FAQ
Is a workation the same as a “work from anywhere” week?
Similar, but not identical. A workation is typically shorter (1-4 weeks) and may be for personal enrichment. A work-from-anywhere programme is often more structured and may be available year-round with fewer restrictions.
Can my employer say no to a workation?
Yes — particularly if the destination poses tax, security, or compliance risks. The policy should set clear grounds for approval and refusal.
Do I need to tell my employer where I am working from?
Yes. Your employer needs to know for health and safety, insurance, and tax compliance purposes. Working from an undisclosed location may breach your employment contract.
Does workers’ compensation cover workations?
It depends on the policy and location. Many workers’ compensation policies cover injuries anywhere in the world if the employee is working. Some policies have territorial limits. Check before departure.
Can I work from another country while on annual leave from my home country?
This is the same arrangement. If you are working, you are not on annual leave — even if you are in a holiday destination. Track your days cleanly: work days and leave days are separate.