As travel is slowly returning worldwide, and remote work is becoming truly remote, the key to having a successful remote workforce policy is to have a plan. Having an approach that essentially lets your employees freely choose where they work puts both the company and the employee at risk. And there are many risks ranging from health, duty of care, employee benefits, and insurance, to more operational aspects such as immigration, tax, payroll withholding, and social security. Below are some guidelines for how you can handle your traveling remote workforce.
Many companies are using policy to inform their workforce on the company’s approach for what they can and cannot do in terms of working remotely. This is communicated to the traveling remote employee (the employee temporarily working in a different location than the one they were hired) in tandem with implementing an operational process to manage the risk factors mentioned above.
Questions to consider in designing your company’s policy and process for remote workers include:
- Who in the company owns the process?
- What is the approval process, and can it be automated?
- How does an employee make a request, or do they even need to make a request?
- Will the policy allow for permanent remote workers, temporary remote workers, or both types of scenarios? In other words, will the policy cover an employee who will work remotely from a permanent fixed location (e.g., someone working remotely from their home) versus an employee who wants to work from multiple locations during the course of a year?
- If your organization will allow temporary remote workers, is there a number of days they can spend in that location without triggering a risk alert that requires an action from the company? In some locations, working even one day in another country or state can trigger a compliance requirement. However, some companies assess risk based on location and adopt 30, 60, or even 90-day thresholds before triggering an action around compliance and reporting. Choosing an arbitrary internal threshold for compliance purposes can create risk for the company and employee but may be necessary for practical purposes.
- What is the impact on employee compensation and benefits? For example, will you reduce compensation for employees who choose to work in lower-cost locations? Are your US benefits appropriate for individuals who will work remotely in other countries?
Our remote workforce policy is in place; now what?
Once the policy has been designed, it’s time to turn to the operational aspects of managing risk for your traveling remote employees. As part of the approval process, many companies are adopting a position that an employee can only work remotely from a location in which the company has a corporate entity, and that the employee must seek approval to work remotely every time. But, in practice, we know this doesn’t always happen.
As part of the approval process, it is essential to think about risk and compliance:
- What immigration documentation will be required?
- What are the activities or duties of the employee and could this lead to corporate tax risk and income tax and payroll withholding obligations?
- If traveling within the European Union (EU)/European Economic Area (EEA), is Posted Worker Directive (PWD) reporting required?
These questions should be addressed prior to travel as remote workers are under increased scrutiny from tax authorities who may now require documentation to be in place before working in a new location.
Speaking of pre-travel, let’s not forget duty-of-care aspects including insurance, safety, and in light of the pandemic, understanding the safety status of the country and if there is a quarantine/stay-at-home order in place. Additionally, with vaccines now being administered, is a “health passport” needed as part of your employee’s documentation?
During the period of remote work, a company also needs to consider monitoring the whereabouts of your remote worker, including how many days of presence in each location and their activity, as this may require an alternative compliance outcome (e.g., if there is a longer period of temporary remote working of say 40 days, should payroll be changed).
And lastly, once the remote worker moves to a new location or returns to a previous one, that travel also needs to be reviewed in the same manner. It is not enough just to monitor each individual trip. Many forget to review the cumulative travel of their employee, not only for risk and compliance requirements but also cost management and strategic decisions about deployment and talent management.
Issues to keep in mind for your remote workforce and how you can handle them
The biggest mistake is to assume that the country or state the remote employee is going to doesn’t have any additional reporting requirements for either the company or the employee. Your employee is doing business in another location on your behalf either at their temporary location, a client site, or even one of your office locations. Local immigration and tax authorities are fully aware of this and expect their local rules to be adhered to. These authorities can stop an individual at the border or audit you as the employer and ask questions on how you manage this employee population.
The main compliance issues are:
- Compensation and benefits: Should you continue to pay the same level of compensation to the remote worker? And are there employment rights and benefits in the new location that the temporary employee could or should be entitled to?
- Data privacy and GDPR: Do local rules expose the company to different safety requirements or restrictions and could local authorities access sensitive information because work is being performed in their jurisdiction?
- Duty of care: Especially now, the need to consider the health and safety of your employees is paramount, including the possibility of vaccine passports.
- Immigration: Have you got the right documentation to work/provide a service in that country?
- Income tax: While the employee may be able to rely on an income tax treaty or local arrangement between the two countries or states to exempt them from reporting individual income taxes, this doesn’t necessarily negate the need to meet local compliance obligations to make that claim.
- Payroll withholding: Do you have payroll withholding and individual tax filing obligations because of the remote working arrangement not only in the location they are traveling to but in their Home location as well? There could be a dual payroll withholding obligations that many employers, employees, and payrolls are not ready to handle.
- PWD: If you have employees providing a temporary service in the EU/EEA, have you considered PWD reporting including a Posted Worker Notification, an A1 Certificate (for social security coverage), as well setting up internal infrastructure for document retention and identifying a person to act as a country liaison?
- Social security: Many tax jurisdictions are asking for proof upfront that your employee is covered under their Home country social security administration. Have you applied for the relevant certificate (A1 or Certificate of Coverage) where one is available?
- Tax issues: At a corporate level, is your employee creating a permanent establishment by virtue of their presence and work duties? Some states and countries are reviewing their tax legislation in light of these future work scenarios.
As you can see, there are many issues and quite a bit of up-front work to be done with a pre-travel assessment. Help is at hand through various means such as technology that can assess pre-travel risk in all these areas and the use of internal resources and/or external vendors to advise and meet compliance needs. Internally, having an “owner” within the business is increasingly becoming a requirement. The risk areas affect several internal functions and having technology to monitor these issues and an identified owner is critical to success.
By taking time now to review your program capabilities, resources, polices, and processes, you can make sure your program is prepared to support organizational goals for your remote workforce. And the good news is that adopting these foundations for a remote worker policy can easily be enhanced to meet the needs of your business travelers and commuters as travel opens up. GTN’s Mobile Workforce Management solution helps clients track and manage the tax risks and compliance requirements related to their entire workforce, including global and domestic business travelers, remote workers, and work anywhere employees. Schedule a call with our team to see how we can help.
