Article by Jim Pickett
Addressing how to develop an approach for displaced workers and remote working requests has been a steep learning curve for many—one thing we can all agree on—the topic is complex. Until now, the focus has been on identifying where employees are and addressing potential international tax exposure of “under the radar” remote working.
In our article on remote working, we considered the potential tax and compliance implications of remote work and discussed how to enable a global remote workforce. As tax leaders look to the future, the important question tax leaders should address is:
Two years have passed since the first wave of Covid-19 and to answer these questions, companies need to consider the operational benefits to emerge from the disruption. Based on conversations with Deloitte clients and client-serving executives around the globe, it is apparent that a growing number of companies are looking to implement processes that assess and manage risk exposures (immigration, corporate and payroll tax, individual tax) that have always existed but have been intensified by the growth of a disparate and potentially permanent, remote workforce.
With more employees working remotely, either permanently or on a hybrid basis, the higher the overall potential cumulative risk leading many organisations to develop more restrictive cross-border working protocols from 2022 onwards. For instance, many people may be surprised to learn that if they worked from a country or jurisdiction that is not their designated work location, they may need to file an income tax return and pay additional taxes and that this obligation can extend to employer taxes as well.
Businesses understand that a full return to assigned office-based work, especially in the near to medium-term, is unlikely and instead have embraced a hybrid approach. Organisations must reassess their capability to support a hybrid or remote workforce and manage the complex corporate and individual tax and other compliance considerations that are inextricably linked to this form of working.
Some companies are communicating restrictive guidelines and considerations to employees before approving cross-border remote working arrangements, including: Business leader approval; whether individuals have an existing legal right to work; whether or not the company has an existing presence in the destination location; are certain employee activities restricted from remote work; and limiting the number of days someone may work remotely, ranging from an average of 14-30 days or more depending on the corporate risk tolerance.
In addition, the stance organisations are taking towards cross-border remote working ranges from: No tolerance; exceptions allowed for business continuity; employees allowed limited days due to COVID-19 reasons; to cross-border remote working being touted as an employee incentive for high performers.
This framework highlights the key information necessary to develop an informed road map to embed a tax compliant global workforce strategy.
Define and implement guidelines
Create an infrastructure
Resilient tax leaders are those who are agile enough to embrace change quickly and seamlessly, they are using the pandemic as a catalyst to rethink the resiliency of their workforce policies.
These tax leaders must play a key role by collaborating with other stakeholders—HR, Talent, Global Mobility, Reward, Legal and Technology to articulate and align on priorities as part of a holistic approach to building a compliant workforce strategy.
They are also considering the role of global mobility as a strategic partner who can implement sustainable remote work policies and governance models aligned to their global workforce strategy. This may include creating more remote roles to reduce real estate footprint or introducing new global mobility policies that consider virtual assignments.
Global mobility has shown it can support agility in the workforce and enable the remote working agenda. Amid the uncertainty, tax leaders played a vital role in providing counsel on issues such as stranded and cross-border remote workers. Business leaders quickly realised the value of the tax and mobility functions—working collaboratively across functions and with vendors to not only mitigate risk, but also design a new model of employee engagement based on human-centered processes, putting people at the center of design and delivery, which elevated the human experience for employees and their families.
For companies looking to embed a successful remote working model, it is essential to work across functions and embrace a broader perspective. Tax leaders can play a bigger advisory role— this will help address tax, legal and immigration compliance risks, while enhancing the employee experience in a remote working culture and, could help attract and retain key talent.