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Working: Unleashed

How tax leaders can help build a resilient global workforce in a post-pandemic world

Article by Jim Pickett

The COVID-19 pandemic accelerated an unprecedented global shift to remote and hybrid working.

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.

As companies look ahead post-pandemic, it may be time to stop thinking about “remote work,” as a distinct and special category.

According to Deloitte’s Tax operations in focus study, 78% of leaders now plan to embed either hybrid or fully remote models in the tax function long term, and this is likely be the case across all other business functions.

Companies and tax leaders also want to capitalise on lessons learnt from the COVID-19 driven disruption, rethink their approach towards a more flexible workforce and imbed resilience through updated workforce strategies, policies and operations.

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:

How to embrace the pandemic driven changes to reimagine a different work environment—and have a long-term vision?

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.

Market observations

Risk is taking on more prominence as companies make decisions in where their employees work— balancing employee experience and administrative pragmatism; companies with lower risk tolerances are taking a more conservative stance and are monitoring the risk closely.

At the onset of the pandemic, most companies did not change employee payroll locations for what they saw as temporary remote work. However, as the timeline extends, companies are discussing adjusting payroll withholding to accurately reflect where their people are working. This is particularly prevalent in the US where multiple states mean each set of payroll rules must be considered in addition to the federal rules. Where employees have crossed international borders, global shadow payrolls could be the answer to manage an increasingly complex issue.

Companies are looking to make their people aware of potential tax compliance issues created by remote working, even if they expect the employees themselves to handle any resulting tax implications. Informed employees are better able to initiate payroll related changes and keep their employers apprised of their work location before compliance exposures arise.

While constantly under review as part of the longer-term strategies, companies are largely not changing compensation for short-term remote work arrangements. If short-term arrangements become more permanent, it is anticipated that companies will review this more closely.

Legacy employee benefits such as gym memberships or corporate canteens may now be redundant. Many companies are beginning to review their benefits to identify new options that are more attractive to employees and aid their productivity and engagement while working remotely.

Some companies are requiring employees to acknowledge that their chosen location may result in tax, payroll, healthcare coverage and other implications, and to certify that they understand any current approval to work remotely is temporary and that they will return to their assigned work location when required.

Many companies are approving remote work arrangements on a short-term basis and continuing to provide short-term extensions. Others are providing longer extensions to avoid uncertainty.

For employees who do not adhere to their “return by” date, companies have threatened changes in compensation, unpaid leave and termination as consequences.

Developing a compliant global workforce strategy

This framework highlights the key information necessary to develop an informed road map to embed a tax compliant global workforce strategy.

Define strategy

  • Remote work philosophy
  • Worforce and geographical applicability

Define and implement guidelines

  • Types of remote work
  • Available benefits

Create an infrastructure

  • Stakeholders
  • Decision trees
  • Supporting processes
  • Ongoing governance

Change management

  • Communictaions
  • Employee resources
  • Business training

Looking ahead

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.

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