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Establishing the Global Policy and Approval Framework for Remote Work Requests—A Case Study

    

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In 2020, a leading e-commerce business began receiving remote work requests from employees on a regular basis. The company quickly realized they didn’t have appropriate policies, processes, or bandwidth in place to handle the requests. Unsure of where to start, they reached out to GTN for assistance. GTN worked alongside the company to build a global remote work policy and automated approval process that not only ensured employee and employer tax compliance, but also maintained a strong company culture and positive employee experience.

Identifying and understanding the pain points of a remote workforce 

During the summer of 2020, corporate office locations were shut down for several months and the company’s entire workforce was forced to work remotely for an extended period. Unbeknownst to the company, this new remote worker population was exposing both the company and employee to risks.

The transition to a fully remote workforce forced the company to ask fundamental questions about their policies and processes, questions that hadn’t been considered pre-COVID-19. 

  • Do we know where our people are working from?
  • What are the risks the company is now exposed to?
  • Are the company and employees compliant with the applicable regulations?

As the company considered their current situation and the steps needed to manage their fully remote workforce, several pain points were identified.

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Pain point #1 – Historical Risk

The shift to remote work unknowingly created corporate and individual risks. Employees had been working in jurisdictions where the company either did not have a legal entity or had generally not conducted business. The company was unsure of how to determine their historical risk as well as how to communicate to employees how this risk would impact them and the company moving forward.

Pain point #2 – Resources

Without a defined global mobility team, there was no dedicated resource to manage the remote work requests. Instead, this fell to the compensation and benefits team who had little previous knowledge of the tax compliance risks associated with allowing employees to work remotely.

Pain point #3 – No defined policy

The company had not created a clear and consistent global remote worker policy that outlined what was expected from each employee when they submitted a remote work request. It was important for remote worker opportunities to remain open to most employees and equally important that employees wouldn’t be negatively impacted by any new changes of policies, processes, and/or technology implementations. The company wanted to manage the change that implementing a remote worker policy would create and minimize the negative impact to employees.

Pain point #4 – Lack of global approval and governance structure

A global approval process did not exist, so the company didn’t have a process in place to handle the remote work requests as they were submitted. With employees potentially working remotely in areas of high-risk, the company needed to develop a clear and consistent remote work request approval process and identify the internal teams that could lead it. This approval process would need to work hand-in-hand with the remote worker policy. The policy and process would rely on each other to achieve success—a policy with no process or a process with no policy is not an effective strategy.

Pain point #5 – No management reporting

To make informed decisions regarding the company’s mobile employee population, it is crucial to have good data. The company did not have sufficient data on their remote worker and business traveler populations which led to an inability to provide management with the information necessary to make productive business decisions. Management needed to be provided with easy-to-understand data to make informed decisions and drive strategy for the company and its employees.

The first 3 steps to creating a compliant remote worker program

Employee Survey

Before the transition to a fully remote workforce, management had known of various anecdotal cases of employees moving to another state or country to work, but the company had no idea the size of the population of employees working in other jurisdictions than their Home location. To learn where their workforce was conducting business, a survey was distributed amongst all employees requesting they share their current work location so the company could better assess the risk. As expected, the company uncovered tax risks that could impact both the company and employee.

Damage Control

From the survey results, the company split employees into two groups—those who were working in a country other than their country of employment and those who were working in a state other than their state of employment.

For the two groups, separate communication plans were established:

  • For employees working in a country other than their country of employment, the company asked them to return to their country of employment by a specified date.
  • For those working in a state other than their state of employment, the company distributed communications to ensure all employees understood the potential tax implications of working in another state(s). The company then updated each employee’s tax withholding to reflect the state they were physically present in.

With GTN’s assistance, the company assessed and analyzed the risks arising because of their remote employees and created a plan to address and mitigate the associated risks. For example, a brief internal list was developed for the countries in which no future remote work requests would be granted as having employees working in these countries would potentially expose the company to Permanent Establishment (PE) issues.

Establishing a Panel of Subject Matter Experts

The third step was to ensure the company knew, going forward, where employees were working and would be able to address any related issues. The company considered the following questions:

  • How do we set appropriate expectations for future remote work requests?
  • How do we ensure employees will be motivated to submit remote work requests versus deciding to work remotely without asking or telling anyone?
  • What communications need to be sent out to ensure these expectations will be met?

With the support of GTN, the company set up a panel of cross-functional subject matter experts (SMEs) comprised of the following departments:

  • Compensation & Benefits
  • Corporate Tax
  • Human Resources
  • Immigration
  • Legal

This panel reviewed and assessed new remote work requests on a weekly basis while trying to remain as accommodating as possible for personal situations. A large importance was placed on remaining open, consistent, and transparent with employees while maintaining an understanding of the risks for each situation.

Developing a global remote worker approval process

Employees’ personal situations along with various country and state combinations made the development of a global remote worker policy complicated. To keep the process both manageable and scalable for the future, the company wanted to keep it as straightforward as possible.

To simplify the process, remote work requests were split up into two categories:

  • Domestic – requests to work from a different state within the same country
  • International – requests to work from another country, which are potentially more complicated and often have more factors to consider

The requests were also segregated based on the length:

  • Short-term – 30 days or less
  • Long-term – greater than 30 days

The company determined that any domestic request under 30 days would not be managed using technology. They based this decision on their risk profile and administrative burden/disruption. Long-term domestic requests were to be submitted through GTN’s Whereabouts™ technology solution. This solution routes the long-term domestic remote work request to the employee’s line manager first to confirm the arrangement makes sense from a day-to-day perspective. Once the request is approved by the line manager, Whereabouts™ forwards the request to the employee’s assigned HR Business Partner (HRBP) for approval. Finally, after the HRBP has approved the request, Whereabouts™ forwards it to the employee’s assigned VP or SVP for final approval.

International requests were viewed through a lens of varying factors. Like domestic requests, they were sent to various SMEs via GTN’s Whereabouts™ technology for review and assessment of multiple factors based on the countries involved and the employee’s specific set of facts and circumstances. If necessary, the internal team may discuss the request prior to approval, but generally the requests are reviewed and approved individually within Whereabouts™.

One of the biggest challenges the company faced was balancing flexibility for employees with the risks faced by the company and employees alike. Clear communication to managers and employees was crucial to develop a full understanding of the risks to all parties; providing context to employees helped manage the ramifications of policy change. While the company wanted to be as flexible and accommodating as they could for their employees, there were times where they had to take a firm stance on where someone could or could not work.

As an example, the company has several Indian national employees working in other countries, such as Ireland and the US. A past practice, that was unknown to the company until they began developing their remote worker policy, included employees obtaining approvals from their managers to travel home to India to visit family and continue their normal role remotely. Due to the identified heightened PE risk the company faced in India, the company determined it would be unable to accommodate any remote work in that location for the foreseeable future.

It was a challenge to communicate to employees why the remote work request process had changed. Communication was sent out to provide employees with additional context to help convey the reasons they may not be able to work remotely in certain locations—even if they had been allowed to do so in the past.

Company case studies that helped form the remote work policy

The following scenarios were some of the remote work requests the company analyzed to ensure the policy and processes used in the remote work program would work as expected. The request details are presented in each case along with the company’s decision-making process and whether the request was granted.

Case study 1: International remote work request

The request and relevant details:

An Indonesian national employee working for an Irish entity submitted a request to work remotely in Indonesia for up to 6 months to care for a sick family member.

  • This employee would be working for 2 weeks in Indonesia with the remainder of the time being a combination of annual and parental leave.
  • The company does not have a legal entity in Indonesia.
  • The employee does not have decision-making authority and cannot initiate contracts on behalf of the company.

The decision-making process:

Indonesia was not on the list of countries where a heightened PE risk was identified, where the company was not permitting any remote work. This request, however, served as a reminder to the company to remain agile and flexible in their policies as it’s important to continuously monitor and assess additional risks as regulations change. This is crucial as the company could not assess the risk tolerance of all country combinations before the remote worker policy was rolled out. To date, the team continues to monitor the risks very closely and make changes as appropriate.

The result:

In this situation, the company was able to accommodate the request due to the short-term nature of the 2-week work period combined with the employee’s personal circumstances. However, the lack of a physical presence in Indonesia had given the company pause to look deeper before granting approval. The employee will be responsible for any Indonesian income tax liability incurred.

This case showed Whereabouts™ in action and how the technology solution was integrated with this remote worker request and approval process:

This individual had an employee profile set up within GTN’s Whereabouts™ technology. The company worked with GTN to configure Whereabouts™ to take into consideration their remote worker policy, review processes, and corporate structure to ensure automation of the process. The company integrated the employee profile, employee request form, company corporate structure, and various guidelines into the technology. These integrations generate alerts and highlight applicable risks that may need to be considered in each case.

Due to the short-term nature of this request (30 days or less), it was routed solely to the HRBP for approval. The benefits team also received a notification so they had visibility into the situation in the event there were potential benefits consequences (i.e., will the employee lose coverage if they’re working in a place where their benefits won’t cover them). The decision making was intentionally kept as decentralized as possible until a greater risk needed to be assessed more closely.

Case study 2: US domestic remote work request

The request and relevant details:

A US national employee working for the company’s US entity in Illinois requested to work remotely in Indiana for personal reasons.

The following details were taken into consideration when reviewing the employee’s request:

  • This employee may need to stay in Indiana indefinitely.
  • The company does not have an office located in Indiana.
  • The company is headquartered in Chicago, Illinois.
  • There is no reciprocity agreement between Indiana and Illinois (certain agreements that avoid double taxation or provide tax relief).
  • The employee does not have decision-making authority and cannot initiate contracts on behalf of the company.

The decision-making process:

Before the transition to remote work, it was common for employees living in Northwest Indiana to commute to the company’s headquarters in Chicago, Illinois for work. When employees started working from home in other states where no reciprocity agreements were in place, it opened up potential risk for the company.

Due to the size of the employee population working remotely in other states, the company used negative assurance through employee communications to handle this. This negative assurance meant all employees working in another state were informed the company was going to change their tax withholding to reflect the state they were physically present in on a certain date unless the employee came forward to specify otherwise. This negative assurance approach was integrated into the remote work policy for any future requests to work in a different state for more than 30 days.

The result:

The employee’s remote work request was ultimately approved by the company. The company issued formal notifications to all domestic employees who were approved to work remotely to inform them they should change their work state in the company’s HRIS if the change was indefinite.

The company understood that individual tax circumstances can be nuanced, and there are likely tax implications that could potentially affect both the company and the employee for all remote worker requests. Since the employee’s tax consequences are ultimately the employee’s responsibility, the company wanted to ensure employees were making informed decisions. The company advised them to consult with a personal tax advisor (GTN) on the potential implications of their situations.

Case study 3: International/Domestic remote work request

The request and relevant details:

A US national employee working for the company’s US entity requested to work remotely in Puerto Rico to visit family and friends.

  • The employee currently lives and works in the US.
  • The employee would like to transfer permanently to Puerto Rico.
  • The employee will remain on US payroll during his time in Puerto Rico.
  • The employee does not have decision-making authority and cannot initiate contracts on behalf of the company.

The decision-making process:

Typically, the company would not approve permanent relocation arrangements to locations where they don’t have legal entities as it would be a challenge to comply with payroll withholding requirements. Due to Puerto Rico being a US territory, it proved to be an interesting exception. Puerto Rico has its own set of laws from a tax and payroll perspective that the company had to navigate when reviewing this request to ensure both the company and the employee would remain compliant if approval was granted.

The nature of this request gave the company the opportunity to clarify their policy further before it was rolled out. The clarification being that US territories would qualify as intercountry moves as the fact pattern more closely aligns with international moves versus domestic moves.

In this case, the request was approved by not only the business, but by the SMEs including legal, tax, and immigration.

The result:

The employee was permitted to work in Puerto Rico.

Current state of the global remote worker program

Before developing a global remote worker policy, tracking process, and approval framework, the company was tracking their remote employees using Google Sheets. As this was an inefficient and time-consuming method, the company knew they needed assistance.

Working alongside GTN, the company was able to:

  • Finalize a global remote work policy that adhered to company and employee needs as well as technical and compliance related requirements
  • Develop a framework to locate all existing remote employees along with a process to proactively track their remote employees going forward
  • Configure GTN’s Whereabouts™ technology to automate and centralize the entire global remote work approval process
  • Go live with a global policy and approval process ensuring minimal impact to employees by providing clear communication, guidance, and training for all employees

Ultimately, the company developed a system which is less stressful on the teams responsible for overseeing the program, ensures scalability to meet future business needs, and supports a positive experience for their employees.

Remote work is here to stay and it is important from both a company and employee perspective that a process exists to fully evaluate incoming remote work requests. GTN has extensive experience in assisting companies in building and implementing remote work and business travel policies and processes. Schedule a call with our team to learn how we can guide your organization in building a policy, creating automation around an approval process, and helping to address your compliance concerns.

Download the Foundational Steps to Establishing a Mobility Tax Program Infographic

Author Andrew Engaldo

 
Andrew is a Tax Senior and has been with GTN since 2019. He helps clients manage the tax risks of their mobile and remote workforces with the use of our Mobile Workforce Management solution and Whereabouts™ technology. Through this solution, Andrew helps clients implement policies and processes that help streamline the compliance requirements for their entire workforce. He also has experience in all aspects of mobility tax, tax consulting, preparation and review of expatriate and foreign national tax returns, tax equalization, cost projection, and related mobility tax program planning. +1.619.758.4147 | aengaldo@gtn.com
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