While COVID-19 continues to impact the world of business travel, there are still many companies with mobile workforces. Essential business trips didn’t stop when the pandemic hit for employees who continued to travel due to the nature of their job responsibilities. And in the current world climate, “mobile workforce” now includes remote working, work from anywhere, and commuting—all of which have seen an increase in popularity during the pandemic. While these work situations may be somewhat temporary, there are still tax risks and compliance requirements that need to be addressed.
The risks and compliance requirements for short-term business travelers and their employers can oftentimes get overlooked—whether due to the number of days a person is traveling or the fact that a company simply doesn’t have the ability to properly track and report all business travel. However, just because you can’t address each situation doesn’t mean the risks and requirements disappear. In order to ensure both your business and your employees remain compliant, it is essential to have proper policies, processes, technology, and technical guidance in place.
The compliance concerns with a business traveler population
As an illustration of the tax and risk considerations resulting from a mobile workforce, a large engineering company engaged us to manage their business traveler population. Their immediate need was to address the current compliance risks related to their business travelers who were traveling to 20 different countries. They also needed a process to manage and maintain those risks on an ongoing basis for their entire business traveler population, which included 1,000 tracked business travelers, 150 business travelers requiring action per year, and 10 payrolls operated for those business travelers.
This client had a large number of business travelers working across state and country borders and no solid process to track what risks or regulatory requirements they were incurring. Since they had no tracking or systems in place to alert them when they had a taxable event—such as the activity or number of days being spent in another location, and no exemption from tax reporting requirements—the company not only put their organization at risk of reputational damage, they also put their employees at risk of being subject to non-compliance in different jurisdictions.
Additionally, as with many companies, they were looking for a way to reduce the administrative time spent in sending the same information to all their strategic vendors (their immigration firm, payroll provider, tax firm, and employer of record—an organization that serves as the employer for tax purposes while an employee performs work at a different company) who use the information for different risk analyses.
How to solve for the tax and compliance risks
In order to reduce risk for the company and their business travelers and to ensure compliance, a solid process needed to be put in place. One that was fully defined and could be followed by everyone in the company. Through the design of a suite of mobility policies, and specifically a business traveler policy, we were able to fully define our client’s business traveler program and the employee requirements needed to keep travelers compliant.
The key areas we identified for this client’s business traveler policy included:
- Scope: who was covered and the benefits they would receive once they were identified as covered
- Escalation: the process of reporting non-compliant business travelers and any consequences
- Classification: considerations when a business traveler is reclassified to a short-term assignee (i.e., what criteria the business needs to consider to determine when the employee changes status and what additional costs and benefits this will trigger)
- Corporate Re-charging: the corporate re-charging provisions (relating to transfer pricing and how costs, etc. will be shared between company entities) to identify how the operational considerations of a project will automatically trigger reporting requirements
- Withholding: wage reporting and withholding process including risk tolerance, ownership, payroll operations, and remittance
This policy helped resolve this client's current situation. However, a business traveler policy is just one of the policies a company should consider building when they have a mobile workforce. Work from anywhere, for example, has become a growing trend with many different nuances that need to be considered when building a policy.
Download our free guide for a checklist of Mobility Tax Considerations for your Work Anywhere Policy
Once a policy is defined, implementation and proper communication is crucial. Especially with short-term assignments or work from anywhere scenarios, employees and managers may be unaware that they have tax reporting or registration duties. Beyond creating greater awareness, the key is for your mobile employees to provide you with enough time to plan and conduct the necessary assessments and to identify and proactively implement any tax planning opportunities. The implementation plan and ongoing process for our engineering client ensures all employees are being assessed before they travel and that they are tracked during travel. It also includes processes for change management, process mapping and flows, and decision-making escalation points.
After a solid process is in place and backed by policies, and implementation has taken place, the next step is to offer tax technical support for your individual travelers. There are many things to consider when you have an employee traveling for business, and part of your duty of care as an employer is to protect your employees from a global tax perspective. For this client, after we built and implemented the policies, we delivered the tax technical support for their business travelers to ensure compliance for all traveling employees. This included individual income tax requirements, corporate tax needs, and social security requirements.
By building a process and configuring technology (that allowed us to track their business travelers and seamlessly share the relevant data among all their chosen vendors), we were able to manage their risk, ensure compliance for their individual business travelers, and simplify their overall process.
Steps you can take to building a successful mobile workforce program
Regardless of how many mobile employees you have and where they are working, compliance is possible. Here are a few steps you can take to develop appropriate policies and procedures:
- Identify the types of mobile assignees within your organization.
- Know where your mobile employees are and make sure you are tracking them using appropriate processes and technology.
- Understand the rules for each location your mobile employees are working from and residing in. Note that tax, immigration, benefits, and employment law can change depending on many factors so it is important not to assume that “one-size-fits-all.”
- Consider best practices for managing each category of mobile employee. For example, the best practices for managing your business traveler program may have different nuances than are applicable for your work anywhere program.
- Develop a policy that provides clear guidance to program managers and employees.
- Provide tax and legal support for your traveling employees as appropriate.
- Educate your business travelers and their managers—they may not be aware they have tax reporting obligations and will need to understand your organization’s policies and procedures.
It is important to note that your organization may need to develop separate policies and processes for different types of mobile employees. For example, while permanent and long-term assignments are generally managed through a defined HR function, managing short-term business travel tends to be a bit more challenging and companies often lose sight of these individuals. Actively managing short-term business travel can greatly reduce compliance risk for your organization and business travelers. Thus, developing a structure to oversee this area is imperative.
Here are some resources you can use to begin to manage your business traveler program:
- Simple steps to managing your business traveler program
- 5 risks to be aware of when managing your business traveler program
- Tips for managing the risks of business travelers
GTN can help
We have developed solutions which provide advisory and compliance services to companies with mobile employees. These solutions encompass four key areas including policy, process, technology, and technical support.
Policy: Designing, reviewing, and implementing policies that fit your culture, are relevant in the market, and ensure a successful and rewarding experience for your mobile employees.
Process: Implementing change management, process mapping and flows, decision-making, escalation points, and delivery and risk management to ensure you maintain business as usual.
Technology: Providing the technology or integrating with your technology platform to track your mobile employees, reporting the risks and maintaining compliance.
Technical: Delivering tax technical support and guidance for income tax, corporate tax, and social security requirements, and partnering with your other strategic vendors for immigration and labor law requirements.
If you have questions related to your mobility program, we are here to help. Schedule a call with our team so we can discuss your specific situation and define a plan that will solve your risk and compliance concerns.