The world has been impacted by COVID-19 for over 8 months now, and while working from home once seemed to be a temporary solution to abide by stay-at-home orders, that no longer appears to be the case. Many companies have extended office closures into 2021 and some have even decided their employees do not need to return to the office at all, enacting a permanent work at home option.
In the recent Work Anywhere Pulse Survey (conducted by GTN along with some of our cooperating vendors) of over 100 companies, an average of 38% of respondents stated they will have permanent remote workers for at least a portion of their organization. Another 24% said they are either working through the decision or expect a mix of temporary and/or permanent remote workers.
Many companies understand the employee risks associated with more traditional forms of mobility, such as long-term assignments and permanent transfers. Here, they may provide tax and immigration support to make sure the employee remains compliant with Home and Host country legislation. But, in this new world of stay-at-home workers, what should companies consider in determining their level of employee support? In this month’s newsletter, we consider how these changes to the workplace impact an employer’s duty of care, highlight areas of risk for remote workers, and provide a framework for moving forward in developing an appropriate “work anywhere” policy for your organization.
How do new changes in the workplace affect an employer’s duty of care?
As employers decide the amount of support they will provide to their employees, they must consider duty of care—the legal and ethical obligation that employers have to ensure the health, safety, and well-being of their employees.
Some examples may include:
- Local-level health and safety regulations (e.g. OSHA in the US)—either with a US state or another country
- Workers’ compensation coverage
- Other personal regulatory compliance, such as immigration and tax compliance
Previously, most employers would likely have decided that more company support would be provided to an employee who was traveling for business, rather than an employee who was primarily traveling for personal reasons but decided to work while traveling. However, with this shift in remote work environments, the line between work and personal time has become less obvious and employers must now consider how it impacts the duty they have to their employees.
Duty of care has a very broad definition (health, safety, and well-being of employees) and different companies may have different ideas on what this means in terms of support to their employees. Some questions that should be considered when deciding the amount of support to provide to an employee who is not working from their typical office location may include:
- How will you and other stakeholders within the company be made aware the employee is no longer working from their typical office location?
- What type of job duties is the employee performing?
- Are there local-level health and safety laws that must be considered?
- Will the company reimburse travel to the office for necessary meetings, and to what extent? What if flights are required?
- Will company health insurance plans cover a new location the employee is working in?
- Are there any special data privacy and security requirements that will need to be considered due to a new remote work location?
- Will compensation be adjusted if the employee permanently moves to a new location with a higher or lower cost of living?
- Will any immigration paperwork need to be submitted due to the employee’s remote work location, even if it is only temporary?
- Where should unemployment insurance and workers compensation be paid? Are there other employment law considerations?
- How will the company track employee travel to ensure payroll accurately reports income in jurisdictions where work is being performed?
- If tax returns need to be filed in a new location, will the company assist the employee, or at least notify them of their obligation?
- Will the employee’s work/physical presence in the remote location create additional corporate reporting or tax obligations for the company?
- Are there home office expenses that the company will reimburse for?
- Cell phone/landline
- Printer and other office equipment
Company and employee risks in a remote workplace culture
When employees hear the term “remote work,” they understand and see the flexibility it allows. It provides them with an ability to work from anywhere making it easy to travel to a different location and still perform their job duties. It is an employer’s obligation to know where their employees are so they can address the issues that arise from working outside of one’s typical office location.
To help illustrate this from a tax perspective, we outline two recent client case studies:
Case study 1: Jim learned that his company, located in California, will allow employees to work remotely until spring of 2021. Due to this, Jim decided to travel to his home state of Wisconsin to spend time with his parents. He is taking full advantage of the ability to work remotely and stay with his parents for an extended period of time. Jim’s manager is aware of where Jim is working but has not contacted the company’s global mobility team because Jim is still working within the United States. Since Jim will still be filing a resident return in his home state of California and reporting all wages, there are no issues, right?
Jim and the company may face significant issues in this scenario, such as:
- Changes to income tax and withholding obligations
- Nexus (i.e., state taxable corporate presence) risks for the company in Wisconsin
- Issues with health insurance and other benefits
Case study 2: Tina traveled back to her home country of India in late January 2020 for holiday celebrations. She originally only intended to stay there for a few weeks and was originally scheduled to return to the US in the middle of February. Due to COVID-19 travel restrictions, she has been unable to return to the US. Tina’s manager knows that she is “stuck” in India but sees no issues as Tina is still able to perform her work duties as normal. Tina is a citizen of India and therefore does not need a business visa, so there should not be any issues, right?
Tina and the company may face significant issues in this scenario, such as:
- Additional income tax and withholding obligations
- Permanent establishment risks for the company (i.e., creation of taxable corporate presence in India)
- Possible immigration complications
These issues often stem from the fact that each stakeholder within a company often does not have visibility into where their employees are working from. This in turn creates significant challenges for employers in terms of compliance and in deciding how much support they will provide to an employee. We address these challenges and considerations for both scenarios below.
Duty of care for global tax compliance – building a policy framework
When building a policy to address “work anywhere” risks for your organization, it is important to understand the issues you and your employees may face. As illustrated above, there are many risks associated with remote work, and organizations will have different views on their duty of care responsibilities for their employee and on their level of risk tolerance for the company.
In reviewing these case studies from a tax and payroll perspective, Jim or Jim’s manager should have notified the company payroll team to let them know about his temporary work location. Once payroll is notified of his situation, the following needs to be considered:
- Analysis of the income tax and withholding laws of Wisconsin. Different states within the US have different regulations on when withholding is required. Some are required from the first day of working in the state, and others may have a days or income amount threshold.
- The corporate tax team should review if there are any nexus risks based on the work that he is performing.
- The benefits team should check that his health insurance is accepted in Wisconsin and that there are no other local employment law considerations.
- Jim will need to provide travel data to payroll so that payroll can accurately report his wages in both California and Wisconsin.
- If Jim is working in the US under a visa, immigration attorneys must be consulted to make sure no additional paperwork is required.
Tina’s situation is a little more complex, especially since it involves another country. Once it was known that Tina was not going to be able to leave India as planned, the global mobility team should have been notified. Once notified, the company will need to take into consideration the following:
- Analysis of the income tax and withholding laws of India. Many people are familiar with the basic “183-day rule,” and with the amount of time Tina has spent in her Home country of India, an exemption from income tax in India under the US–India treaty could potentially apply. However, some countries will require income reporting and tax withholding even if a person has not been there for 183 days and even if an exemption from ultimate tax does apply under a treaty. It is also important to note that physical presence is not the only factor to consider in determining if a treaty may be applied to exempt an individual from taxation, so it is important to review the specific treaty terms for every unique scenario.
- The corporate tax team should review if there are any permanent establishment risks based on the work that Tina is performing. The duties of her job can affect the risk of not only her being taxed in India, but also the company being taxed there as well.
- Her US health insurance may not be accepted in India so the benefits team should consider whether she should be placed on an international health insurance plan for the time she remains there.
- Tina will need to provide travel data to payroll so they can accurately allocate the income taxable in India.
- Since Tina has gone back to her birth country, there should be no immigration issues. However, if she was visiting family in a country where she does not have citizenship, immigration attorneys must be consulted to see if work permits are required. The company should not assume that there are no immigration issues just because their employee is visiting family.
Once you understand the issues, it is important to establish a process to track where your employees are working and to clearly communicate employee responsibilities in managing this process. Even if your company does not plan to implement a full “work anywhere” policy, there should be clear guidelines provided to all managers as well as employees so you can maintain consistent treatment throughout your employee population. It is important to make sure your employees understand what remote working does and doesn’t mean, and what level of support will and will not be provided.
It is also important to make sure your employees understand what their obligations are. In our Work Anywhere Pulse Survey, 51% of companies said they expected their employees to self-report where they are working from.
Employees are not always aware when they need to report their travel. As highlighted in the case studies above, you could have multiple employees spending extended time away from their typical tax jurisdiction but continuing to file in their Home location, unaware that they should report this new location to anyone. To ensure company awareness and compliance, employees need to understand what should be reported, who they should report it to, and when they should report it. One way to assist with this could be to increase your global mobility team. This way, employees have access to resources and guidance from individuals that are familiar and experienced in this area and who can help keep them compliant with laws and company policy.
Once you have determined the best way for your organization to identify who is working remotely, it will be important to properly document the guidelines and procedures in a policy. In our Work Anywhere Pulse Survey, 36% of companies have either completed or are in the process of finalizing a policy in this area. GTN has developed a Work Anywhere Checklist to assist companies as they develop their policies.
Finally, once you have drafted appropriate guidelines or policies, it is critical that you communicate the policy to your employees and set up procedures to allow for review and approval of new cases. Without enforcement of the policies, your organization will not be able to meet its own obligations and will not meet the appropriate duty of care standards.
Ultimately, your obligation as an employer is to ensure duty of care for your employees and to understand and meet any tax and legal obligations for the company. Following these steps can help your organization meet these objectives:
- Understand the key issues to consider
- Determine the best way to track employee travel and share with all internal stakeholders
- Develop a policy and guidelines, then communicate and enforce the policy with all employees
A change in workplace culture leads to natural changes to policies and obligations. If you have questions regarding the global tax implications related to your duty of care, we invite you to schedule a call with our team. We are happy to help.
Author: Gina Chang
Gina has been with GTN since 2011 and currently serves as Manager in GTN’s Pacific region. She has 17 years of experience in the world of international tax preparation and consulting. She enjoys working with companies with growing mobility programs and assisting clients in setting up successful processes for their newly established programs. Gina always finds the opportunity to teach those not familiar with the expat world to be very fulfilling.
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