Google, Microsoft, Amazon, Twitter and Facebook are among the growing list of major corporations to acknowledge the benefits of remote or flexible work as a long-term employment strategy.
Not only is there evidence that employees prefer the flexibility of working from home, there are also significant benefits for employers. According to a Global Workplace Analytics survey, businesses can save roughly US$11,000 a year for each employee who works remotely just half of the time. The same study found that remote work programs created during the pandemic are collectively saving employers in the US more than $30 billion a day. Most of these savings come from a reduction in real estate and energy costs.
Embracing remote work is also a strategic tactic for companies looking to stay competitive in an employee-driven talent marketplace. In one survey of US workers, between 94 and 99 percent of respondents indicated they would like to work remotely — at least part-time — for the rest of their careers. Companies that can offer flexible work schedules will remain ahead of the curve and be better positioned to attract and retain top talent.
While the rise of remote work presents businesses with a significant opportunity to reduce costs, they must make important decisions before transitioning permanently. If your business is looking to make the long-term shift to a remote-work model, here are some important considerations.
Setting salaries for remote employees
When calculating salaries for remote workers there are a number of factors to consider, including: the type of work being conducted, where the company is based, where the employee is located, market trends and more. Location is typically a key element in this equation because the cost of living, tax requirements and employment laws vary by location, both within the US and internationally.
In addition to properly determining the salary ranges for remote workers, employers should establish a system that will allow them to accurately track and maintain records of their virtual employees’ locations. This will help them avoid possible non-compliance with local tax, HR, immigration and other regulations.
Triggering a corporate tax presence
Even a single employee working remotely in another country, state or municipality can be enough to trigger a taxable presence, or a permanent establishment, in that jurisdiction. Activities that trigger a permanent establishment can range from sending employees abroad on business trips to hiring contractors in another country to signing sales contracts to establishing a remote office and more. If a PE is triggered, there will likely be a requirement to report and pay corporate income taxes to authorities in that location. Failure to understand and follow permanent establishment laws in all jurisdictions of operation can lead to double taxation, financial penalties, reputational damage and more.
While hiring long-term workers as independent contractors can be an effective solution for scaling back costs, many governments are increasingly questioning the fair treatment of contractors versus employees and adjusting and enforcing employment laws accordingly. Local authorities typically look beyond the contractor agreement and use their own employment tests to determine a worker’s classification. If a contractor is deemed to be an employee, the company could be liable for back taxes, non-compliance penalties, backdated employee benefits and more.
Travel and immigration considerations
Businesses that employ remote workers abroad should familiarise themselves with the country-specific procedures related to sponsoring a visa or other immigration documentation requirements. Two of the most common immigration violations include entering a country on the wrong visa and staying longer than a visa permits. This is often more of a concern for remote workers because their travel isn’t as closely monitored as that of their office-based counterparts. Employers that don’t comply with these types of requirements can face fines, reputational damage and, in extreme cases, criminal prosecution. Companies need to be able to easily report and track their travelers, so an online booking tool or a robust traveler report can help companies comply with tax and immigration requirements.
Payroll, worker compensation and benefits
The location of a company’s employees plays an important role in determining where the company will be subject to income tax reporting and other payment obligations, such as payroll taxes, wage withholding and unemployment insurance. It’s also important to remember that every jurisdiction has its own set of laws governing things like workers’ compensation coverage, overtime requirements, family leave, vacation time and medical accommodations. Businesses should invest in designing and setting up a proper payroll process for their remote workers to avoid related compliance, compensation and payroll management problems.
Data protection considerations
Employing a remote workforce comes with increased use of personal devices, insecure wifi connections, risky file-sharing practices and other actions that pose a potential threat to your company’s sensitive data. It also puts you at risk of failing to comply with data protection laws, which could lead to significant fines and reputational damage.
Unfortunately, extending data and information security protection to home offices presents a host of IT-related challenges, especially as online attacks on personal and corporate data continue to rise. Remote work poses other problems as well, such as: how an employer can compliantly monitor employee activities at home without breaching their privacy rights; how to ensure physical documents are properly stored and destroyed; how to continue working if the company’s VPN goes down; and more. These and related risks only increase when a business operates across borders and multiple data protection laws may apply.
Employers need to establish robust processes to protect corporate and employee data and ensure compliance with local data protection laws in every jurisdiction of operation. They should also provide data protection training to all employees and implement related policies and procedures to help them maintain good information-security habits.
This is an updated version of a previously published article. Jason Mendelsohn, director, global mobility, contributed to the article.
For more information, download the "Cross-border remote work action checklist."
How can we help?
The contents of this article are intended for informational purposes only. The article should not be relied on as legal or other professional advice. Neither Vistra Group Holding S.A. nor any of its group companies, subsidiaries or affiliates accept responsibility for any loss occasioned by actions taken or refrained from as a result of reading or otherwise consuming this article. For details, read our Legal and Regulatory notice at: http://www.vistra.com/notices . Copyright © 2022 by Vistra Group Holdings SA. All Rights Reserved.
Vistra 2030: Preparing for a new era of globalisation
21 Mar 2023
Vistra’s 2030 report is the fund and corporate service industry’s leading research series, one that examines changing client demands and how the industry itself is adapting. Our current edition incorporates survey responses from over 600 professionals…
ECJ ruling on access to beneficial ownership information: Balancing transparency and privacy
23 Feb 2023
Global tax opportunities: Making tax work for your organisation in uncertain times
28 Feb 2023