Over the last year, pandemic lockdowns have changed the way many of us think about working. We've seen corporations across the globe comply with important public health guidelines by shutting down offices and putting contingency plans in place to help their employees work remotely, to help stop the spread of COVID-19. For some, that has meant setting up a home office and working from their family residence, while other employees—including those on international assignments—often worked from other locales due to ongoing travel restrictions. In each case, employers helped their workers adapt by introducing additional flexibility so that employees could work remotely from the most convenient location.
While this recent shift seems like a significant change from the past, some employers were already developing programs to support employees working remotely in a different country, province or state. Other companies were able to quickly adapt to the realities of remote working. These employers handled this unexpected change by implementing new policies and technology to deal with important tax-related issues, employment legal concerns and logistical challenges. And although it's expected that the pandemic will eventually subside, the "work from anywhere" concept—and all of its related employer issues—appears to be here to stay.
Whether employers choose to call it remote working, working from home or telecommuting, they need to be aware that evolving their business to the "work from anywhere" model presents an important set of challenges for tax compliance—especially where multiple countries are involved. Employers should fully review the relevant residency rules and income tax treaties to determine whether their employees have any filing or remittance obligations. In particular, employers with employees on international assignments should carefully determine where employees have to meet income tax and social security obligations. Many employees will have to meet requirements in both their home country and their remote work country.
Employers may see an increase in their own tax obligations, as well. For example, certain employers may discover that they must withhold and remit payroll taxes in multiple jurisdictions—including at the provincial or state level, depending on where an employee performs their work. In addition to meeting these requirements, employers in this situation should also consider making changes to their systems to properly track their payroll in each relevant jurisdiction. Further, some countries may consider an employer to have a permanent establishment or taxable corporate presence where an individual travels from another country to conduct business activities inside their borders. In this case, employers should determine whether they have foreign filing obligations, including whether profits attributable to the individual's work are considered taxable income in that jurisdiction.
Beyond contending with these tax issues, employers should also be prepared to familiarize themselves with any legal obligations in the countries and jurisdictions that their employees work. In some cases, these responsibilities can be significantly different from an employer's obligations at home, especially for longer-term assignments. There are several key considerations in this area that employers should review, including:
- Minimum statutory rights and obligations (such as hours of work, overtime thresholds, public holidays and vacation entitlements)
- Human rights obligations
- Occupational health and safety standards
- Employee benefits, and
- Termination entitlements.
These issues are important and may help companies shape their "work from anywhere" policies and procedures. However, it's also important to remember that other more practical considerations can also come into play. Employers will often have to take the time to determine whether an employee is even eligible to work in the other country—there are immigration procedures, and visa and work permits are often required. Aside from technology and security concerns about remote working in other countries, companies are also looking to understand how remote working can affect employee engagement and productivity, and how it may influence an organization's overall culture. While a company's past experience with developing these kinds of programs may provide some direction in these areas, there are many questions yet to be fully resolved.
When it comes to implementing an effective remote work program, companies should adopt a deliberate and considered strategy to properly address any tax and legal concerns that may arise. As part of this approach, employers may want to take steps to consult key stakeholders, collect all the required information, asses any risks and develop appropriate terms and conditions. Taking an active approach now can help ensure any remote work program can remain relevant and successful—even after the pandemic ends. As the nature of work continues to evolve beyond the limits of office spaces and international borders, it's up to employers to be ready to help their employees embrace these new horizons.