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Employee safety, business disruption, economic volatility, financial uncertainty – COVID-19 is posing unprecedented challenges on all fronts for global mobility leaders.

As today’s extreme circumstances test the ability of businesses to operate and manage rapid change in a time of uncertainty, what should global mobility leaders and their organizations be doing to maintain employee welfare and business continuity?

The health and well-being of staff should be at the top of your agenda. For global mobility, that starts with confirming where each employee is located at the moment and what measures are needed to protect them as conditions, responses and emergency protocols evolve in their respective countries or regions.

As work-from-home arrangements proliferate globally to protect employee health and contain the virus, assess your organization’s ability to provide appropriate remote-working conditions, including reliable communications capabilities, VPN access and connections to necessary business resources. Be prepared to enhance IT systems as needed in terms of capacity, tools and data security. Protecting business data while you are quickly implementing changes and responses to the crisis is critical.

Also keep in mind that as specific policies and emergency measures are being enacted and updated by countries and territories everywhere, it’s critical to confirm that employees have and retain the legal right to work at the global locations they are in during the outbreak. Do you now face, for example, new or temporary immigration rules that will affect staffing and potentially require special measures to manage employees relocating to their homes or to safer jurisdictions?  

Managing on short notice

In many cases, as KPMG member firms are working with clients, employees are working across boundaries on very short notice, perhaps due to national travel restrictions, employees moving quickly from ‘hot zones’ to safer locations, or businesses relocating people as needed to maintain reliable client service and business continuity.

Employee movement on short notice requires immediate attention in order to establish compliance with rules governing immigration, work permits, business registration, and personal, corporate or local tax obligations that are potentially triggered as employees are moving on the fly. Fast action here is crucial to try to reduce disruption or confusion, particularly for employees relocating from one country to another – for example from China to Vietnam, as we have seen.

It also makes sense to explore current international immigration requirements in order to identify countries and territories in which required documentation such as work permits will be easiest to acquire quickly during this time.

KPMG member firms are seeing some businesses struggle with the challenge of determining a strategic sequence of responses: what to do right now, what to look at for the longer term, what is important, what’s not. Our advice is to put immigration requirements and related legalities at the top of your to-do list while establishing priorities or ‘triage rules’ for action. Turning your focus to financial and tax-related issues should follow without delay.

Flexible planning for business continuity

Beyond acting decisively to address employee safety, working conditions and compliance, agile business-continuity planning in these times is indispensable in order to protect and sustain operations as economic activity slows and revenues decline.

Assess as fully as possible the immediate economic impact on your operations and formulate a broad-ranging strategy that can help to reduce the impact. Flexible and timely planning and responses need to be in place to manage economic repercussions and maintain continuity. It is a moving target that demands appropriate action amid evolving global conditions.

What, for example, are your immediate – and potentially changing – tax exposures and obligations during this time? How can you effectively manage cashflow via cost containment and workforce capacity measures? Training a sharp lens of the economic and tax picture is essential.

Monitor and compare tax exposures that are created when people are working for an entity in one jurisdiction while located in a different jurisdiction (permanent establishment risk). The Australian Tax Office, for example, recently advised that it will take a lenient approach to this issue during the current unplanned movement of people. At the same time, the change does not yet cover personal-tax exposure for individuals, or employer obligations.

Identify jurisdictions that have double tax agreements (DTAs) in place that could potentially prevent new tax liabilities as employees relocate from one nation or jurisdiction to another.

China, for example, has a relatively broad range of DTAs in place, while Hong Kong SAR, China lacks DTAs with locations such as the US, Australia and Singapore. At the same time, China also has specific limitations to be aware of, for example the fact that about one-third of DTAs will not assist expatriates or foreigners taxed only on China-sourced income.

Also find out which jurisdictions are extending tax-filing deadlines and how that will affect your business, and monitor what’s happening as we move forward regarding deadline changes or updates. As has been seen in past, for example, US tax authorities have taken extended various tax-filing deadlines in the wake of natural disasters or other emergencies. At the same time, focus on what the tax-risk picture looks like beyond the immediate term to anticipate or identify future implications and issues that could arise in the weeks or months ahead. Again, this is a moving target and no one can say how far we are from a resolution.  

HR issues in turbulent times

Bear in mind that employee relations and respect for employee rights at this time are as important as ever to maintain trust and business continuity. Ongoing communication is critical for global mobility leaders. Employees may have urgent questions about evolving work arrangements and some may voice concerns about the potential for job losses. Be accessible to all employees, including those with heightened concerns or unique situations that will require your insights and guidance. Stick to the facts as we know them today and avoid speculation amid likely rumours and predictions.

While work-from-home policies are being advocated and implemented widely during this time, the fact is that some businesses, lacking a formal remote-work policy, will be addressing this staffing issue for the first time. These businesses will need to determine how remote working arrangements will be applicable or suitable within their operations, for example manufacturers or retailers requiring on-site staff.

For some businesses or regions, working remotely will be prohibitive given a lack of required technology to allow off-site work. This is a challenge we are seeing in some Asia Pacific countries and territories where communications infrastructure may be relatively limited or unreliable for remote work. If so, explore viable alternatives to remote working that can include shift work, job-sharing or flexible work hours.  

Managing surplus capacity to align with business needs and control costs has also become an issue for many businesses amid the global economic slowdown that the crisis has precipitated. Questions are arising around the issue of employee pay as schedules change to meet fluctuating or reduced workforce demands. 

Rules on pay, limits on overtime vary

Know what the rules are in respective jurisdictions that your employees operate in regarding pay, including whether employees can be placed on leave that is unpaid or part-paid. Also confirm if employees can or should use their annual vacation or sick leave allocation to cover temporary layoffs or voluntary absences.

Generally speaking, legislations tend not to provide for a pandemic situation. Any such arrangement will likely require an agreement, preferably in writing, between the employer and employee. Aside from the written agreement, all correspondence leading up to the agreement by the employee to take unpaid or part-paid leave should be documented to avoid disputes later.

If employees are working overtime, what are the local, regional or national rules governing fair pay? Note that in some nations, South Korea and Singapore for example, the number of overtime hours worked in a given period is subject to limits, while in Hong Kong (SAR), China no strict guidelines are in place regarding overtime hours worked.

Also take the time to review employee contract requirements for specific language that could have an impact on remuneration during reassignment or relocation.

Finally, follow these steps when making employment decisions during this time:

  • Work out a contingency plan as early as possible in case of a roadblock affecting current assignment changes, employee movement and beyond;
  • Always consider whether any measure you take is both legal and palatable to the staff population;
  • Document all agreements made and communications provided;
  • Engage in negotiations as needed to ensure best outcomes for employees and the business from as many angles as possible. 

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Contributors:

Murray Sarelius
Partner, Tax
National Head of People Services
KPMG China

Jill Hemphill
Partner, Tax
KMG in the US

Alex Ma
Senior Associate
SF Lawyers,
In association with KPMG Law
Hong Kong

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