Eric Loff: With more than 20 years of global tax experience, Eric serves as the Managing Director for GTN’s West Central region. He is known for leading by example and finding the strengths in others; improving communication so all participants are engaged in a project; and serving as a bridge between a company and its expat employees. As a specialist on managing international assignment programs and the related tax, human resource, and payroll matters, he serves as a frequent speaker on global mobility topics. +1.763.252.0642 | eloff@gtn.com
April. A time for spring warmth and the coming summer months; a time for excitement as Major League Baseball teams start fresh on their quest for a pennant; and especially in 2021, a time for increased hope for effective vaccines and reduced travel restrictions. In short, April is a time for optimism and new beginnings. In this article, we continue this forward-looking optimism by considering the future state of mobility tax. Casey Stengel, a Hall of Fame baseball manager, once said “Never make predictions, especially about the future.” However, despite this “warning,” we are looking to the future and have outlined three key mobility tax trends and related planning considerations you should be thinking about. By understanding these trends and taking steps to prepare your organization now, you can maintain a winning mobility program.
The flexible workforce is here to stay
Prior to 2020, non-traditional mobility scenarios were on the rise, including remote workers and commuters. The COVID-19 pandemic greatly accelerated this trend and for many companies, it has proven to be a positive and potentially permanent addition to their workplace culture. As vaccine distributions continue, many companies are now considering a return to the pre-pandemic office setting, but perhaps in a more flexible or socially distant way. On a macro level, this will likely lead to some type of new balance between in-office and remote work scenarios. But how will this new flexibility impact your organization?
Unfortunately, there is no one-size-fits-all approach for companies to follow as they consider work-from-home or work-from-anywhere policies. Key questions that need consideration include:
What types of work are your employees doing and can this work be done as effectively outside of a specific office?
A year or so ago, this determination probably seemed a lot more obvious for many professions. But now, most of us are used to online meetings for many of our business and personal needs. However, face-to-face meetings can still be critical for many reasons, including collaboration, system implementations and maintenance, relationship building, and business development (we might add mental health to the list!).
Certain roles and industries may also have a more difficult time supporting a remote work environment (e.g., the job may not allow for remote work or in-person collaboration is deemed a cornerstone of the organization’s culture). However, although a fully remote scenario may not work, it may still be possible to incorporate some flexibility or consideration for a “distributed” workforce even in these situations. With a distributed workforce approach, teams may meet in any convenient physical office when in-person meetings are needed, rather than being tied only to a given headquarters location.
It is critical to identify and work with key stakeholders in the organization as you begin to consider what types of roles can work outside of a physical office or specific geography. Your colleagues in corporate tax will play an important role in this process because factors such as an employee’s location and duration, role, and duties can impact your company’s corporate tax position and compliance requirements.
Do you know (really know) where your employees are currently working and how will you verify their work locations in the future?
At the beginning of the pandemic, many companies became aware of employees who had been working in unexpected locations. For example, some employees became trapped in a location due to COVID-19 travel restrictions that did not match up with the address found in the company’s HR information system (HRIS). As physical offices begin to reopen, it is likely that more surprises like this will again surface when employees fail to show up at a given desk.
Will your company culture support the use of a more invasive technology tool for tracking workplace locations or will you need to rely on employee self-reporting? In either case, how will your organization enforce a given policy? Will a strict adherence to a given policy result in issues with employee retention and difficulties attracting new talent to the organization?
Understanding your internal tracking capabilities (if any) and the potential technology solutions offered by your mobility vendors is an important first step in identifying potential solutions. If you do decide to deploy a technology solution, it is important to make sure your organization is not simply paying for data that arrives on your desk without actionable output that will allow you to assess risk and next steps.
Employee self-reporting can also help to mitigate risk if supported by appropriate policies, communications, and follow-through. The key point is to develop a policy that balances the needs of your employees and the risks for your company.
Do your compensation and benefits packages need to be adjusted to address the new types of scenarios that may result from having a remote workforce?
If an employee decides to move to a lower-cost location, will you require that their base salary be adjusted to be commensurate with the new location? What if the employee is critical to your business and your organization can save costs by reducing its physical footprint in a higher-cost location? Salaries and benefits may also increase for workers in traditionally lower cost locations if companies from higher-cost areas begin to compete for remote talent.
If the remote worker is eligible for equity compensation, it is critical that your organization understands its reporting and withholding requirements for individuals who are now a resident of or working in new jurisdictions. This review is especially critical in an international context as different timing or withholding and taxation can result in issues for your employee, including cash flow issues relating to unforeseen withholding requirements or double taxation that eliminates the intended benefit for the award.
In addition to compensation, the benefits for remote workers will need review, especially for international scenarios. Here, there may be mandatory benefits under local employment laws that apply to your remote worker, even if they are not working in an official office location for your organization. US medical benefits may not be appropriate, with local or supplemental coverage needed for duty of care purposes.
