Author Brett Sipes
Brett is Managing Director for GTN’s Pacific region and has over 20 years of experience in providing mobility tax services. He joined GTN in 2006 and is responsible for managing all aspects of the Pacific region along with providing tax compliance and consulting to Pacific region clients. His straightforward and detail-oriented approach to answering complicated tax questions provides mobility program managers with cost-savings and simplified approaches to managing their mobility programs. firstname.lastname@example.org | +1.619.758.4083
The COVID-19 pandemic has inadvertently resulted in a surge of “work-from-home” employees, and for many companies, it has proved to be a positive addition to their workplace culture. Because of this positive feedback and overall ease of having employees working from home, companies are allowing more of their employees to work remotely on a regular basis. According to a March 2020 article by Forbes, remote work increased 159% between 2002 and 2017 due to various benefits. The fact that COVID-19 has forced more companies to allow their employees to work remotely will likely mean this already growing trend will continue and even accelerate in the future. This migration to having more remote workers is likely to be just one of many significant changes as a result of COVID-19 and although working from home is not a new concept, having such an increase in remote workers will create new issues for companies to consider.
The issues surrounding a company’s remote worker policy will impact many departments including corporate tax, legal, payroll, human resources, benefits, finance, accounting, stock administration, and others, but one department that is well suited to address the challenges of a remote worker policy is a company’s global mobility department. Originally, global mobility departments were created to assist with long-term international assignments, but over the years, the role of the global mobility department has expanded to assist with short-term assignments, permanent transfers, and more recently, business travelers and commuters.
The “new mobility” – the work anywhere employee
A company’s global mobility department is uniquely positioned to address many of the challenges that arise from a company implementing a large-scale work-from-home or “work anywhere” policy. As a result of COVID-19, it is conceivable that, for many global mobility departments, the “traditional” mobile employees consisting of business travelers, assignees, commuters, and transferees may decrease and instead be replaced by an even larger group of “remote workers.” Thus, remote workers are poised to be the “new mobile employees” who will likely need to be managed by a company’s global mobility department, resulting in an even greater role for the global mobility team in a post-COVID-19 world.
We have put together a list of mobility tax issues a company should consider as they build their remote worker policy. In Part 1 of an initial three-part series, we discuss three mobility tax considerations including temporary vs. permanent remote workers, domestic vs. international remote workers, and considerations for employees who travel while working remotely.
For purposes of defining a “remote worker,” we are assuming the employee will live and work in a jurisdiction that is different than where their company is located. For employees that live and work in the same jurisdiction where their company is located, there are likely to be little to no mobility tax issues simply due to working from home rather than commuting to the office that is in the same jurisdiction.
Will employees be working remotely on a temporary or permanent basis?
One of the biggest initial considerations for a company allowing employees to work remotely is to determine if it will be on a temporary or permanent basis. For a temporary remote worker policy, the expectation is that things will return to somewhat “normal” conditions and most people will return to working onsite at a company office within six months to one year. For a permanent remote worker policy, the company will allow an individual to move to an entirely different location from where their company is located and there is no expectation of having the employee in the office on a regular basis.
There are many advantages and disadvantages of either approach that go beyond mobility tax issues; however, the key point is that there can be differences in tax treatment between temporary and permanent remote worker scenarios and it is important that your company have a process to identify these scenarios so company risks and compliance requirements can be considered.
It is important to understand that even a temporary remote worker can create tax reporting and withholding requirements for their company. For example, although some states may show leniency with tax reporting and withholding for workers who are working from home because of COVID-19 related restrictions, New Jersey, for example, has indicated that wage income would continue to be sourced “in accordance with the employer’s jurisdiction,” as opposed to their physical location. This interpretation could lead to double taxation if the employee’s remote work location bases taxation on where the employee is physically working.