The remote work revolution is here, but you still need to remain compliant.
One of the most prevalent and enduring changes triggered by the COVID-19 pandemic – among its many disruptions to our personal and professional lives – has been the record rise of remote work. Beyond the pandemic, it appears remote work will remain a permanent fixture in the world of work for years to come. According to recent data from Ladders, 25% of all professional jobs in North America will be remote by the end of 2022 and remote openings will continue to grow through 2023.
However, governments around the globe are exploring regulatory measures and implementing statutory frameworks that will impact how remote work is treated in terms of tax, payroll administration, benefits, compliance and other functions of business planning. For example, new provisions concerning remote work were recently added to the labor codes in Chile, Norway and many other countries.
With these recent and forthcoming developments in mind, a looming question that’s been burning in the background is now coming to the forefront for companies around the globe: Do you know where your workers are? As one company recently learned the hard way amid a grueling labor-related audit, not having this information can be a costly and time-consuming error.
The “work from anywhere” movement
Before we get to the labor-related audit, it is important to understand the magnitude of remote work trends. Even though many workers have returned to physical office spaces, it’s safe to say that the lines marking the workplace have been forever blurred. As a result, the “work from home” movement is transitioning to a “work from anywhere” revolution – one that will forever change the world of work.
First and foremost, options for travel are reopening and tourism spending is unsurprisingly expected to soar in destinations around the globe according to the World Travel and Tourism Council. With the itch to travel after staying put for more than two years, remote or hybrid employees may choose to enjoy ‘workations’ where they continue their full-time work schedule while staying in a location other than home.
Remote work may also encourage more geographic mobility in the long term, with people exploring new places to call home. Research recently published by Harvard University shows there was a nearly 15% increase in people moving in December of 2020 compared to pre-pandemic December of 2019. With remote work now here to stay, it is likely we will see more people take advantage of this employment mobility in upcoming years. Some countries are even offering special visas to support the digital nomad lifestyle, such as Portugal and Brazil.
‘Know your employee’
With these trends unfolding in the background, companies with a remote workforce may not always know exactly where their employees are when they log on to do their work. While an employer may not mind if an employee is taking a workation, so long as they maintain productivity levels, governments decidedly feel very differently about the matter.
As mentioned, the GoGlobal team recently worked with an organization that received a request for a labor related audit by authorities in Taiwan. It turns out, the company believed one of their employees was living and working in Taiwan; however, they were really living and, effectively, working in the US. While the issue was eventually sorted out, it was an arduous, onerous process.
And still, it could have been worse. What if a lawsuit is pressed against an employer for violating employment laws? What if an employer is deemed to have permanent establishment in a country by having an employee abroad? How can you ensure withholding obligations for the company and the employee are being fulfilled?
Rules are not just different from country to country. Even within one country, there can be a range of jurisdictions with unique labor laws, taxation structures, contribution requirements and statutory benefits.
At best, a company that does not know where its workers are is putting itself at risk for a failed labor audit, which can prove to be an expensive process to address. Not only do these audits consume a lot of staff time, they usually require the hiring of professional service firms to assess, sort out and report on. Worse yet, not knowing where an employee is can present a company with ongoing legal challenges. It can also seriously compromise the wellbeing of an employee if an emergency health or legal situation arises.
For these reasons, it is important for companies to qualify local employment for all workers and conduct continuous due diligence to verify where they are living and working. Since the issue does not just impact a company’s bottom line, it is important to educate your workforce so they too are made aware of how being employed in the wrong jurisdiction can impact both them and the company.
There is a series of ‘what ifs’ that can impact an employee: What if an employee who is abroad gets seriously sick abroad or suffers an accident? With them actually living and working in another country, their designated healthcare benefits may not apply. What if an employee runs into visa issues with immigration authorities? What if tax authorities enforce an audit on an employee’s individual tax position?
When employees understand the personal risks at stake for them, they will likely be more forthcoming in their travel and residency plans.
In recent years, there has been an emphasis on ‘know your customer’ rules so companies can help stop money laundering and fraud. In the new world of work where more of the workforce is remote, it is now advisable to make ‘know your employee’ part of your remote workforce engagement strategy.
Consider engaging an EOR to support global hiring and workforce management
To gain geographic flexibility in hiring and ensure compliance in workforce management, it may be helpful for companies to consider engaging an Employer of Record (EOR) partner. Whatever the circumstance may be, if an employee wishes to work remotely from another jurisdiction where a company doesn’t have a local entity, the EOR solution can serve as a fast, cost-effective solution for keeping that worker on the team.
Essentially, the EOR model safeguards both the company and the individual, alleviating the risks of permanent establishment and audits. As part of the arrangement, the EOR legally employs workers on your behalf. They assume the liabilities of operating a local business as well as the responsibilities of administering payroll in the country.
For many companies, especially those with low headcounts, an EOR model might be the right option for ensuring compliance and avoiding the hassles of a labor audit. In today’s environment where employees can essentially work from anywhere, an EOR like GoGlobal brings agility, efficiency and peace of mind to the end-to-end global hiring experience. Contact a GoGlobal expert to learn more about how an EOR can help companies with employees who are working from anywhere in the world.