Dangers and Hidden Tax Benefits When Managing a Workforce Remotely

It is time for tax and mobility professionals to prepare for the change. The pandemic has accelerated trends in the remote workforce, and working from anywhere is becoming a built-in feature in businesses. For accounting firms and mobility leaders, the realities of managing a remote workforce, both positive and negative, are taking hold.

To stay in compliance and avoid tax breaches, it’s time for tax and mobility professionals to take a step back and consider the pros and cons of the remote working landscape. Fortunately, with these pros and cons in the foreground, it is possible to establish a plan that will help businesses overcome the tax and compliance risks resulting from a massive increase in remote working.

The general workforce has evolved into more remote working over the past decade. However, the pandemic has shifted this change into high gear. According to Statistical, before COVID-19, less than 20% of American workers did business from home five days a week. During the pandemic, that number more than doubled to 44%. Now an estimate 36.2 million American workers are expected to be doing business remotely by 2025.

Perhaps more important to policymakers, the shift to remote working appears to be more than a fad. According to a recent Gartner survey, 82% of business leaders plan to allow remote working in their company at least part-time after the end of COVID-19.

For tax and mobility professionals, there are both advantages and disadvantages of this seismic change, but if leaders are to avoid violations and capitalize on the benefits, change will be essential.

Business benefits of remote work

Many business leaders quickly realize that working remotely is not just a benefit for some employees. If used correctly, it can generate substantial benefits for businesses. Here are some incentives that suggest business leaders might want to continue to adopt more flexible labor policies:

Remote work offers a competitive advantage. Employees are starting to realize a wider range of benefits that come with working remotely, and flexible working is becoming extremely popular. Buffer Remote Work Status Report suggested that 99% of remote workers want to continue working remotely at least part-time throughout their careers. As a result, flexible working could be a necessary benefit for companies wishing to attract and retain talent.

Businesses can save money. Physical office space and equipment can represent a huge chunk of a company’s budget. Remote working presents an opportunity for business leaders to forgo their leases or downsize their offices and increase the bottom line of their business.

Companies can tap into a global talent pool. When employees don’t need to be tied to a physical location, it can explode the talent pool. A more remote workforce means talent managers have more candidates to choose from and a more diverse set of perspectives to integrate.

Remote work tax and compliance dangers

With the unexpected onset of the pandemic, many business leaders have rushed to create remote working policies. The entire organization, and in particular tax and mobility professionals, are now faced with high risk exposure. Here are some concerns that loom on the horizon:

The duty of care can suffer as a result. The increase in remote working has left employees scattered across the globe, and many business leaders don’t even know where the employees are. It’s a bright red flag for compliance officers who are responsible for keeping employees safe. If a natural disaster strikes, political unrest or some other emergency arises, companies with even the most comprehensive emergency security plans will not be able to act if they do not know the whereabouts of their employees.

Tax offenses can occur. When employees cross borders, whether within the country or abroad, it can trigger quickly complicated tax obligations. For example, with the South Dakota vs. Wayfair Opening the door to state-by-state linkage laws, employers might discover that they have established a taxable presence in a state with a single remote employee working there. At the same time, there may be withholding tax responsibilities that are not met or even social security responsibilities that arise from country specific work.

Whether employees work in multiple states / provinces or travel between countries, they could put themselves and the company at risk of tax offenses, legal fines and / or damage to reputation. .

Departments can be overwhelmed. When it comes to managing work remotely, it’s easy to blur the lines between tax, payroll, human resources and other departments. For example, if an employee jumps from country to country while working, a tax or mobility manager may need to figure it all out, value-added tax, and tax requirements. visa to country specific social security laws and global equity compensation best practices to reduce risk. This, in addition to the management of requests and remote work policy, can lead to rapid overload of managers.

How Tax and Mobility Professionals Can Embrace Change and Avoid Risk

While uncertainty looms, there are several best practices tax and mobility professionals can adopt to avoid headaches and protect the business as remote working grows:

1. Start following employees. Simply put, it is impossible to ensure the safety and tax compliance of employees without knowing their whereabouts. That’s why the first step in crafting a better remote working policy is to find out where employees have been working, how long they’ve been working there, and where they’ll be going in the future.

2. Reset the remote work and travel policies. Remote work policies provide a scaffolding that simplifies decisions and empowers employees to minimize risk. To get started, leaders need to define what it means to be an international employee in their company. From there, they have to decide what types of remote working, countries or regions are prohibited. This will lay the groundwork for creating a more comprehensive set of rules to put workers around the world in a more manageable situation from a tax and compliance perspective.

3. Don’t be afraid of technology. Technology can ease the burden on tax and mobility officials and help keep track of employee information. The technical solution may mean relying on software that identifies risks or a centralized database that channels information into one place. Either way, technology won’t solve all problems on its own, but it can save your life when paired with effective policies and processes.

How Tax and Mobility Professionals Can Be Proactive

With remote working taking hold, the time has come for business decision makers to reorganize their remote working strategies. By tracking remote workers, rewriting policies and procedures, and implementing technology, tax and mobility professionals will have the tools to tackle the remote workforce revolution. This proactive approach is a necessity to avoid tax and compliance traps and make the most of the rapid shift towards more flexible work.

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