With corporations like Airbnb, Pinterest, Spotify, and even our legacy company, American Express, rolling out work-from-anywhere (WFA) programs that enable employees to temporarily perform their jobs from another country, perhaps your organization is pondering a similar move as part of a talent acquisition and retention strategy? Or maybe you’re mulling over an employee’s proposition to work overseas for a period of time after they learned about someone else’s experience as a digital nomad?
At first glance, it may seem like a reasonable request that’s easy to accommodate, considering today’s technology and the prevalence of remote work policies. If an employee has access to a laptop and reliable Wi-Fi, what could be the problem?
But launching a WFA program is much more complicated than equipping an employee with the right tech tools and could potentially lead to costly consequences if not set up properly. Before allowing employees to pack their bags and hit the road, it’s important to understand the legal, tax, administrative, and logistical issues that can arise with cross-border remote work and establish some policies and controls.
To help corporates embarking on the WFA path, we spoke to Skye Wiseman, who leads American Express Global Business Travel’s global mobility program, and Chris Gibson, vice president of tax, about top considerations when launching a cross-border remote work program. The insights they put together below are by no means a comprehensive how-to but can give you a better understanding of the broader issues you may encounter during this journey.
Start with the employee’s fact patterns
With all the talk these days about WFA and digital nomadism, many employees approach HR and say something like, “XYZ company is letting its workers spend 60 days in another country – why can’t we?” But Skye said that comparisons are very difficult to make since every case is unique.
Regulations vary from destination to destination, so the outcome of a remote work assessment will depend upon the home-host country combination and the employee’s particular fact patterns. For example, laws governing cross-border remote work will be very different for an employee visiting Ireland from India versus one heading to the United Kingdom from the United States.
Employee fact patterns like nationality, education, years of experience, and family needs can all come into play. A lot will also depend on the organization’s global structure, where it has entities, and the role of the employee.
Establish if the employee has the legal right to work in their chosen country
It’s worth mentioning that while an employee may tell you they have the right to work in the desired location, it is your responsibility as the employer to verify this information and review their supporting documentation.
Depending on the length of stay and where the employee will travel to and from, they may need work visas or other permits. In that event, the next question is whether the employee can secure their own visa or requires the employer to sponsor them (an extra cost!).
Immigration laws largely determine how long a remote worker can remain in a country. Once their legal right to work has ended, they most likely will need to leave the country unless they have been granted an extension or another type of visa.
Find out if there will be unexpected tax obligations and costs for the employer
When employees begin working in a location where the company lacks a presence, you risk creating new tax and legal liabilities where none existed. Because of this concern, Chris said many companies won’t allow employees on a blanket basis to go to a country where they don’t already have a business entity due to the corporate and employment tax risk.
The employer will need to consider whether the physical presence of that individual in the country and the specifics of their role and day-to-day activities create the risk of a taxable trading presence for the employing entity, which could result in unexpected tax compliance costs and corporate tax exposure.
The rules and tax authority interpretation as to what constitutes a taxable trading presence can vary by destination, even with the same fact pattern. It is, therefore, vital to thoroughly research the local tax rules and to understand whether there is a risk that needs to be mitigated. Not doing that early research could cause irreparable damage to the employer.
Learn about other employer obligations the company could be responsible for
Corporates should also consider potential employment tax responsibilities that could be triggered in the country, such as employment tax withholding obligations, tax filings, incremental payroll taxes and social security costs for the employer, and pensions. The devil is in the details. Factors such as whether an income tax treaty can be used, how long the remote worker was present, and if they triggered a tax residency in the country can all affect whether or not an employer is on the hook for these employment tax obligations, said Skye.
She added that international income tax treaties and social security agreements (totalization agreements), which aim to minimize double taxation and facilitate the free movement of individuals by limiting some of the tax red tape, do exist and can be useful. However, applying these tax treaties can be complicated. Therefore, it’s often necessary to engage a tax provider who can offer upfront tax planning.
Another point to consider is whether the fact pattern of the relocation opens up issues on notice periods, termination rights, vacation, benefits, minimum pay, overtime, etc. Chris recalls that some regimes are more onerous in this respect than others and that the cost of obtaining specialist local advice and constantly having to monitor the situation in itself can be the deciding factor in refusing an application to work in a particular country.
Determine if employees can successfully perform their jobs from another country
Cross-border remote work doesn’t make sense for all employees or employers. When companies actively encourage or even require employees to work on a hybrid basis, it may not be feasible to allow them to move to locations far from the office.
Time zone differences may enter the equation too. For instance, it could be challenging for a manager who’s leading meetings all day to be in a destination where their team members are 12 hours ahead. Since reliable internet access is a remote work must-have, sites with poor Wi-Fi connectivity should be ruled out.
Decide which countries are safe from an information security perspective
Since policies and philosophies surrounding the collection, usage, and storage of visitors’ data can vary significantly from one region to the next, Skye recommends working with your IT team to assess which countries are safe for cross-border remote work based on your information security standards.
She noted that governments that collect data from travelers’ mobile devices and computers the moment they set foot in the country might be considered a no-go for many corporations. Even for low-risk countries, it’s best to train traveling employees on how to protect valuable company data.
Create a policy/process that works for your company
When developing a cross-border remote work policy, you’ll need to decide whether the arrangement will be allowed on a blanket or case-by-case basis.
The former can be simple to manage once the policies and controls have been developed and implemented. When taking this path, Skye said you might want to create models that offer clear-cut guidance for specific host-home country combinations that serve as the basis of your policy. Once established, you can review an employee’s fact pattern against the model to quickly decide whether they can travel to their desired destination. The downside to this approach is generating such models can be costly and an administrative burden to maintain.
Alternatively, she said, you could employ a third-party tech solution that automates the review of a remote work situation and adheres to your policy, corporate structure, and overall risk tolerance.
Chris added that creating a decision tree to set parameters around cross-border work arrangements could be useful. The benefit of this is transparency; it conveys to team members why one trip has been approved while another hasn’t.
A case-by-case approach is more appropriate for an organization that wants greater oversight. This option allows you to weigh the risk associated with each request carefully. However, the process can be costly and administratively intensive to manage, depending on the number of applications received.
While launching a WFA program can be complex because each country has its own rules, the good news is that some governments are striving to change that by working with the Organization for Economic Cooperation and Development to figure out how to address digital nomads and cross-border remote workers in a more consistent manner.
Despite the costs and complications, there are many benefits of offering a WFA program that go beyond employee satisfaction. When companies immerse their teams in different cultures, it fosters diversity in thought, experiences, and backgrounds. Working in new environments sparks creativity, innovation, problem-solving skills, and resilience – all essential attributes that contribute to the company’s ultimate success.
Contact us to learn about more about the travel requirements of the places your employees are heading to.
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