Is remote work fated to become a blip on the screen? For some companies, maybe, but for a growing number of others, no. Despite what we’ve heard about employers like IBM, Yahoo and Best Buy reeling in their telecommuters, remote work seems here to stay.
There's research to back this up. The International Workforce Group (IWG) polled 15,000 people in 80 countries and found remote (flexible) work to not only be the “new normal” (which hadn’t been the case in previous years), but in many instances a deal-breaker. That is, if faced with two similar job offers, 83% of respondents said they would turn down the one that didn’t offer flexible working.
The benefits to all parties involved — from greener companies and lower infrastructure costs to happier employees — have long been recognized, but another recent study by the ADP Research Institute quantifies this even further. It found that virtual workers are also more engaged than those who work in offices, which gives their companies a greater competitive advantage.
This being said, a remote and flexible workforce isn’t without its challenges, especially when workers are scattered around the globe either because they’re on assignment or business travel or simply because they and their employers are in different countries.
Due to the nature of the services our company provides, I've become quite familiar with these increasingly common challenges to organizations with remote-work flexibility. Some of the most frequent areas of concern include tax, immigration and statutory employer obligations.
Tax Headaches
As might be expected, tax compliance can be one of the riskier areas here, especially when it comes to withholding foreign income tax and statutory benefits from an employee's pay. (This applies to employers based in one location with an employee working in another country.) In many countries, for example, we've found that foreign companies that don’t withhold the right amount of income tax can be liable for past due amounts, or even more.
Another common pain point is a misclassification violation. Companies that use independent contractors to avoid paying local taxes and social security in a foreign country can be penalized for misclassification if they don’t handle this correctly. Due to the loss of tax revenue, many countries are quite diligent in identifying violations, so it’s important that any employee classified as a contractor clearly be treated as such. For example, he or she should be paid on a project basis as opposed to a salary and not have set hours or receive the types of benefits usually given to employees.
Immigration Noncompliance
Although immigration is a complex topic, it, too, ultimately comes down to compliance. Two of the most typical violations — entering a country on the wrong visa or overstaying a visa — can be even more of a concern for remote workers, whose travel may be less closely monitored than that of office-based employees.
With these types of violations, what often happens is that an employee will travel to a foreign jurisdiction as a business visitor or under a business visa (with or without an employer’s knowledge) and perform activities that technically require a work permit, for example repairing machinery. The employee may also stay longer than allowed. Permitted durations vary by country, but time frames are usually limited to 90 days or less.
As it’s faster and cheaper to travel as a business visitor or business visa holder, the employee may go this route even when he or she is aware of the violation, and hope that it goes unnoticed. And while sometimes this is the case, the odds of flying under the radar are rapidly decreasing due to new technologies that make it easier for authorities to identify noncompliance.
Once a violation is detected, the result can be fines, deportation and even imprisonment for the employee. Employers can also be fined and possibly have their immigration benefits revoked.
Statutory Requirements
A company with remote employees in foreign countries must also comply with each country’s labor laws (such as paying all agreed-upon benefits), even when the employee is operating under a home country contract. This is because local employment laws generally supersede home country contract terms, especially if they favor the company over the employee. It’s particularly important to comply with these regulations when an employee is being terminated, in areas like severance, notice periods and annual leave paid out.
Employers who don’t comply with these types of requirements can incur fines and other penalties. To avoid them, they should thoroughly familiarize themselves with a country’s regulations and/or seek appropriate counsel. Should a violation occur, communication and cooperation with host country authorities is essential, as is correcting the violation by whatever means necessary (e.g., making required payments).
Keeping It Simple
While all of the above is just a snapshot of some common issues, that are anything but simple, what can be simple (in comparison) is coming up with a set of guidelines for remote and globally mobile employees. These should spell out company policy in some or all of these areas, as applicable, and designate what a remote employee may or may not do. To further protect the employee and employer, guidelines should be updated regularly, since regulations often change. While they may not prevent all compliance violations, they can help to avoid as many as possible.
