Working from Anywhere: the new reality

Many employers have seen an increase in appetite for international remote working from their employees.

As technology has improved, long-term remote work is now seen as a viable alternative to office-based working. Employees have begun to view this as an opportunity to work from anywhere with individuals choosing to relocate for reasons such as family, climate or lifestyle.

However, the question remains, whether employees should continue to work from anywhere and if employers wish to support this on an ongoing basis.
 

Working from anywhere considerations for individuals

A common consideration with any relocation is the impact on the tax affairs of the individual. Will their tax residency be impacted, will that mean a tax liability in the alternate jurisdiction and a new filing requirement? Will social security contributions be required? For more senior employees, who may have more complex tax affairs, how will personal income be taxed, and are pensions and inheritance tax planning impacted? Find out what individuals should plan for when considering a move, read more here.
 

Working from anywhere considerations for employers

Does the individual working remotely in an alternate jurisdiction result in additional compliance obligations for their employer, including the running of a payroll? If the social security liability of the individual has shifted, then the employer contributions (if applicable) will be due in the new jurisdiction, which could increase the level of cost of that employee.

There is also a potential impact on the corporate tax position of the employer, should the duties of that employee create an unintended corporate presence.

Finally, there are the non-tax issues such as regulatory requirements, labour laws, security of systems and maintaining effective line management protocols to name a few. The war for talent has led to many employers offering greater flexibility for international remote working to cater for employees that want to be more agile in their working arrangements. There are advantages for employers too, such as the prospect of being able to hire from anywhere and move more quickly into new jurisdictions. Employers simply need to be aware of the potential risks and put policies in place based on the level of flexibility that they are willing to offer, so that requests for international or cross-state remote working can be assessed and unintended consequences minimised.

In summary: what are the risks of international remote working?

• Income Tax and Social Security - Proposed arrangements may create an overseas income tax or social liability - can these be mitigated through Double Taxation Treaties or social security agreements? Will employers become liable for a potentially costly overseas employer social security charge?
• Permanent Establishment - Is there a risk of a creating an overseas permanent establishment and corporate tax exposure in a foreign jurisdiction?
• Payroll and compliance costs - Overseas corporate registrations and operation of a foreign payroll can be extremely costly and administratively burdensome. Some remote working arrangements may result in dual withholding so an employer may want to consider offering a loan to the employee to assist with cash flow issues.
• Corporate Criminal Offence (CCO) - UK businesses can be considered to commit a criminal offence if they have not taken reasonable steps to ensure that overseas tax liabilities are met. Are employers comfortable that a CCO is not being committed?
• Immigration - Do your employees have the right to work in the alternative location?
• Remuneration - With competitive salaries and comprehensive benefit packages a given, the most successful employers are delivering a differentiated employee experience and are embracing a Total Reward mindset.

 

Looking to the future

Many employers have suggested that remote working is here to stay, whether through a hybrid model of office and home-based work, or via permanent office closures creating 100% working from home arrangements.

Trends within global mobility and remote working are also quickly changing. Employees who have found themselves working from home are becoming empowered to dictate their preferred working patterns. Employers will need to quickly quantify the benefits of a more permanent remote working approach, including potential cost reductions and productivity increases among other benefits.

Separately, remote working offers the ability to increase diversity and help plug any gaps in attracting and retaining talent. Hiring outside the major cities within the UK or from overseas can assist with this. However, companies need to carefully consider other factors such as whether remuneration will be adjusted for location, legal issues and whether the employee will be insured for injury overseas.
 

For your business

Keep track of your business travellers through interactive dashboards and produce bespoke reports at the click of a button. Efficiently manage any compliance obligations that could arise for both the traveller and your business. Our technology provides data analytics potential across a range of uses e.g. duty of care, ESG and DE&I to name a few.

Designed to take the stress out of managing international tax affairs and reduce HR complexity, BDO QuickTrip puts you in control and provides you with experts in over 160 countries.

If you would like further information please contact Karen McGrory, National Head of Expatriate Tax, so that we can discuss how we can support your business.