Remote Worker Policy Development
“I have a laptop; I can work from anywhere.” This is a common mindset given our current reality, but as many organizations are finding out, there is a lot more to it. When the COVID-19 pandemic first started, there was a “do what you need to do to get the work done” mentality. Many employees now expect this flexibility. The demand for talent is high and businesses that want to compete may find themselves bending their existing policies to attract and retain key resources. Setting precedent with policy exceptions not fully vetted can quickly create issues that are not only difficult to correct but can also be costly for the company and employee.
A BDO client recently allowed an Indian student to go home to India to work remotely during the pandemic. The company made an exception to accommodate this request; however, soon other international students asked for the same option. The client reached out to BDO for tax guidance and found that allowing a small number of employees to work remotely for just three months came with a high price tag. The company needed to perform a permanent establishment (PE) review to determine if corporate nexus was established, and subsequently had to register in that country to operate a local payroll for compensation reporting and tax withholding/remittance purposes. These issues could arise with even one remote employee, let alone several. The client had put itself in a precarious position by unintentionally setting a precedent without prior review. BDO was able to help the client navigate through the process and put guidelines in place to understand potential obligations prior to approving such requests in the future.
While the risks and complexities that come with remote work arrangements aren’t new, the pandemic accelerated many of these issues. Tax authorities are under pressure to find revenue, and remote workers provide an opportunity to identify potential tax exposures. Operating under the radar is not a prudent approach for businesses. Instead, they should be proactive and develop a remote worker policy that mitigates risk and aligns with overall business objectives.
How to Create a Remote Worker Policy
Step 1: Build a team and identify the stakeholders
The first step in developing a remote worker policy is to identify all parties that will need to be involved. This includes key leadership, who will need to buy into the policy and understand the complexities and potential exposures. It also includes those who will develop the plan and be knowledgeable to address and own several facets of mobility:
- HR: performance management, recruiting and talent management, employee adoption, culture, employee welfare, nondiscrimination issues, compensation strategy
- IT/Security: data privacy, equipment considerations, remote support staff
- Legal: employment law and location-specific considerations such as minimum wage laws, immigration and safety issues including duty of care
- Tax: payroll, corporate tax, transfer pricing, international tax
Step 2: Define the objectives and parameters of the policy
After the team is developed, the next step is to bring everyone together and brainstorm ideas of what they want to accomplish. Is in-person work important to developing relationships and a culture that values a tight-knit team? Does virtual work allow you to hire from anywhere and recruit the best candidates?
Once the wish list is developed, it will likely need to be narrowed down to create what will become the policy. It’s important to be flexible and realize that not everything can be accomplished. Each member of the team will likely raise important risks that will need to be addressed and carefully considered. While it’s possible to have more than one policy for different employee populations, it’s important that there be only one version for each. As soon as an exception is created, the strength and consistency of the policy is weakened, and the company risks being called to task for internal inequities and generating a potentially large and unexpected cost. It's unlikely that the first policy developed will be the last. When new issues arise, the policy may need to evolve to meet the changing needs of the organization and its workforce.
Step 3: Develop a method to collect data
The key to successfully managing the risks of a remote workforce is to identify and track where employees are working. There are a few ways to accomplish this, including:
- Surveys that ask employees to self-report. This option is relatively easy to implement but relies on the employee to respond timely and accurately.
- Time sheets to match time worked with location. Adding to an existing time entry process can make employee adoption easier; however, not all time-tracking software allows for location entry.
- Software to track employee travel. There are employee tracking tools, such as BDO QuickTrip, that can track employee location and cross-border movement and will trigger alerts when nearing a tax event. Some tools also have the capability to analyze historical data to make informed decisions.
- IP Tracing on company-issued laptops and equipment. While any activity on company hardware may be subject to employer review, there are privacy implications that should be carefully reviewed by the legal department.
Step 4: Communicate, implement and refine
The final step is implementation. Employee education and communication is key. Businesses need to make clear to employees why the policy is important. Down the road this can help employees understand their role in ensuring compliance and why a request may be denied. HR and company leadership will be integral for change management. Once the policy is put in place, it becomes the employees’ responsibility to follow it, so determining when to make this obligation an employee responsibility is important. Has everyone been made aware? Have they been given an opportunity to ask questions? Is there a system in place for employees to acknowledge that they received and understand the policy?
Remote work can be a great benefit for employees; however, businesses should consider the cost of remaining compliant with obligations created by remote working arrangements. When new employee requests are received, the approval process must be streamlined and concrete. Making adjustments retroactively can expose an organization to unnecessary costs and penalties. Lastly, businesses should have a check-in process to review performance and make sure the policy continues to align with the organization’s direction.
Remote and flexible working arrangements can be attractive to businesses and their workforce. While there are tax implications and other risks to consider, developing a thoughtful remote worker policy that is aligned with business strategy and culture can open a door of opportunity. A BDO advisor can help you review and understand your potential obligations and develop a policy to guide you toward a successful future.
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