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Broader acceptance of video calls has made the working world seem smaller in some ways, just as both employers and employees increasingly recognize the new realities of flexible work away from the physical office.
The EY 2022 Work Reimagined Survey shows 72% of employers are considering or have implemented a policy to work from another location on a temporary basis, and a further 74% of employers say they agree their company is prepared to hire employees with hard-to-fill or critical skills from any geography, and allow them to work from anywhere. These perspectives from employers come at a time when remote work is an ever-greater part of worker expectations: 80% of employees say they want to work at least two days remotely per week.
The specifics of work flexibility can range from a few hours or days remotely per week, to an extended work placement in another location, to the overly mobile “digital nomad” lifestyle. Digital nomads are a class of worker largely unanchored by geographic location, doing work wherever the Wi-Fi takes them, from mountain chalets to tropical beaches.
The appeal of this kind of extreme mobility for the worker may rest in a greater sense of freedom and choice over the details of work logistics. But for employers, the shift to more mobile and flexible workforces carries with it added complexity for organizations looking to manage risks associated with tax, immigration, or other compliance and regulatory requirements.
Old myths around workforce mobility may not stack up to the new realities of cross-border work, and by parsing fact from fiction leaders can begin to weigh the true costs and benefits of new ways of working.
Myth 1: Digital nomads and fully remote workers are a new phenomenon to manage.
“This isn’t really a new issue — that’s probably the biggest myth of all,” says Shawn Orme, EY Global Immigration Leader.
It’s not new that an employee might want to extend a vacation stay and make a few work calls while traveling, for example, or even spend a few weeks or months working in a secondary location.
What is new is the scale of the expectation and duration of remote work whether home or abroad, and how that’s influencing companies determining where to place their workforce, and for how long. This, combined with the increased race for talent, is pushing employers to seek talent from new locations. In the next two years, 55% of respondents to the EY Tax and Finance Operations Survey anticipate facing more permanent establishment corporate tax risks connected to a higher number of employees working remotely.
A company may face compliance issues for a worker crossing international borders, but also for an employee changing tax jurisdictions within a country, such as between U.S. states or Swiss cantons.
These risks can add immigration-related complications to what may appear to be a convenient solution for sourcing foreign labor as some countries have now started to offer so-called digital nomad visas.
“The nomad visas you read about post COVID-19 have sometimes been rebadged as nomad options, more geared toward individuals than companies,” says Ben Willis, EY EMEIA Global Immigration Leader. “If you’re a gig economy, or freelance worker, maybe it appeals to you. As companies look to take advantage of these programs there are things that complicate it: is there a permanent establishment created? Is social security being met? Has tax—personal and corporate—been impacted? Do they require any additional work authorization? There’s a whole host of complications or regulatory requirements which are going to impact that ability for free movement and work authorization.”
Myth 2: Companies don’t have increased risk with more mobile workforces.
“Depending on local rules, you can have tax and immigration risk from day 1 of an employee working in another jurisdiction. You may also have other liabilities that are unintended and unplanned for,” Willis says, adding that just knowing where your workers are is part of managing risk. “With COVID-19, people were off in other jurisdictions which resulted in stranded workers who were unable to travel back because of sudden border closures and other restrictions. Combine that with geopolitical uncertainty. Imagine having to extract people working remotely from a conflict zone, but not knowing they were there in the first place, and whether your evacuation insurance covers those situations.”
This highlights the importance of real-time data being able to show exactly where the work is being done, and under what conditions.
“There’s what I call the doctrine of unintended consequences: you can solve for an immigration issue, but create a tax consequence that was not anticipated, or not expected,” Orme says. “The laws around all of this are so fluid and changing, you really need a constant lens of what’s going on. You may have a permanent establishment that creates corporate tax consequences for something as harmless as having a bunch of people going to the beach together and doing work.”
For Orme, there are risks associated with not knowing where workers are, and exactly what they are doing in a location, to determine whether it’s in line with the nuances of local rules and visas.
“That’s where having an integrated mobility solution comes in, including technology and the ability to have tax, immigration, and employee information at your fingertips,” Orme continues. “Having to go to three or four different providers, using three or four different tech solutions to get information just doesn’t provide the immediacy that’s needed in today’s environment.”