HR Management & Compliance, Talent

Distributed Workforces Can Create a Strategic Advantage or Compliance Nightmare

It might seem counterintuitive to think your employees have become more mobile in a time when most of us have been stuck at home for days on end. But in reality, the number and types of employees potentially crossing borders, both local and international, have increased exponentially. The shift to remote work brought on by COVID-19 has forced companies to come face-to-face with a distributed workforce that, for many, was not a core part of their plan.

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While many of us have lamented the upheaval the pandemic has caused in our lives and our organizations, the expansion of distributed workforces on a broad scale unlocks potentially new benefits for companies when it comes to reimagining and expanding their talent strategies. It also creates potential tax, immigration, and other regulatory compliance issues if not managed appropriately. New data from Topia’s Adapt survey show that the evolution in the way we work now offers a whole new set of challenges and opportunities for organizations.

Work Away from Home

According to our survey, 28% of employees who worked remotely in 2020 worked outside their home state/country. And while 78% of HR personnel think employees are self-reporting their working location 100% of the time, in reality, only 33% of employees are doing so. This can create huge compliance issues, from payroll tax withholding to permanent establishment risk to complying with social security and employment regulations in Europe, such as the Posted Workers Directive. These compliance concerns pose significant implications for organizations as they think about transitioning to more formal flexible work policies.

It’s no surprise, then, that 40% of HR professionals don’t feel they have the right data for decision-making. As COVID quickly became a pandemic in the spring, it left many HR and mobility practitioners scrambling to figure out where their employees actually were and if they were all safe. As we shift to more permanently adopting remote and flexible working, HR teams will need new solutions that help them monitor employee footprints and collect other key data points around employee engagement.

However, there is some good news: 94% of employees are comfortable with employers knowing what city they’re working in.Many employers are rightfully concerned about employee data privacy. In the case of employers monitoring employee working locations, however, employees don’t seem to mind employers knowing that information. Proactively collecting this information will enable organizations to adopt flexible remote work policies while keeping an eye on potential compliance risks.

Managing Risks

While managing the risks associated with flexible distributed workforces might seem daunting, adopting this way of working does bring with it a number of benefits and advantages. Here are just a few:

  1. Increase retention through greater flexibility. As we settle into distributed work as the way of the future, talent retention will become increasingly crucial. Even before the pandemic, the so-called “compensation premium”—the salary increase it takes to lure employees to another company—had reached its lowest point in years. With people willing to switch jobs for almost no increase in salary, companies must focus on making employee experience a top priority in order to retain talent.

    Ninety-one percent of employees agree that “I should be able to work from wherever I want as long as I get my work done,” and 93% say it is important to have a flexible work arrangement in their next job. Fortunately, HR pros agree, and the flexibility employees enjoyed over the last year has driven a big jump in employee experience ratings. The percentage of people who give their company a 10/10 on employee experience has jumped from just 6% last year to 14%—an impressive leap considering the difficult circumstances. Continuing to provide flexibility will be a key driver in employee experience and retention post-COVID.
  1. A whole new talent pool. Just as COVID turned digital transformation into an urgent reality after years of open-ended planning, the shift to remote work has also made whole new pools of talent instantly available. By eliminating geography from the talent equation, remote work has removed significant barriers to accessing a new and diverse talent pool.

    In fact, 82% of employees agree teams should be built based on experience and skill sets, not location, and 80% feel teams of the future will be agile, and it won’t matter if you’re in the same location or not. This affords access to talent not only in different geographies but also in different lifestyles. For example, working parents can now lend their crucial talent and skills to groundbreaking projects and still be available for school drop-off and pickup. Employees no longer have to sacrifice family for their career or vice versa. The flexibility allows HR teams to access diverse talent and skills and allows people to live the lifestyle they want, wherever they want, which widens opportunities for both employers and employees.
  1. Give employees international experience. Despite current barriers, employees’ desire to work outside their home country has actually increased during the pandemic. One in four employees say they desire an international work experience, which is up significantly from just 17% last year. The number of workers who are willing to take a long-term assignment jumped 8% to roughly one-third of employees, while those who said they had no interest in working abroad shrank by over 10%.

    This desire for international work experience is a huge advantage for organizations, as it provides an employee population that is willing to work wherever the need arises and that seeks to advance its skills and experience in the process to accrue leadership acumen. Leveraging international mobility can help businesses give employees the experience they want while building the leadership pipeline organizations need.

After a year plus of many employees working remotely, it’s unlikely the way we work will ever fully return to what we once knew it to be—primarily in an office in a single location. And that’s not a bad thing for employees or businesses. It does, however, mean you have to be smart about how you adopt more permanent flexible working practices and examine policies and the technologies you have in place to enable them.

You can learn more about Topia’s Adapt survey here.

Steve Black is Cofounder and Chief Strategy Officer at Topia.