HR Management & Compliance

A Holly but Un-Jolly Season for Remote Work Compliance

When people set off for Christmas and New Year vacations, many will bring along something risky: no, not just the Omicron variant but also their work.

Nearly 2 years into the COVID-19 pandemic, most governments don’t know what to do with remote work. In the United States, many states expect employers to report remote work in their jurisdictions and withhold taxes accordingly. Worldwide, most immigration authorities insist that if someone checks the box for “leisure” on his or her entry papers, he or she can’t work (legally) during the trip. 

Although these rules feel outdated and self-defeating, they present compliance risks that HR and payroll teams cannot ignore. Many digital workers will create tax exposure, immigration risks, or both during their holiday vacations, especially if they take extended trips that blend work and leisure. 

In retrospect, this might be an un-jolly holiday season for companies that unknowingly trigger audits, penalties, and tax bills. Good thing that’s all preventable.

HR and Payroll Won’t Ask If You Don’t Tell

Until COVID-19, most employers followed the time-tested compliance strategy of burying their heads in the sand. The unspoken agreement was: “I won’t ask if you worked during your trip. Don’t tell me if you did work during your trip.” The odds of being caught were extremely low. And they still are.

But now that two-thirds of employees in white-collar jobs tell Gallup they’re working from home (remotely) either exclusively or part time, authorities have more reason to look for violators. And violators are plentiful, especially around the holidays.

In February, my company, Topia, found in its annual Adapt survey that 28% of employees worked outside their home state or country during the first year of the pandemic, but only one-third reported those days to HR. For an entire year or more, employees traveled around, leaving a breadcrumb trail for auditors, who justify their jobs by enforcing tax laws. 

HR could lay down the law first: No working from anywhere you’re not approved to work. That, however, is likely to backfire. 

Remote Workers Unite

In 2021, employers have stumbled over each other to offer the most flexible remote work arrangements, with many promising “work from anywhere” (with many caveats). Employers that demanded a return to the office found themselves backtracking or postponing the return date in response to the outcry from employees. Once a company OKs remote work—and there is no discernible effect on output—then it transcends from a privilege to a right. With the Great Resignation ongoing, no employer wants to risk taking away a right. Rather, most want to say “yes” to every remote work request and for good reason.

Almost half of remote workers tell Gallup they’d be extremely likely (31%) or likely (18%) to look for a new job if they lost the option of working from home. A stunning 49% of U.S. workers told Owl Labs, a provider of remote conferencing tech, that they would take up to a 5% pay cut to continue in a remote job at least part of the time. Denying employees the right to work on their alleged “vacation” or work-play trip would not poll well. 

Frankly, most employers use definitions of “remote work” and “work from home” that are too ambiguous to hold any red tape in place. Is “remote work” only permitted in one’s legal domicile or nearby coffee shops and coworking spaces, too (and what if they’re across a city line)? What if “home” is temporarily a VRBO or an Airbnb inhabited from December 20 to January 20? 

Employees who don’t feel accommodated—or don’t believe the organization is honoring its own promises—can rally other remote employees to their side against big, bad HR and payroll. Or, they can find a new job easily in this talent-starved market.

Straightforward Solutions

Holiday vacations have been planned, and work will happen wherever employees choose to do it. While you can’t fix all your compliance issues between now and Christmas, you can take meaningful steps to mitigate remote work compliance risks moving into 2022. These longer-term solutions include the following:

  1. Define “remote work” for your organization. Be clear on how your remote work or hybrid policy functions. For example, do you require employees to have a work permit in whichever country they do remote work? Are they restricted to countries where your organization has a legal entity? If you have a hybrid policy requiring, say, 2 days per week in the office, under what conditions would you allow exceptions for extended work-leisure trips? Employees will find whatever loopholes you leave to be tested.
  2. Document where employees work. In Topia’s Adapt survey, by far the most surprising finding was this: 94% of employees would be comfortable with an employer tracking their location at the country, state, and city level. That scale of tracking would enable their employer to manage compliance around tax and immigration laws in practically any jurisdiction. Tracking isn’t “creepy” to employees if it is done responsibly and for a practical reason—like letting them work for a month on a tropical island throughout January.
  3. Look for hidden compliance risks. Sometimes, we don’t spot a compliance risk until it’s too late. For example, Europe’s Schengen area countries allow people from the United Kingdom (and a number of other countries) to spend up to 90 days there during a 180-day period. Whether they visit the Schengen area for leisure or work, the days count toward the 180-day limit. Hence, there’s a delayed risk: The employee who takes a 2 ½-month work-play trip to the Dolomites would have just 2 weeks of business travel time remaining. That could become an issue. 

Eventually, national and state governments might reach accommodations that welcome remote workers without compliance risks. Numerous destinations have already introduced remote work visas. I wouldn’t hold your breath, though, for U.S. states like California and New York to make their tax systems less onerous or remote-friendly. Given that laws won’t change quickly enough to match employee desires, the best move is to create compliance processes that make “yes” the answer to remote work requests as often as (legally) possible.

Steve Black is the Chief Strategy Officer at Topia.