Taxes can be intimidating, time-consuming, and confusing for any employee. But tax complexities shoot through the roof for international employees, business travelers, and remote workers.
If mobile and remote employees don’t understand their tax obligations, they risk violating laws, losing compensation, damaging the company’s reputation, and more. However, HR professionals can reduce this risk and provide an exceptional employee experience by focusing on one thing: communication.
Here are the reasons taxes are so tricky for mobile and remote employees, along with the secrets to communicating tax matters effectively.
Why HR Needs to Communicate Tax Matters to Mobile and Remote Employees
Remote and mobile work remains strong, and it isn’t showing signs of letting up anytime soon. According to an American Opportunity Survey report, 58 percent of employees now have some type of access to remote work options.
However, as more and more members of the workforce are completing work abroad and from remote locations, taxes are becoming more complicated—and the risk of tax violations is rising. Here are some risks remote and mobile employees could face:
Corporate Tax Risk
When employees work for extended periods of time within a jurisdiction, they may create a taxable corporate presence in that area. Permanent establishment rules can vary widely from one region to the next. If employees don’t understand this risk, they may end up working in an area long enough or perform activities that trigger extra corporate tax obligations and rack up a tax bill for the organization.
Equity Compensation
Equity compensation can cause extra tax complications for remote or mobile employees because tax and withholding obligations can shift depending on when those awards mature. To stay tax compliant, the organization needs to know where an employee has been working, how long they’ve worked there, and what specific tax laws apply to equity compensation in those regions.
Loss of Compensation
Tax obligations can change from one jurisdiction to the next, so employees could be caught off guard if their tax bill goes up. The same goes for other benefits. For instance, they may lose healthcare benefits in some countries or regions. Ultimately, any unexpected losses in compensation can lead to frustration or turnover.
Dual Taxation
Mobile employees who move may be on the hook for taxes in multiple jurisdictions. Often, an employee will work from a new state or country without informing their employer. As a result, they may not realize their tax obligations, and they could put the company in a risky situation. In one case, a CEO says his company was asked to pay an unexpected sum of $30,000 in taxes and fees after a remote employee split time between two U.S. states.
Social Security Issues
Remote or mobile employees who work from a country outside their Home country may end up owing social security in their remote work area. Although there are social security arrangements that countries agree on, these rules don’t always apply to remote work scenarios. That means an employee may need to pay social security taxes in a different country than they expect.
Communication Tips for Remote Workers & International Travelers
HR and business leaders can help prevent many of the tax and compliance nightmares that spring out of remote work and business travel with one solution: better communication. Here are a few communication tips to protect your remote workers and business travelers from tax pitfalls:
- Keep track of employee whereabouts. It’s impossible to know what an employee’s tax obligations are if you don’t know where they’re working. That’s why it’s important to keep track of remote and mobile employees’ work locations. That may mean having them complete a travel/work calendar with their locations, asking them to complete regular location check-ins, or simply asking them routinely about their travel plans.
- Schedule regular one-on-one meetings. These person-to-person meetings give employees a chance to ask questions or bring up concerns about taxes. It’s also a good way for managers to keep track of where their remote employees are working and how long they’re planning to remain in the location.
- Schedule biweekly calls with large groups. These calls will help international employees stay engaged and connected with their teams. It also helps international employees feel supported in unfamiliar environments.
- Connect international employees with your local expert. If you have country experts for the area where an international employee is deployed, connect them with your employee. That way, international employees can get country-specific advice or clarification when tax or compensation concerns arise.
Communications for Employees on International Assignment
It’s generally easier to manage taxes for employees on official international assignments. However, anytime an employee works abroad, their tax situation could become more complicated. If they don’t understand their tax obligations or who they can turn to for help, they could violate laws, lose compensation, or become overwhelmed. That’s why it’s important to communicate with employees at every stage of an assignment.
Here’s how to communicate with employees throughout an international assignment:
Pre-Assignment
Before the assignment begins, take time to set expectations. For example, let employees know how often they should connect with their supervisor, mentor, or colleagues in their Home location.
It’s also a good idea to schedule regular check-ins for the assignment. This will make it easier to keep the employee updated on tax information or resolve concerns that surface during the assignment.
During the Assignment
During an international assignment, do everything you can to build connections between the employee, the Home country company, and their colleagues. Keeping a connection to the Home country company and colleagues can facilitate repatriation and reduce the risk of turnover when the assignment is over.
Before the End of the Assignment
Before the end of an assignment, be sure to plan out the next role or project for the employee and communicate the details. This will help them prepare mentally and financially for the next stage and can help them make strategic tax decisions. It also helps show them their international experience is valuable, and that can keep them from taking their skills elsewhere when the assignment is over.
Opening communications with remote and international employees is a simple way to keep them engaged, help them feel supported, and steer them through tax issues. And the sooner you start communicating, the better. By developing a communications plan now, HR leaders can avoid costly tax violations in the future.
Jen Stein has more than 25 years of experience in expat and foreign national tax preparation and consulting. She joined GTN in 2011 and serves as managing director based in Chicago. While clients’ projects may look similar on paper, she understands that every employee situation is unique. She coaches clients to understand the complexities of sending employees across borders and helps them work through the many requirements of Home and Host reporting.