Digital Nomads, Global Mobility Represent Changing Workforce

Global mobility initiatives reflect a changing workforce and changing attitudes towards remote work, two payroll professionals said May 17.

Fidelma McGuirk, founder and CEO of Payslip, divided the modern workforce into categories of employees, including expatriates, digital nomads, contractors, employees of record — those who work for employers of record — as well as temporary and gig workers.

The boundaries between categories are blurred and language has also changed, replacing the traditional terminology of “home and host countries” for expatriate assignments with remote workers or digital nomads, McGuirk said. Mixed workforces with different types of workers mean more tax and payroll reporting requirements, she said.

McGuirk defined digital nomads as workers who are “location independent,” use technology to perform their work, have a nomadic lifestyle, and, importantly, are working from a location of their choice. She cited statistics saying that 51% of the 35 million digital nomads are American, 46% are self-employed, and 35% are employees. The two top locations that digital nomads work from are Thailand and Mexico.

As regards employers of record, McGuirk said they can be used to “access talent quickly” but require more management and that employees can also start working quickly but “it’s always a question of how close they can feel to the culture of the company for which they’re working.”

McGuirk recommended asking what entity the employer of record will use to hire employees and what teams will be responsible for payroll. Nathan North, director of strategic initiatives for PayrollOrg, suggested asking for the official registered name of the entity, and added that in some countries the name may be searchable or counsel may be able to find it.

North and McGuirk spoke at the 41st Payroll Congress in Aurora, Colorado.

Managing Mobile Employees

North mentioned that he has seen secondment letters say that the employee cannot leave a specific area and work somewhere else without notifying the employer, something he said was not a concern before the Covid-19 pandemic. With more technology geared towards keeping track of remote workers, “we have the data to be able to say, ‘wait a second, something’s not looking right,’” he said.

Legislative requirements for taxes, labor, and social insurance are important to monitor, North said. “Sometimes we miss, what are the labor laws there, especially if it’s a new country? What’s going to be applicable to that expat? Are they going to be able to participate in social insurance?” North asked.

North also mentioned the strategy of tax equalization, where the employer ensures that an assignee does not pay any more or less tax than they would at home.

Taxation of equity that accrues during an assignment may also affect the employee, North said, mentioning strategies to avoid that such as granting equity when the employee returns.

North mentioned support networks as another important consideration. “It’s very important to keep the family engaged. There’s a high divorce rate of folks that are sent on assignment, because we care so much about the employee that sometimes we forget about the spouse, the children,” he said. “Where are they going to go to school, what’s the education like there?” also adding that employees are now being sent to areas that may not have international schools.

Governance and oversight is “really important with global mobility. This will save you from a lot of grief,” North said, suggesting having the legal team come up with a governance model based on information provided by payroll and HR.

Initiatives to improve assignees’ experiences can include providing points of contact in payroll and human resources, and in a global mobility team if there is one, providing counseling such as tax and financial advisors, and implementing employee self-service where possible, North said.

North said that the continued increase of mobile or remote workers may increase the number of audits and suggested self-auditing or hiring a third-party consultant. He also mentioned his belief that earned wage access, while not yet prevalent internationally, will affect global mobility “I believe in a very, very, positive way.”