Employers Adopt Remote Work Policies, Lag in Addressing Risks

Increasing numbers of employers have policies about remote work assignments while also lagging behind in addressing the risks that come with them, two consultants said May 7.

Patrick Landers and Abbas Mirza, a partner and senior manager at EY, respectively, spoke about compliance risks associated with remote work while also presenting some results from EY’s 2024 Mobility Reimagined survey, which was released April 19. The pair spoke at PayrollOrg’s 42nd Payroll Congress in Nashville.

Mirza broke down remote assignments into business travel, where an employee travels for company-approved business needs and does not change their tax residency; remote work, where an employee works outside their tax residence or normal workplace for an undefined period; and a hybrid approach where an employee alternately works outside their normal workplace and returns on a set schedule.

Landers said he had an expatriate assignment that turned into a hybrid system, moving to Bangalore, India, in 2017, returning to the US during the Covid-19 pandemic, and then commuting between the US and India for a few weeks at a time.

The Covid-19 pandemic saw a 54% decrease in global business travel spending that is expected to recover to prepandemic levels, Landers said citing the EY survey. He added that employers are having difficulty recruiting employees with the skills they require, citing declining birthrates in the Western world.

Further survey findings on remote work and global mobility were that 87% of knowledge workers think they should be able to work from home at least twice per week, while 82% of employers said they had “developed a policy/approach for hybrid mobility,” Landers said.

The survey found that 98% of employers used some method of tracking employees’ locations, either through employee disclosure, tracking, or software tools, Landers said. Travel data was the most common method, used by 43% of employers, and next most common were employee self-reporting, expense reports, or email or social media monitoring, he said.

Areas of Risk

Basic areas of focus for US remote work compliance include state tax and employment laws, Mirza said, while internationally tax residency, work permits, and tax treaties are also included. Employees working remotely somewhere where they do not have the right to work can lead to civil or criminal penalties for both the employee and employer, he said.

“Any one of these areas can create a potential issue for your organization,” Landers said, referring to immigration, employment taxes, individual income tax, social security, and any other regulations.

The survey found that employers acknowledged risks in the areas of data privacy, cybersecurity, tax compliance, and immigration or legal compliance much more often than they had formal policies in those areas, Landers said.

The percentage of responding employers that acknowledged those risks ranged from 78% to 84%, but the percentage that had policies about each category of risk ranged from 32% to 55%, Landers said.

Landers turned to tax compliance when providing examples of unintended consequences of remote work, such as sourcing of deferred compensation when an employee moves or that employees can cause their employers to become liable for state business or franchise taxes. In response to a question about whether countries tracked employee presence as well, Landers said it depends on the jurisdiction but “there’s definitely visibility to this in a way that there wasn’t a few years ago.”

International jurisdictions that the presenters cited as high-risk regarding employment taxes included Australia, Brazil, Colombia, the Netherlands, and Switzerland. Landers mentioned that Australia in particular has automated much of its entry processes, which he characterized as positive because of less human interaction but also potentially negative because automated algorithms can trigger follow-ups from officials.

In the US, the presenters cited New York and Connecticut as high-risk states for employment taxes, followed by California, Minnesota, and Ohio as “medium-high risk.”