The pandemic changed the working environment forever, but as restrictions ease, employees are starting to return to work. For example, Salesforce recently announced the reopening of its San Francisco office.
One thing is certain though — we can get work done from anywhere, and this has affected employee expectations. Our recent Adapt survey found that 93% of employees say it is very or somewhat important to have a flexible work arrangement. Will companies force employees back to the office? HR will have to shape policies around where employees can work from. Here are four challenges that HR teams must consider from a risk and compliance angle.
Tax compliance
Enabling employees to work wherever they wish raises new challenges for HR teams. They need to know where their employees are working and understand the compliance implications. In the UK, Brexit has complicated the situation further. HR teams need a better awareness of both new and existing legislation. That includes various tax laws that organisations must comply with.
For example, the concept of a permanent establishment in a country might create a taxable presence in that country. The European Posted Workers Directive went into effect last year and adds new requirements before employees travel and already, it is an area where KPMG has noted an increase in non-compliance. Now imagine the challenge as travel volumes start to pick up in the second half of the year.
Do you know where your employees are? 78% of HR teams are confident that employees report when they work in other locations, but worryingly only 33% of employees reported all days worked outside their home jurisdiction. Luckily, 94% of respondents were comfortable with an employer tracking their location down to a city level.
It is not just about the corporate tax requirements. HR needs an awareness of the impact on employees and educate them accordingly. In the US, there’s a case in front of the US Supreme Court between states around who gets to take the state-level income tax for remote workers no longer commuting across state borders. There are similar issues with people working in India and even moving between different Cantons in Switzerland.
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People challenges
Choosing a location to work in is no longer as simple as before. According to our study, 76% of companies believe finding the right talent is more important than where they are located. 91% of employees expect to work from wherever they want. However nearly 40% of employees report being unaware of the potential tax and compliance implications of working in another state or country.
Recruitment
If employees can work anywhere, where should HR teams look to hire workers from? While employing someone in a distant city at a cheaper rate is attractive from a payroll point of view, there are complications. Google announced that it might adjust salaries for employees working remotely to their local living costs. Companies will need to consider these decisions carefully to avoid discrimination cases. Unions and works councils may also have a say in such changes.
Duty of care is harder
The duty of care responsibility is complex. This is partly due to a new set of challenge stressors. You probably have policies and processes which exist but haven’t been redefined for this new world of work. The question of work-life balance, zoom fatigue, and mental health raise questions about how you keep close to employees when it’s a bit harder to keep a finger on the pulse. It is not just mental health. Do employees have the right working space? HR needs to ensure employees are working safely at home with the right equipment.
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New challenges of travel
As international travel restarts, organisations must be cognisant of an individual’s circumstance. Are they vaccinated and/or vulnerable? How far do you allow personal preference for travel to impact the performance of their role? Policies need redefining and employment contracts updating for new, if not existing, employees.
HR needs an awareness of the latest travel advice for different countries. What paperwork is needed? Is a Covid passport required? Do they include vaccination and proof of testing?
After Brexit, UK employees can spend no more than 90 days out of any 180 days without an appropriate visa in Schengen area countries, including personal travel and weekends. Enforcement has started, with a group of British ex-pats refused entry to Spain. This may also signal the end of the wider relaxation of immigration and tax compliance seen since the pandemic started.
With more people working remotely, there is a greater burden on HR teams. Road warriors may travel less, but homeworkers may need to travel more often, creating a new class of infrequent business traveller.
Data and technology challenges
The fundamental objective of HR is to recruit, develop, retain and engage the organisation’s best talent. They also need to ensure the organisation is compliant with local laws. To achieve that, HR teams need up-to-date and accurate data about their employees and regulations. The Topia survey highlighted that only 40% of HR professionals currently have the right data and decision-making insights.
That shortfall needs addressing. Many organisations still have very fragmented HR systems. They may have Workday, but gaps in functionality must be filled with best-in-class solutions. Remote working also makes HR more complex. Existing processes, technology, and tools were fundamentally built and designed for people in the office most of the time. Moving to the cloud is not enough — the technology must be geared for new ways of working.
Solving the challenges
The shift to remote work creates a requirement for HR to have a stronger connection to the Finance and Compliance teams.
- Where are people working? Can they and should they be working there?
- Do you have processes to track those working elsewhere?
- Where do you have compliance risk, and how can you mitigate it?
- What is our location strategy, and how do we balance talent needs with corporate risk?
HR, finance and compliance need to be joined at the hip to simultaneously execute cost, compliance, and talent strategies.
The shift to hybrid working has created new gaps, especially around the visibility of where employees work and compliance with regulatory requirements. HR needs help filling in the gap by providing the data and information HR teams need to ensure compliance. The priority is achieving a single source of the truth for this globally mobile population.
