You’ve Lost the Remote…
…when work-from-home becomes work from anywhere.
Did your “remote” workforce make the change from “work from home” to work from “anywhere” and, more importantly, did you know? Like all things COVID related, remote work has not been the easiest thing to navigate. Between creating or revamping a ‘Remote Work Policy’, to doling out equipment, adjustments have been made. And while we probably contorted ourselves, and businesses, into moves we didn’t even know we had, just like hitting the old fitness routine for the first time in ages, there are consequences to these moves.
Since the onset of the pandemic, 28% of employees have worked outside their home state or country with only one-third of those reporting these changes to human resources according to a recent survey. The 2021 Adapt Survey, conducted on behalf of Topia, a talent mobility software company, found that potential employees place flexibility for remote work as their second most important attribute when evaluating a potential employer (behind only high pay). However, a significant portion of those working remotely fail to report when they work outside of their home state or country as shown above, opening a tax compliance door that resembles pandora’s box. It looks something like this:
Employer offers Remote Work benefit-
· Assumption-
- 93% of HR professionals are confident that they know where a majority of their employees are working.
- 78% of these HR professionals are confident that their employees are reporting if and when they work outside of their home state or country.
· Reality-
- Only 33% of employees report all days worked outside their home jurisdiction.
- 24% do not report any change in location at all.
- And a whopping 61% state they are aware of the tax compliance implications.
- HR professionals seem to have taken on the ‘doctors are the worst patients’ adage as well considering 42% likely worked in a different state and failed to report this change in location as well.
Tax Implications
Many U.S. States have asserted that an employee working remotely within a different state gives the employer “nexus” with the state for tax purposes. Nexus is defined as a connection or series of connections, meaning companies may have unknowingly created a nexus in jurisdictions or locations that they previously had no presence which may trigger registration requirements, statutory laws and you guessed it, tax implications that may come in the form of unemployment insurance that should be paid and state taxes that may need to be withheld.
States have varied in their approach; many have decided that nexus by way of the pandemic alone will not initiate tax implications. However, not all states have confirmed this. Kentucky, for example, will evaluate on a case-by-case basis. Additionally, the duration of pandemic related tax relief varies by state. In June of 2020, the Remote and Mobile Worker Relief Act was introduced to assist in advocating to simplify and unify employer taxes, however to date, this act has not been approved so it is important to review state regulation.
Now What?
Review your Remote Work Policies, are they up to par? A great way to address the reporting issue is to include it in the policy and require that employees report time that will be spent working in a different state or country. A surprising number, 94%, of employees stated that they were comfortable with their employer tracking their location at the country, state and city level and 81% stated they were comfortable with that tracking as granular as street level.
We continue to live in an evolving and ever-changing landscape, but one thing that employees and employers seem to agree on is that location is becoming less important from an efficiency standpoint. Teams have found a way to stay connected and working ‘together’ from different states, or even countries, has become feasible.
This is not to say that all work can be done remotely, in fact year over year, 59% of those polled agree that digital technology cannot replace having a team all together in the same location. So, whatever your current “office” looks like, we have seen that we can make it work, we just need to know where to send the taxes.
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