The Future – “Work from Anywhere” policies

Flexible working arrangements have taken root over the past 12 months and have fundamentally moved the dial for many employers and employees in terms of where the workforce may choose to be based. As pandemic-related restrictions start to lift, many employers have already announced plans for hybrid working arrangements, under which an employee’s working time may be split between home and the office. Others are taking a step further and formalising what have become known as “Work from Anywhere” policies, which in theory could provide employees with the opportunity to spend some of their time working from anywhere in the world. Some of the potential benefits to such flexibility might include reduced office costs and a more attractive employee value proposition, though there are also a number of risks (both tax and otherwise) for employers to navigate.

Depending on where in the world an employee works, and the nature of the work carried out, there is the potential that their presence could create a permanent establishment for their employer in that country. Where that occurs, the company could be exposed to corporation tax in that country, as well as payroll withholding obligations and other regulatory requirements.

From the employee’s perspective, working from anywhere may also necessitate personal income tax filing obligations, a review of their social security position and appropriate immigration paperwork to ensure that they may legally work in that country. Whilst there have been some relaxations agreed by countries and supra-national bodies such as the OECD, which have supported cross-border flexible working necessitated by the pandemic, as some of these measures are pared back, employers and employees will need to give careful thought to the extent of their “Work from Anywhere” policies and ensure that controls are included in the review and approvals process, which are able to manage the associated tax & legal risks accordingly. 

Action for employers: Taking all of the above into account, it is necessary for employers to understand the risks and potential exposure associated with future ways of working and then to set a framework and policy which helps achieve these objectives, whilst still managing the risks. Governance and monitoring of such policies will also be a key concern. 

• What is your future of work strategy post COVID-19? Many organisations globally are rethinking their workforce strategies. Employees now want to work in more flexible ways and not to be bound by where their employer’s offices are located.
• What changes do you plan to make to your remote working policies? For example, does your policy address location and if it’s permitted to work outside of the employee’s employment country or state? Without this, you may face tax and legal risks.
• Have you modelled the cost implications of the intended Work from Anywhere scenarios? Different scenarios carry different risks and associated costs.
  • Example 1: Immigration exposure can be reduced if the employees work in the countries where they’re a national.
  • Example 2: Corporate tax risk can be mitigated if the employees only work from locations where the organization has an existing PE.
• Who’s involved in your ‘new ways of working’ or ‘future of work’ strategy design? As this issue impacts teams across HR, Tax, Compliance, Global Mobility and Finance, more and more companies are forming ‘working groups’. Do you have one already set up?
• Do you have a policy for how to manage cross-border remote work requests? Before COVID-19 hit, most companies did not have consistent policies or processes for managing remote work requests. So throughout 2020, they ended up spending huge amounts of time reviewing requests case-by-case. This resulted in inconsistencies in how employees were treated and increased exposure for the organisations. Robust policies and processes are needed to mitigate this risk.