Home is where the office is – the reality of flexible working post-pandemic
By Jane O’Berg, Tax Director, Johnston Carmichael
As the UK workforce prepares for a return to office life after more than a year of working from home, global mobility is proving to be a hot topic. Employees are now realising flexibility is just as important as remuneration and organisations are becoming increasingly aware of the cost of having a distributed workforce.
With 97 percent of all office workers looking to maintain a work-from-home model, according to a recent survey by Nyenrode Business University, Open University and Moneypenny, an increase in flexible working requests appears inevitable.
Various companies are announcing new remote working policies – also badged as work from anywhere policies – whereby the immediate understanding of employees is that they can, actually, work from anywhere. However, take a closer look at the small print and you will see varying degrees of flexibility. Some companies are restricting the location of work to within the country of employment, while others are happy for employees to work from anywhere, accepting and managing the myriad of risks that this undoubtedly leads to.
Tax compliance risks have to be a consideration for both employer and employee when adopting more agile hybrid working arrangements, a lesson hard learned by those impacted by the complications of COVID travel restrictions since lockdown began last year.
Back in March 2020, there was an understandable rise in requests for remote working, especially from non-UK nationals living and working in the UK for UK based companies who wanted to go home to be with their families. Employers had staff dispersed in different countries for longer periods than originally anticipated, creating unexpected tax implications, with some companies still dealing with this hangover now.
The oil and gas sector was heavily affected by this. Tax and social security rules for offshore oil and gas workers have always been complicated and dependent upon a number of factors, including whose waters the individual is working in and the location of the employer. A lot of roles in this sector cannot be undertaken remotely which led to individuals being displaced and isolated unexpectedly for significant periods of time, resulting in a number of complications.
The sector faced organisational challenges to ensure operations could continue in a COVID safe environment; ensuring employee wellbeing was addressed, together with potential increases in tax compliance costs, at a time when they were also dealing with a fall in demand and price of their product. As we continue to navigate out of the pandemic, contingency plans should be implemented by the sector to address these issues which will undoubtedly continue to arise going forward.
While the pandemic has resulted in employees considering their working location, it’s also prompted employers to widen their talent pool. The growing tech industry is a great example of this, where UK based firms may be targeting specialists in the US or Europe – however this must be done with caution as overseas appointments can give rise to corporate and employment tax, social security, employment law and immigration consequences.
Aside from COVID driving the desire for more flexibility in the workplace, there have been other complex developments in global mobility in the last year which employers need to be aware of. Brexit has impacted business travel and it’s now not quite as easy to jump on a plane for a last-minute meeting in Europe. There are more legalities with potentially different documentation being required from an immigration perspective and companies should also be aware of the EU Posted Worker Directive.
The latest revision to the directive had to be transposed into national laws by last July, and as that was the only mandate, there are variations on how each EU country has adopted the rules and processes. Some countries have opted for a ‘belt and braces’ approach, applying the legislation to all workers entering their country for however short a period of time.
The result is that now, more than ever, companies need to ensure they have robust processes in place when they have globally mobile employees, in order to monitor and manage any risks and exposures resulting from their travel from compliance, financial and reputational perspectives.
Business travel into the UK has always been complex and this is set to continue when travel restrictions lift and the skies re-open. Even if an employee of the company’s sister office in France works in the UK for a couple of days a year, or a non-UK resident director of the company comes to the UK to attend a board meeting – all these trips could have UK tax consequences for UK employers and the individuals concerned.
Companies need to consider their processes for monitoring such travel and ensure that they are taking the required employer compliance actions. One action is to determine whether a short-term business visitor agreement would be appropriate for the business – a one off application to HMRC whereby certain compliance obligations are relaxed in respect of overseas employees who meet the criteria.
As with everything post-pandemic, the more flexible working landscape is going to take a bit of getting used to. The businesses best placed to deal with these new ways of working will be the ones who consider their risks and exposures and have a firm understanding of their global travel pattern, where their employees are based and where their talent pool is. These steps will help ensure companies are compliant with the authorities and remain attractive to current and potential employees.
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