Remote working is becoming increasingly popular as a permanent redesign of the way we work. For employees, the end of commuting and increased flexibility make it very appealing. Effective digital tools for virtual working are also enabling employers to make the most of the benefits it offers them: on top of increased productivity and a more agile workforce, the positive impact on employee wellbeing is also a return on investment.
Long term gains include lower overheads as office space is reduced - or, for hybrid workers, reimagined as collaborative spaces - and access to a larger talent pool. Our recent survey of 603 mid-size business showed that 88% of businesses are expecting a long term transition to a remote or hybrid working model.
Hybrid working brings together the advantages of working from home and going into an office - so that different people can work in different ways to achieve their goals.
With this fundamental change in how we work, employers who prepare for and manage the risks will benefit the most as the world ‘re-opens’. These include: withholding obligations; hybrid working expenses; and employee retention and wellbeing. We're leading the way on supporting employers to understand, identify and pro-actively manage these risks.
Withholding obligations
One of the attractions of remote working is the opportunity to base yourself anywhere in the world. In practice, however, that presents a potential risk for companies. If your people are regularly or for long periods, residing in a different country they may become subject to income tax and social security there. As an employer you may therefore be obliged to operate payroll withholding and register a payroll or complete other reporting obligations there. Furthermore, it is possible that social security may be due in the country your employee lives in, rather than the country they are employed in which can lead to unexpected employer social security charges and additional costs for your business.
Things to consider when assessing the risk of remote working arrangements
- How much time your employees spend working in a particular jurisdiction and how many employees you have working there remotely
- Their roles and responsibilities
- Are they in a country with which there is a double tax treaty and / or social security agreement?
- The nature of your business and risk appetite
- Do they have the right to work in the foreign jurisdiction?
- Do your insurance policies adequately cover remote working?
- Access to and use of data while overseas and GDPR
Consideration must be given to these risks and any potential downstream costs, in determining your policy for international remote working, but the most critical aspect is ensuring that your policies and procedures are clear and communicable to everyone.
Hybrid working expenses
There is always an element of risk in calculating tax relief on employees' expenses, but hybrid working is making it more complex. What are the risks of hybrid working expenses you need to know about?
Travel expenses
For hybrid workers one thing to be aware of is that travel expenses for employees commuting into an office that is your organisation's permanent place of work are still taxable. You also need to look into the tax specific status of benefits you pay to people working from home. You can pay up to £6 a month as a home-working allowance — employees can claim tax relief up to this limit if they do not receive this benefit. However, we've encountered organisations paying up to £20 a month for broadband, but there is no tax relief on this benefit because it's assumed that employees would pay for this service anyway.
Christmas gifts
As restrictions stopped traditional festive celebrations in December, many companies were keen to reward their people: by sending them gifts or vouchers. The cost of these little rewards, however, did add up — potentially amounting to an unexpectedly large tax liability. To continue with this model long term, you do need to think about the cost of this goodwill and, where possible, take advantage of any tax exemptions that may be available.
Company cars
One benefit that many employees decided that they didn't want during the original lockdown was their company car. Unfortunately, simply saying you no longer want a benefit doesn’t mean that the tax liability will disappear. HMRC stated that unless a person had been ordered to give the keys back, the car was still a benefit, even if the vehicle remained sitting on their driveway because it was still “available” to the employee.
