The future is remote – but are employers ready?

July 7, 2021 | David Daly 5 Mins read

In recent weeks, the much talked about hybrid working model-a mixture of remote working and working from home combined with time spent in the office-has been gathering momentum and featuring heavily in the international media.

Not long ago, the fintech giant Revolut revealed its plans to allow workers in their international workforce to work from a different location for up to 60 days a year. Now, tech giant Facebook has followed a similar path by enabling their employees, based in their Irish headquarters to work from abroad if they wish to do so.

This will appeal to the many foreign nationals who currently call Dublin home but have a strong desire to reconnect with family abroad and deliver their duties for Facebook in a remote environment from their home countries.  Facebook are a huge international organization and a major brand name, so there is a general feeling among many in the technology industry, that this is a clear indication of a remote work trend setting in, after the pandemic. Many other global technology companies are likely to follow a similar path and put in place similar remote working policies for the remote workers at their organizations.

As we mentioned in a previous article , the implications of this new hybrid model on HR policies, office space and global payroll delivery are significant. While it all sounds very positive from an employee perspective, as they get to work from anywhere they want for certain periods of the year, and also from a global employer perspective who appear flexible and innovative when it comes to the future of work, there needs to be a certain amount of consideration given to the inevitable administrative and legislative complications that could result from these groundbreaking decisions. In this article, we will ask if global employers are truly ready for this level of change with work arrangements?

Global payroll implications

It is quite likely that global payroll professionals and managers have not been involved enough in the decision-making process around adopting a hybrid working model for an international workforce. While payroll people may not inherently object to the model, they would certainly raise some very relevant points around the implications of the models for the delivery and management of global payroll.

Here are a few of the things they would recommend global employers consider:

Tax

More specifically tax residency- if an employee based in one country delivers their duties from another country, which country are they liable to pay tax in? It may all depend on the number of days they spend working outside the country of their employer-it will very likely vary from country to country and at present it, the tax liability is far from clear.

Contracts

How much time spent working abroad by an employee would trigger an automatic need for a localized contract of employment? This is a question payroll people would be asking. If such a localized contract of employment was to be put in place, then there would also be a requirement for local protections and local payroll laws to be followed-this is not as straightforward as it sounds and of course, it would require engaging with local expertise and lawmakers, and these services would cost money.

Corporate structures

Are global employers fully prepared to adjust and amend corporate structures so that they align with this new hybrid working model? Human resources policies and individual employment contracts would need to be amended to reflect this- at a large multinational or global enterprise with thousands of employees, this could be a huge amount of administrative burden.

EU legislation

Many global companies located in EU capital cities and countries also have an obligation to conform to EU law as well as the local law within that country. Companies need to be careful not to rush ahead, adapt and change their internal corporate structure and policies, only to find that these new policies are in direct conflict with any new EU legislation around labor laws. No such EU legislation has been finalized as yet, this is a very fluid situation and subject to major change-a more cautious ‘wait and see’ approach might be an advisable strategy for many corporations.

Local expertise

Global payroll professionals have always been advocates of the need for localized and specialized knowledge-there may be an increasing need for this, and it may be important to have somebody on the ground locally who can interpret and provide guidance on any local tax or employment laws that may be changing as a result of this new hybrid working model. Multinational companies who do not yet have deep local connections in the countries where their employees may soon be choosing to work in large numbers, need to consider their access to local expertise, as they will most certainly be needed in the coming months if they are pursuing a hybrid working model.

While many industry insiders agree that EU law has provided similar law structures and a level of uniformity across all EU member states, there are still implications on a practical level, as in situations like these, it tends to be the smaller or minor differences across countries that prove to be the sticking points and lead to the most administrative burden or policy challenges.

Global employers are therefore not advised to take it lightly or underestimate the amount of work involved to get all the paperwork correct in this new normal. A casual approach may lead to severe challenges further down the road. Significant planning will be required, and Payslip recommend that global employers begin initiating contact with local experts including law firms, accountancy practices and local payroll providers.

It is not simply a case of getting a clear handle on local employment law, social security and tax. These are the major ones for sure but as mentioned above, the less obvious ones can prove to be the biggest hurdles. An example of this would be something like parental leave, childcare or sick leave policies varying widely between countries in the EU.  Data protection, GDPR, and health & safety standards all come into play here too.

This is particularly relevant for non-enterprise sized organizations or small and medium sized businesses- there is a lot of work that needs to be done and a lot of money that needs to be spent to make sure that everything is accurate and aboveboard, and not subject to any future legal challenges.

It is unlikely that organizations working on tight or limited budgets would have anticipated the need to create budget for a scenario such as this- the implication being that a flexible hybrid working from anywhere style policy with remote work options may not be introduced across the board for office workers. This in turn, of course, could lead to staff retention issues with the talent pool as employees seek alternative employment with larger organizations who are capable of offering a far more attractive work life balance, including the opportunity to work from your country of origin.

Public announcements like the one Facebook has made recently in the press, tend to be good news stories and they will certainly be embraced with enthusiasm by the vast majority of employees at multinational companies. But as with all announcements that change the game significantly, the wise approach might not be just to rush straight in and look to overhaul human resources policies and global payroll practices that have been in place for several years. Risk analysis and lots of conversations need to take place to ensure that organizations get this right at the first time of asking. Make sure your global payroll professionals have a seat at the table is our advice!

 

For information on the Payslip Platform contact us today.

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Using Payslip, we can manage all our payrolls across nine in-country vendors on one platform. When the global Covid-19 pandemic arose, it was not an issue from a payroll perspective, and critically getting everyone paid. The Payslip platform enabled continuity for our international payroll service including the fast and seamless implementation of the Payslip Employment Self Service during this time.

Colin Smith

Payroll Manager, LogMeIn

Payslip as a technology platform has added a missing piece in our payroll set-up. As an international company with offices in 16 countries, it’s important to us that every employee at GetYourGuide has the same great experience when accessing their pay data.

At the same time, we work well with smaller local payroll providers, supporting us with direct local expertise in their countries. We were able to combine those two elements by placing the Payslip platform in the middle, to simplify reporting and communication with local providers, and to have one simple employee-facing solution across all locations.

Julian Fichter

Head of HR, GetYourGuide

With business and employee growth rates of above 50%, we rely on our vendors to deliver on time, every time. Payslip’s workflow automation, enables Phorest to manage our payroll provider process – data driven, real time and transparent. Payslip saves us time so we can focus on our business growth.

Ana Kelly

International Payroll Manager, Phorest

Payslip made our payroll process entirely transparent, which was something that we really need as we continue to grow and scale at such a rapid pace.

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HR Systems Lead, Wave