How companies evaluate remote work requests
Remote work is a hot topic. In my last post, I wrote about how industry, risk aversion, and culture impact a company’s approach and receptiveness to employee remote work requests. Here, I’d like to share some insights into how companies make the call on whether or not to approve requests.
Most companies, regardless of size, evaluate remote work requests on a case-by-case basis. Since that is inherently time consuming and can yield uneven treatment, and because companies anticipate increased requests, we are seeing growing interest in formalizing the process or clearly outlining eligibility.
The 6 criteria that drive remote work request decisions
In case you are exploring or revisiting your remote work policy, here are the six main criteria companies evaluate when considering an employee request. Your company may have more or fewer points to consider.
1. Job Feasibility
The first is Job Feasibility. Each job has related tasks and tasks can have location conditions e.g. if you are a lab technician, you likely need lab access to complete your work. There are also team dynamics to consider. For example, if a manager leads a team serving clients in Dubai, and she requests to work remotely from Buenos Aires, the window of overlapping time is small which may impact cohesiveness, turnaround time, or overall team productivity.
2. Permanent Establishment
The second element is evaluating the risk for Permanent Establishment resulting in additional corporate tax. This involves looking at the requestor’s level and job scope but also the country’s legislation. It’s in the company’s best interest to avoid permanent establishment issues, so requests that risk triggering it are typically denied.
3. Income Tax
The third criterion is Income Tax. It’s not always a deal breaker, but the employee may incur incremental income tax in multiple tax jurisdictions. Companies expect employees to bear those costs, but this is part of the assessment to help the company understand reporting requirements and decide whether they can or want to support any additional requirements. Many companies share the anticipated impact with the requesting employee, so all parties are equally informed.
4. Social Security
The fourth consideration is Social Security. If the remote and work locations are within the same country this is a non-issue. But, if the remote work arrangement involves two countries – especially ones without a totalization agreement, this becomes a consideration. Incremental employer contributions could result in a request denial. Most companies notify the requesting employee if benefit disruption is possible.
5. Health Insurance
Health Insurance is the fifth concern. Employers generally want to ensure their workforce has health insurance. However, local requirements and available options vary widely, particularly for cross-border remote work scenarios. Companies are wise to evaluate the options and potential incremental costs (to the company or employee) before approving a request.
6. Payroll Capability
Lastly, Payroll Capability is evaluated. When an entity already exists in the remote work location, an approval is easier to grant. However, if a new payroll must be established or an existing one amended, this can result in a declined request.
Resources for making the best decisions
We are happy to share additional insights from recent corporate interviews we’ve conducted on this topic – contact us for a one-page summary of interview highlights.
We continue tracking remote work trends and exploring related topics like virtual assignments – see our survey results here.
If you’re interested in exploring more remote work content, click below to visit our resource center that contains white papers, benchmarks, webinars, and much more to help inform your decisions around remote work policy:
Remote Work in 2020: Tax and other considerations [Download]
Listen | Partner | Deliver. For over 60 years, AIRINC has helped clients with the right data, cutting-edge technology, and thought-leading advice needed to effectively deploy talent worldwide. Our industry expertise, solutions, and service enable us to effectively partner with clients to navigate the complexity of today’s global mobility programs. As the market continues to evolve, AIRINC seeks innovative ways to help clients address new workforce globalization challenges, including mobility program assessment metrics and cross-border talent mobility strategy. Our approach is designed with your success in mind. With an understanding of your goals and objectives, we ensure you achieve them. Headquartered in Cambridge, MA, USA, AIRINC has full-service offices in Brussels, London, and Hong Kong. Learn more by clicking here.
2020 Balancing Cost in Global Mobility [Download]