I have encountered some interesting conversations over the last few weeks in all corners of the world: from the U.S., to Europe, to Bangalore, on to Hong Kong, and even Thailand. Across different industries, everyone seems to be talking about one thing: globalization of the workforce. This does not strictly refer to corporate expansion but also to individuals wishing to be able to work remotely from global locations.
There is an emerging trend and expectation that, with technology being what it is, an individual should be able to work in different places throughout the world and not just the company’s brick and mortar office. (And no, not just with millennials! With other workforce generations as well). Aires has seen increasing requests from our customers for guidance on this topic. For instance, how does one accommodate a top-tier employing wishing to work from the Bahamas or Myanmar? Many times, the employee requests remote locations to fulfill their idea of the best experience. The problem? Sometimes, they neglect to notify their company of the move.
“Stealth expats” (employees who move to another country and work remotely without informing their global mobility team) can create personal income tax and social security tax liabilities in addition to potential corporate tax exposure. To help mitigate this risk, we recommend periodic communications from global mobility or Human Resources to the entire employee population highlighting potential tax risks related to working remotely from another country. To put it simply, “don’t go until you get the go-ahead!”
So, what’s a leading innovative company to do? It seems the increasing expectation is that the Global Mobility/ Human Resources will have the answer and take care of it. The immediate considerations are along the lines of compliance and cost, while keeping in mind the need to attract, maintain, and develop the right talent for the business. In the past, it may have simple refusal to meet needs if not in policy, but today that doesn’t work with individual expectations and the heavy demands of the business to have the right talent in place. Aires spoke with Global Tax Network (GTN) to summarize the main needs for expanding your remote workforce. Here are some of our key takeaways, below.
- Use a partner in your supply chain locally or global mobility partner to employ and pay the person and provide immigration or work permit if necessary. Payroll considerations should be considered when establishing remote employment (e.g., home/host country split). Additionally, a back to back contract should be in place for total employment cost, plus any administration fees, and for the hire of services (employee). Some contracts may also include a desk and communications (e.g., phone, internet). Contractual items must include the notice period and cover all of the local labor law costs.
- Employ a company to set up a minimal corporate entity in conjunction with your Mobility provider to run payroll and immigration locally for the person (e.g., https://velocityglobal.com).
- Large corporations often put their “Balance Sheet Expatriates” onto a Global Contract based in a specific host country. They then employ and deploy these “Foreign Staff” wherever they need them. They are very often paid in home country or home /host split with a local Cost of Living Allowance in the host country; however, they are still subject to Immigration which is often done by a corporate subsidiary in the host country. It is worth noting that we recommend consulting a tax advisor to find the best country / contracts combination.
- Buy citizenship. In some countries, (especially tax havens like the Bahamas and British Virgin Islands), individuals may purchase citizenship. This way the company does not have to carry the burden and expenses of that lifestyle choice. The employee can live where they choose while still remain employed contractually.
- Many of the employees requesting flexible and remote work may have a local partner or spouse which may give another route into citizenship and the right to work. Payment to this employee could be made through a third party in country or via the corporate headquarters with previous considerations in mind.
With whichever options are used, it is important to keep in mind the costs associated while creating the offer package for hire. Remote work is not ideal for a company’s entire workforce, but these do provide solutions to successfully keep critical and strategic hires within the company when they require certain flexibilities. It is important to consult an expert and take these factors into consideration when expanding workforces worldwide.