Remote Workers: The Modern Mobile Employee Comes With Mobility Tax Compliance Challenges

Expanded remote work populations add complexity to tax compliance. The concept of the mobile employee is not a new one for companies and their HR/Payroll/Stock plan administration. Yet, movement to broad based remote workforces during the COVID-19 pandemic raises new challenges that require employers to adapt their thinking and practices around mobility.

Does anyone remember when the concept of a “mobile” employee was an expatriate that the company tasked to work in another jurisdiction? While tax management for expat scenarios may have been more involved, the company was fully aware of their expat population and able to evaluate tax withholdings accordingly.

Fast forward to 2021 and every employee could be a mobile employee in some organizations. This presents a new challenge: the employee who is moving about while the company is completely unaware. When crossing state or country lines is involved, this could add up to tax compliance failures for the employer that aren’t even on the radar.

A recent 2021 survey (the 2021 Adapt or Lose the War for Talent Survey conducted on behalf of Topia, a talent mobility software company) reported that 28% of employees have worked in locations outside of their home state or country since the pandemic began. Yet, only one-third of these employees reported all of their mobile working days to their employer. Topia highlights a big blind spot for companies: employers with remote workforces may be failing to properly withhold payroll taxes without even realizing it.
 

 

28% of employees have worked in locations outside of their home state or country since the pandemic began. Yet, only one-third of these employees reported all of their mobile working days to their employer.

Despite the enthusiasm for remote work, enterprises are unprepared from a compliance standpoint. A significant portion of employees fail to report when they work outside their home state or country, even though the majority know there are tax and immigration implications of doing so.

• 93% of HR professionals are confident they know where the majority of their employees are working, and 78% are confident their employees self-report when working in another state or country.

• In reality, only 33% of employees report all days worked outside their home jurisdiction, and 24% reported none at all, even though 61% are aware of the tax compliance implications.

The Need to Adapt Mobility Tracking

The remote workforce is not going away anytime soon. While some companies are delaying a return to the office for workers, others have determined that remote work will continue permanently or indefinitely. Location seems to matter less and less, and employees agree. 91% of employees agree that they should be able to work from whatever location they want so long as they get their work done.

As such, adaptations in employee mobility tracking need to occur to tax compliance processes that match up to the realities of the current workforce.

The good news: most employees report comfort with employer tracking of their location. Topia reports that “Perhaps contrary to popular opinion, employees are very willing for their employer to track working location."

• 94% of employees are comfortable with an employer tracking their location at the country, state, and city level.

• Even 81% would be comfortable with location tracking down to the street level.

What’s Next in Tracking Employee Location and Mobility for Stock Plan Transactions?

While organizations as a whole grapple with their longer-term strategy for managing a remote workforce, tax compliance still needs to happen now. So, what is a stock plan administrator to do to ensure proper withholding and reporting? Here are some suggestions:

• Verify employee location more frequently. Leverage your stock plan communications to remind employees that proper tax withholding will depend on reporting their location and movements.

• Strengthen internal communications and teamwork with HR and Payroll. These departments are as much a stakeholder in employee location and compliance as the Stock Administration function. Now is the time to grow those inter-departmental relationships and work together to form new strategies.

• Consider adapting a policy that clarifies remote work expectations. With such a rapid shift to remote work over the past year, many employers have not laid out expectations about what they expect from their remote workers. While reminders and requests for information may help to up mobility tracking, companies should consider a more formal policy that communicates location expectations and requires the employee to inform the company of their movements.  

Proper tracking of mobile employees should rank among top 2021 priorities for companies with remote workers. The first steps are to ensure the company knows where the employee is and withhold accordingly. This is necessary to reduce tax compliance failures and mitigate risk of adverse action from the tax authorities.