Ensuring Global Tax Compliance: Navigating the Duty of Care for Your Remote Employees

The rise of remote work has introduced additional tax compliance complexities for employees and businesses.

Why does duty of care training need an update in the age of remote work?

Most business leaders realize remote and hybrid work have significantly transformed the way organizations operate. However, amid this shift, one critical aspect that often goes unnoticed is the need to address the duty of care training and safety measures concerning remote workers’ tax compliance obligations.

The rise of remote work has introduced additional complexities in compliance responsibilities, including tax reporting, withholding obligations, and potential risks for employees and businesses. Failure to recognize and adequately address these duty of care and compliance challenges can expose employers to employee safety threats, regulatory violations, financial penalties, and long-term damage to their reputation.

This article aims to highlight the importance of updating duty of care training for remote work and provides insights into how companies can proactively prepare to safeguard their employees in flexible work environments.

Why Remote Work Complicates Duty of Care and Compliance

Remote work has surged recently, and it isn’t likely to fade anytime soon. According to a survey conducted by McKinsey in spring 2022, 58 percent of Americans report working remotely at least one day per week. What’s more, the same report suggests remote work could continue to climb—with 87 percent saying they jump on the chance to work flexibly when it’s offered to them.

However, most companies aren’t setting up the training, processes, or other precautions necessary to combat the added tax risks that remote work creates. Too often, remote employees will work across international borders and state lines—and employers have no way of keeping track of their whereabouts.

Here are a few reasons this type of untethered remote work complicates duty of care and compliance plans:

  • Emergencies and natural disasters: If employers don’t know where their employees are, it’s difficult—if not impossible—to help keep them safe. That means workers could be hung out to dry if natural disasters hit, political unrest erupts, or other emergencies pop up.
  • Lost benefits: When companies don’t know their employees’ locations, it’s difficult to provide adequate benefits. For instance, if an employee decides to move to a new state without updating the company, they may end up outside coverage zones for healthcare benefits. If they’re traveling internationally without an international healthcare plan, their risk of being stuck with a massive bill for medical care increases significantly.
  • Tax noncompliance: While not a direct threat to employee health, unregulated remote work puts employees in danger of tax violations. Tax withholding obligations can shift depending on the jurisdiction. Employees may also end up owing social security or other country-specific taxes by working outside of their Home country. It’s easy for companies and employees to set off tax violations in these situations or end up on the hook for taxes in multiple jurisdictions.

How to Improve Duty of Care Protections for Remote Workforces

Companies can protect against the rise in remote work risks by updating training, policies, and company best practices. Here’s how HR teams and corporate leaders can keep employees—and the company—safer in this age of increased remote work:

Start tracking employee locations.

Companies need to know where workers are to keep employees safe, compliant, and eligible for benefits. Different states, countries, and jurisdictions have various laws and risks. That’s why the first step in protecting remote employees is tracking their whereabouts.

The sooner you can start tracking employee locations, the better. In an all-too-common nightmare scenario, an employer will find out an employee has moved to a new state or country long after they’ve been working in the new location. Sometimes that leaves the company sorting through tax messes, incurring fines, or paying taxes across multiple locations. In at least one case, a company may end up paying an estimated $500,000 after a remote worker failed to disclose their work history in California and Texas.

The best way to track employees will depend on your organization’s culture, resources, and other factors. Still, whether it’s through location check-ins, software, or another tracking solution, it’s important that employees frequently let employers know when they’re on the move—and whether they’re working in a location that fits the company’s policies.

Refresh your remote work and travel policies.

The pandemic forced companies to adopt remote work options in a hurry. Unfortunately, many of those companies haven’t updated their corporate travel policies to account for remote work. Although remote work policies vary from one company to the next, there are a few things to make sure you include in your updated remote work policies:

  • Definitions of different types of work that your company considers remote or hybrid
  • A clear approval process that lays out where employees can and can’t work
  • How and how often your company expects employees to report their location

Build cross-departmental processes.

HR may be in charge of duty of care, but the responsibility for monitoring remote work often spreads across several departments. For instance, if employees work internationally, you may need input from immigration, tax professionals, corporate tax specialists, payroll, or other departments to ensure they’re protected. To craft processes that protect against the most potential hazards possible, be sure to gather input from multiple departments when you design your remote work processes.

Proactive Companies Can Keep Remote Workers Safe

Even though remote and hybrid work may disrupt a company’s duty of care plans, it’s possible to map out training, policies, and procedures that keep employees safe. Company leaders that adopt a proactive stance toward duty of care can now help protect both employees and the organization—even as the nature of work continues to shift.

Jennifer Stein
Jennifer Stein is the Managing Director of Global Tax Network. Stein has more than 25 years of experience in expat and foreign national tax preparation and consulting. She joined Global Tax Network in 2011 and serves as managing director. While clients' projects may look similar on paper, she understands that every employee’s situation is unique. She coaches clients to understand the complexities of sending employees across borders and helps them work through the many requirements of home and host reporting.