2021 may be the year that organizations voluntarily adopt more permanent remote work and flexible working arrangements vs. being forced to by a global pandemic. With COVID-19 vaccines starting to roll-out globally, employees are starting to think about an eventual return to the office, but will work-life go back to the way we knew it? As a Finance leader, you may be excited or worried about the impact these changes will have on your bottom line. Here are three tips as your organization crafts remote and flexible work policies.
1. Understand how remote work impacts your tax footprint — If done right it can offer a good deal of savings. But if left unchecked, work anywhere policies could lead to major compliance headaches. Many cities such as New York, San Francisco, Los Angeles, Seattle, and others have local taxes based on where employees are physically located. If employees are working outside of those cities, there’s the opportunity for real tax savings. On the other hand, if an employee decides to uproot from their home in the Bay Area and say work for a few months in France, you could find yourself in a position where your employee may have inadvertently created a permanent establishment in Europe, opening you up to a whole slew of new taxes and regulations. Putting new policies in place, backed by technology to enforce them will be important.
2. Prepare for audits — They are on the rise and are only likely to increase as budget shortfalls continue to grow at city, state, and country levels. Expect that local and national jurisdictions will make all attempts to capture tax revenue. You need to be prepared with auditable data to defend your tax positions and that is likely to mean being able to prove where work is being done.
3. Expect hybrid work models to become the norm— While remote work is here to stay for some, we can’t get too excited about the savings that can come from a reduction in facilities costs. Some employees will want to continue working from home nearly every day. Others will want to be in the office on most days. Most will likely fall somewhere in between. It’s far too early to completely write off the importance of having an actual office for people to go to and work together in person. Plan for more fluid working models with your CHRO, and build a facilities plan to support it.
As a CFO, guiding an organization through a transition to remote work is more than just identifying opportunities for hard dollar savings. It’s also about ensuring that the organization is operating in a compliant manner and that the business has the right structure to get work done. Partnering with your CHRO counterpart will be important to make sure employees know why certain rules and tools are in place – for protecting the business and themselves.
