Have you tuned in to the latest episode of Own Up? Chris and John were joined by “walking encyclopedia”, tax expert, and partner and Rutlen Associates, Marlene Zobayan to discuss the ever-evolving challenges of remote working.
You can listen to the full episode of Navigating the Remote Workplace with Marlene Zobayan by clicking the icons or check out our key takeaways below.
As the world gets used to working from home, many organizations are not prepared, and remote working challenges are popping up daily. Issues from responsibility for home offices to data security are still being ironed out. An even greyer area is issues arising around where remote workers are taxed or how equity grants should be most effectively handled.
It’s a complex topic, and the episode touches on subjects as diverse as tax policy, labor law, managing workers in multiple legal jurisdictions and nations, and more.
As John and Chris set detailed questions to Marlene, it became apparent that the remote work phenomenon is one of the most transformational economic changes in more than a century.
Certainly, it ranks right up there with the development of automation, the assembly line, and the computer revolution. As millions of once office-bound employees head to offices in their homes, Marlene has this to say about the trend.
The pandemic put remote working into hyper-drive
Remote working is not new, but the COVID pandemic put in into hyper-drive. All the technology was already in place, but lockdown policies forced many companies to switch to remote work-forces in order to survive financially.
Now, the practice is commonplace. By the end of 2022, perhaps as many as one-third of all traditional office-type work will be performed by at-home, remote workers.
Tax isn’t the biggest issue
Contrary to popular conceptions, taxation issues are not the thorniest problems companies face with the remote work revolution. Data collection is one area that has posed unique challenges to corporations because when people are spread all over the globe, or even in multiple cities within a nation, collecting individual data is time-consuming, to say the least. Plus, there is no infrastructure in place to get the job done.
Computer-based systems are another problem area. For example, companies must figure out how to implement a robust payroll program for workers in perhaps dozens of different tax jurisdictions. It’s virtually impossible to roll out a remote work arrangement without bringing payroll and other systems up to speed.
Companies are starting from the top
One thing many companies are doing is implementing a gradual break-in of the remote setup. Namely, some large corporations are beginning at the top, where the bulk of compensation is, and getting CEOs and top managers onto a full-blown remote system.
Then, the company works, layer by layer, downward on the organizational chart, slowly building systems and infrastructure that can handle all the demands of decentralized operations.
New accounting guidance is needed as people migrate
In the U.S., there are already definitive accounting standards on the books about how cross-state taxation works for employees who move around throughout the year. So, there’s some guidance in that area, and no one will have to reinvent the accounting wheel, so to speak.
However, in states like California, infamous for high crime, a high cost of living, excessive government regulation, and high state taxes, many companies are discovering that it makes sense to move their headquarters to low-crime, low-tax, low-regulation states like Texas.
Even though 90 percent of all employees who move in a given year do so within their own states, it’s apparent that the majority of movement is from high-tax, high-crime cities to safer, less-regulated rural areas. So, there’s a kind of flight from over-regulated states and towns to less regulated ones.
When people have the freedom to choose their work location, they often opt for more favorable living conditions, and that typically means anywhere but the sprawling, crime-ridden urban areas.
Salaries are up for discussion
The topic of salaries is another remote working challenge for corporations whose employees are not centrally located. For instance, because the cost of living varies significantly from place to place, Marlene noted that this could be the year when remote workers see wage changes based on their local cost of living.
For example, a New York City-based accountant would receive higher wages than someone doing the same job for the same company in a rural city where rents and living expenses are much lower.
Equity is also thrown into the mix
Equity grants, like pay, are another problem in the remote work challenge puzzle. Owners need to adjust grants based on where workers are. But how to do that and do it fairly is a question that’s still being addressed.
Legal questions continue to pop up
Likewise, Marlene noted that legal questions pose additional hurdles for corporations whose workers are based in several locales. She gave the example of how companies might handle “on the job” injuries for home-based workers.
Most U.S. states already have laws on their books that govern these kinds of situations. However, there’s still plenty of ambiguity about what constitutes a “work-related” injury for someone whose office is in their home’s spare bedroom.
Now is the time for a remote working policy
Now, not tomorrow or next week or next month, is the time for companies to develop detailed remote work policies. The surge of decentralized employment is in full swing and not likely to slow down. Owners and upper management teams need to develop legal, fair, workable solutions that fit this new kind of economy.
Priority number one for owners is putting a remote-work policy in place, making sure to cover data collection, IT security, potential labor/legal disputes, pay differentials, and taxation policies. There’s no time to waste because the “remote revolution” is already well underway.
Organizations must be proactive and take the time to craft policies that guarantee a smooth transition from the old world of high-rise offices to millions of home-based employees.
Data security is key
One of the most immediate issues for companies is data protection, namely IT security. Marlene suggested that any organization with remote work teams needs an extra layer of security for sensitive data. This is especially true for entities whose workers are located in foreign nations where proprietary corporate files could be at risk for hacking or outright theft.
Local teams can be a solution
One technique for avoiding some of the headaches associated with remote work teams is to hire local work teams based in states or nations. In the old days, multinational corporations called this practice “hiring locally,” and it was an intelligent way to avoid all sorts of tax issues, labor disputes, and other issues that come with sending someone overseas to a remote job post.
Listen to the full episode below.