David: So hello everybody and welcome to our next episode of Mobility Via Podcast, a KPMG Tax Radio podcast. Our Mobility Via Podcast series covers quite a range of mobility topics from remote work to international and domestic business travel to global rewards as well as mobility technology, just to name a few. I’m Dave Mayes. I’m a principal in our Global Mobility Services practice, and I’m joined by Anne d’Arcy who is also a principal in Global Mobility Services as well as Evan Metter, a principal in our Human Capital Advisory Group.
We’ve got a great discussion teed up for you today. Evan, I’d love to start off with just pitching a question to you which is, where do you think we are now in the pandemic, and how are organizations responding?
Evan: Thanks, Dave. It’s great to be here. I think we’re in a bit of like a hiccup mode. Right? I think everything thought we’d be in a very different place. It’s clear that delta has interrupted that. It’s been interesting to see where that new data and the new experience on the ground has actually changed the behaviors of organizations. So I’ve seen some organizations saying, look, we still do want to come back. The fundamentals of return-to-office and et cetera are here, but it’s delayed.
But I’ve also seen this shake other organizations to say this is something that we’re going to expect to see over and over again in different forms, and maybe it was here now and it will be over, and we’ll get back to something that looks like normal. I’ve seen it shake the foundations of some thinking in some organizations and thinking that, oh, we’re not going to get back to normal. Right? We are going to be in a world with future interruptions and unexpected things, and let’s start preparing for that world versus trying to get back to something that we were going to get back to. I don’t have a crystal ball, but that’s what I’m seeing across the organizations I’m serving.
Dave: So Anne, in addition to the lens of what organizations are looking at, how are tax authorities responding to this, and what are they starting to do?
Anne: So I think I look at this in two ways, starting with kind of what is the compliance landscape and then really what are the expectations of the taxing authorities in relation to what the employers are doing operationally. So, starting with the U.S., we have state-to-state compliance, withholding for the employer, filing additional tax forms for the employee. I think we’ve seen that that landscape is very, very complex. There are inconsistent rules between the states.
We saw last year that some of the states tried to get the federal authorities involved to try and opine on whether Massachusetts’ temporary telecommuting rule was constitutional. A lot of people in New Hampshire were upset by that. Then we saw New York who already had an existing telecommuting rule really doubling down on that even when employers said that employees couldn’t come in to New York to the office. New York still says, “Hey, that’s our tax. We want it.” That’s been the landscape last year.
Then, this year we’re kind of seeing states actually realizing, you know what? Maybe getting remote workers into our state is a good thing, and we have a few states – I think Louisiana, West Virginia and Vermont – that are actually bringing in day thresholds to attract people into their states so they’ll spend money there, and then they’re saying you can come in for up to 30 days, and we’re not going to charge withholding for the employer or charge the employee any income tax. So that’s kind of an interesting development as we look forward to the future.
Then, just looking internationally, we’ve always had tax treaties which have helped us with these kinds of short-term assignments and now short-term periods of remote work abroad. I think what’s different in relation to remote work is that Corporate Tax have gotten a bit more involved and a bit more concerned around the PE analysis which, as we know, impacts the answer on the tax treaty. So that’s been a development. I think we had some relaxation of the rules. I think that’s kind of run out now, and everybody’s looking to the future, and definitely that’s an area taxing authorities will look at because they love to get the revenue from the employer rather than the employees. So they will be looking at permanent establishment positions taken by employers and then looking for payroll withholding where that could be true I the future.
Then, just another tax, Social Security. I think the analysis there has started within the EU authorities. They love debating where the rules do and don’t apply. So remote work is a new concept for them. So they’re quite interested in whether they should actually even issue a certificate of coverage for a remote worker. So, probably more to come on that, and I think there will be clarifications from the authorities over time.
Then lastly Posted Workers Directive. Again, the word “posted” is in the title. Whether remote workers are actually posted or not is going to depend on how companies actually operationalize their processes. But one thing I’ll finish on, irrespective of any change in rules, it’s clear – and I think it always has been to us in the tax world – that authorities do expect employers to know where their employees are working. I think if employers are not tracking that, the authorities are looking for how they can track it using data from other sources. So that’s definitely kind of an important point to note.
David: I think that all makes a lot of sense. So, as organizations have started to become aware of those tax and broader risk issues that come with a more distributed workforce and a more flexible workforce, they’re having to now pivot to address those issues. So, what we’re seeing very often is the tried-and-true tackle this through a combination of process, policy and technology.
So, organizations are really starting to, one, make sure that they have the right policies in place to document the decisions and the guardrails that they want to establish for where people can work flexibly, for how long they can work there and what activities they can perform in those other jurisdictions. So very much HR departments are leading the charge here in putting those policies together, but one of the critical things that we’re seeing across organizations is that need to bring a truly cross-functional stakeholder group together to weigh in on those policies to make sure that each of the lenses are being looked through to make sure that all of the issues are addressed. Putting some of the processes in place to operationalize some of the downstream activities around payroll and some of the other compliance activities is also critical.
As things go, there aren’t enough resources inhouse to manage all of these processes. So, a number of organizations are looking to implement some technology to track employees and to make some of those downstream processes more efficient.
Evan: Hey, Dave, I said we didn’t have a crystal ball, but in some ways we know these things are already going to be true. Like one, people don’t like commuting to sit in a cube. Right? Two, now that the workforce has gotten a taste of the freedom of working where they can work and that part of the employee value proposition – and I don’t need to tell anyone listening to this, that there are huge labor shortages, demands in terms of being there – we have a new source of employee value proposition and expectation in terms of what do you owe me. What do you have to allow me? For the first time I’m speaking to a lot of talent acquisition departments, and they’re going, “For the first time we’re not only negotiating around salary, but we’re negotiating over flexibility in terms of coming in.”
So, I think we can clearly say at this point we’re not putting the toothpaste back in the tube. Right? This is a behavior and an expectation, and it’s a burden administratively, back to your point, Anne, around, well, how do we keep track of where everyone is? Like if this is here to stay, how do we keep track of it? We’re not set up for this, and what you were saying, Dave, is true. The toolset today of submit the e-mail or the spreadsheet or whatever and go get the ... it’s just not going to cut it, and that’s where I think some of the most prepared organizations that we’ve been working with are looking at their service management toolset and their HRASs, and they’re going, “Okay, hold on a second. We have the components here, and how do we use these platforms we’ve already invested in and bring to life something that is specific to this journey?”
The I want to work in ... Anne, as you were talking, I was thinking I want to work in Vermont. (Laughs) Go up to Vermont. It’s a beautiful time to be in Vermont, but that toolset which exists, good news, bad news. Right? A lot of these organizations own the toolset. The bad news is there’s some work they got to do in order to get it to actually work this way and be compliant if they want to reduce the burden. But they’re halfway there. Right? Hey, Dave, I thought we might at this point play a little podcast game.
David: Bring it.
Evan: As a guest, I’ll just bring in a little podcast game. I’m going to call this Overrated/Underrated, and I want to just ask the two of you, Dave and Anne, overrated/underrated on a number of subjects. Okay? You’re going to need to explain yourselves a little bit. I’ll start with this one. Video happy hours. Overrated or underrated?
Anne: I think at the beginning they were probably underrated, very important to get people together. I think over time, when everybody’s been sitting on Teams and Zoom calls for eight hours, I think maybe people got a bit tired of them. (Laughter) And maybe moved them to other times in the day.
Evan: David, I’m going to give you the next one. In-person training, overrated or underrated?
David: Completely underrated. I think the impact of being with colleagues and learning through that osmosis that only comes when you’re sitting in a room together, I think is magical. But of course, the reality is we have to pivot. We have to be able to pivot to make that online learning more effective, and I know a lot of organizations are trying to do that. I don’t know that anybody’s really cracked the nut as well as it needs to be, but I’m all for in-person training.
Evan: Anne, here’s a tough one. Overrated or underrated, outdoor work setup.
Anne: Overrated, and I live in an apartment in New York, so probably not as easy for me. There is a garden outside I could go down two floors to get to, but for me it’s definitely overrated.
Evan: I’m going to have to go back to you, Dave, because I know you have a different opinion. Right?
David: (Laughs) For those of us that have been working in our windowless basements, working outside is so underrated. (Laughter)
Evan: All right, last one. I’m going to throw this in here. I don’t know if either of you have direct experience, but you always have opinions even if you don’t. Overrated or underrated, the COVID puppy. (Laughter) What do you think?
David: My two-year-old would love that COVID puppy, but (Laughs) I’m running for the hills on that one.
Evan: (Laughs) So maybe it’s appropriately rated, and you’re just like the Grinch? (Laughter)
David: That’s exactly right.
Evan: As folks wrap up listening to this podcast, what would be a recommendation in terms of an e-mail that they should write? They just finished up. We brought some things up to the fore. What e-mail would you write after listening to this to check in with someone, to ask someone something, to recommend something? What would you do immediately after listening to this? I’ll start with you, Dave.
David: I think the first thing is just about every organization has created some sort of a Return to Office committee or Future of Work committee. The important thing is to make sure that you have your voice that’s been able to weigh into those groups to make sure that the lens that you’re looking at this through has been addressed. So I’d say firing off that e-mail to the project manager or the head of that committee to make sure that you’re connected, that your voice can be heard, and that you’re part of the solution for the long term.
Evan: Excellent. Anne, what’s the e-mail that you would write?
Anne: I think I would appeal to the payroll people. I think get very comfortable with what your payroll system is capable of right now. Find out what’s happening with the company. Are they planning on any releases around remote work, location tracking? I think what we’ve seen from a challenge point of view around payroll systems is you might be able to update going forward. It doesn’t store history, so when you get to your equity process, you may not have all the data to correctly source equity. So I think just looking forward a bit. Just be aware of all of these challenges that are ahead and get comfortable with where you are now and what gaps you need to fill.
David: Thank you so much, Anne.
Evan: I think mine is just going on to VBRO and looking for a Vermont ... like a log cabin or something. But no. I would think that getting to the folks who own the employee experience and saying this is an expectation. This is one of the journeys that we need to focus on. Right? The allow me to have flexibility, allow me to work piece because it’s going to be part, as you said, Dave, part of the policy, and talk about we have investing in certain platforms. Right? We have an HRAS. We have a service management tool. How are we bringing that to bear to, one, deliver on the employee expectation in terms of, look, make this easy for me. You know why? Because I have options, and other organizations make this easy. Right?
So that’s number one, but also, to your point, on the back end, the operation side, make it easy for them. So use these tools to make the approvals easy with the conditional logic, the integrations back to Payroll. I think that this is ... well, we know it’s definitely achievable because we’ve been doing this with other organizations. I would write that e-mail. I’d say, how do we make it easy to get the experience we want, and how do we operationalize this using the investments we’ve already made? Let’s have a conversation. So, I would do that.
David: Evan, Anne, thank you so much for those comments and the feedback here. Great topic. And thank you to our listeners. Please join us again next month for the next installment of Mobility Via Podcast. In the meantime, please check out our previous podcast or connect with us directly via e-mail at US-TaxWatch@KPMG.com. Thanks so much for listening.