30th May 2022
As opportunities to travel increase following the easing of lockdown restrictions across the world, global independent contractors will increasingly be able to work from anywhere and take up assignments of their choosing. However, when a contractor is working from one location, delivering on a project that is based – and billed – elsewhere, there are a wealth of complexities and risks that recruitment firms could face.
We take a look at some of the key challenges.
The rise of ‘work from anywhere’
In April 2022, Brian Chesky, the co-founder and CEO of the US-headquartered online vacation rental marketplace, Airbnb, outlined his vision for the company’s hybrid and work from home strategy. Acknowledging how the pandemic had overhauled our working lives, he told his employees that they could work from anywhere. “This means you can move from San Francisco to Nashville, or from Paris to Lyon. You’ll have the flexibility to do what’s best for your life—whether that’s staying put, moving closer to family, or living in a place you’ve always dreamed of,” he said in an email.
However, Chesky did qualify that by saying that staff could only live and work in any country in the world for up to 90 days. The reason, he added, why most companies did not adopt a similar approach was down to the complex minefield surrounding global employment regulations as well as corporate and personal taxation. Time zone conflicts, which will no doubt affect people’s availability for virtual meetings, were also mentioned. From a compliance standpoint, though, work from anywhere raises a number of compliance issues, such as whether a ‘permanent establishment’ has been created in the country where the work is being carried out, depending on the individual’s set of circumstances.
While contractors must pay the right taxes, and social security contributions and be covered for employee insurance to remain compliant with local legislation, there are other things to factor in as well. As Meike Gleiken, Head of Framework at global home appliances giant Siemens points out, “Immigration is also key. You cannot just travel for a vacation to Thailand and then prolong it by two weeks to work and see it as tourism.”
Work from anywhere compliance risks for global recruiters
Clearly, there are benefits to working from anywhere (WFA) from the individual’s perspective, but for recruiters, this can create a legal minefield. In the same BTN Europe article referenced above, Aurélie Krau, customer success officer at Hubli -the meetings booking platform – talks about the need to understand different rules and regulations in these scenarios, including agreeing on who will be tasked to take ownership of a WFA policy and also the allocation of funds to cover these costs.
Tax compliance, however, does remain the biggest risk and global recruiters who have independent contractors on their books must ensure that these individuals meet all local requirements or face the fallout of noncompliance. The sheer complexities will often call for professional advice. As David Livitt, tax principal at Mazars, the international audit, tax and advisory firm, notes, even if there is a double tax treaty in operation between the two countries in question, at which point does your organisation become an “economic employer”? Will you, therefore, need to register a permanent establishment?
According to Livitt, technology can play a big part in helping to manage and mitigate the risks of working from anywhere and mobility compliance risks. There are a number of products in the marketplace that analyse data, alerting users to a host of different business travel matters, including tax obligations, thresholds for tax relief, corporate nexus tax risks, social security and immigration. “The technologies I’ve seen can be configured to really compare variables [such as who wants to go where for how long and why]. You can make those decisions without overwhelming one person or a team of people,” he adds. But with requirements constantly evolving in the new world of work, expert guidance that is tailored to your firm’s specific needs is the best route to follow.
Mitigate the risks of contractors working from anywhere
Despite the complications and resources needed when a WFA approach is requested, it is evident that there is a growing appetite for companies to allow their contractors to work more freely around the world. Flexible or hybrid working is now expected and those companies not offering such working practices will lose out on top freelance talent. Remote working has also enabled organisations to choose from a wider talent pool of potential applicants.
Other companies such as Spotify have also jumped on the WFA bandwagon. Although the Swedish streaming provider is a standard-bearer for flexible working, allowing its staff to decide whether they want to work in an office or at home, like Airbnb the company is also very aware of the potential risk factors and norms to be respected. “To comply with local laws, Spotify must be a registered entity in the country in which you wish to work,” it clearly states in the FAQ section of its website. “You’ll also need to have the necessary visas and documentation to work in the location of your choice”.
Although there are many benefits to remote working and adopting a work from anywhere approach will be beneficial in attracting and retaining staff – including contractors – as Chesky himself pointed out in his email, there is a “mountain of complexities” referring to taxes, payroll and compliance. Global recruiters placing contractors abroad must tread carefully when it comes to local employment laws and how their contractors operate. Failure to meet the necessary tax and compliance obligations could lead to fines or even court proceedings and prosecution.
If you have any concerns or require information about country-specific compliance legislation for the territories you operate in, contact our 6CATSPRO specialists for further details.