Global Mobility During a Pandemic: Workforce issues take center stage.

• Author: Tonge, Richard

The COVID-19 pandemic has disrupted how US businesses operate, causing significant challenges as many seek to adapt to a harsh economic reality that has continued into 2021. As businesses navigate the crisis, they have managed a seismic shift in how American and global workforces operate that has disrupted and redefined how and where employees work.

This shift created a new range of tax complexities that businesses now face, from corporate tax to employment taxes and payroll obligations to employee tax exposure. This complexity is manifest in the need to comply with new tax laws responding to these changes in every state and is multiplied globally for multinational companies and domestic US employers with an international workforce.

For employers, the pandemic has been characterized by fluidity in how it has impacted businesses and their employees both within the United States and globally. In March and April 2020, as COVID-19 spread across Europe and the United States, many employers took steps to mitigate health risks and exposure to their employees by temporarily restricting access to or closing physical workspaces. As lockdowns cascaded from city to region to country, these restrictions increasingly became a new standard with the anticipation of a return to "normal" later in the year. Many businesses found themselves operating on a nearly full or fully remote basis for the first time, with employees tackling what has been called a new normal.

As local and then national lockdowns became increasingly commonplace to mitigate against the spread and impact of the virus, so too did the closure of national borders to noncitizens and permanent residents. Countries like Chile introduced border shutdowns overnight while options for international flights decreased significantly as travel declined. This sudden change created the first new population of globally mobile employees during the COVID-19 pandemic--those stuck on the wrong side of an international border and thus forced to remain outside their home country locations for long periods.

As lockdowns in the United States and globally have been introduced and extended in response to new and subsequent waves of the COVID-19 pandemic, a second new population of international mobile employees has emerged--those who have chosen to work outside their home countries for extended periods. For some employees, this meant returning to a foreign country to stay with family and friends, whereas for others this entailed using the opportunity to work from an international destination while offices remain closed. Many employees have notified their employers of their international move, though, as employers across the United States are experiencing, some have not.

A year into the pandemic, the latest "new normal" is emerging where remote working has transitioned from being an arrangement primarily agreed upon as an exception to normal arrangements, as was often the case pre-pandemic, to a long-term, commonplace way of operating integrated thoroughly into working arrangements. With a fulltime return to office work seemingly unlikely for many businesses, employers are developing and transforming policies that allow employees to work outside their home states or countries.

The advent of "work anywhere" policies has a twofold impact on companies. As Grant Thornton LLP's research has shown, these policies incentivize and support talent retention while ensuring that employers remain competitive with peers. (1) Additionally, "work anywhere" and remote working arrangements attract talent where jobs are no longer geographically tied to a physical office and therefore no longer require costly and sometimes disruptive relocation of new employees.

The globalization of the war for talent creates a third new population of internationally mobile employees, those already based outside the country of employment who will primarily work remotely from a foreign country while occasionally traveling to their employing office. They may be working in a country where the employer currently does not have a legal entity in place. Similarly, companies may be exploring whether an employment or independent contractor relationship best fits the arrangement.

Global employee mobility has historically addressed formal programs for the relocation or assignment of employees to another country, either at the direction of the company or based on accommodating an individual's request. International business travel has become an increasingly common focus in recent years. Characteristically, management of tax risk within these programs is managed and monitored. However, these three new populations of mobile employees, stuck employees, and remote workers and remote hires present employers with a new frontier of global mobility and tax risk management: a distributed workforce.

Distributed Workforce--Tax Framework

When addressing the potential tax consequences of employees working outside their home countries, employers should consider both the corporate tax implications and the impact of individual taxation outside the country of employment. While an employer, understandably, may not be primarily concerned with an employee's personal tax affairs, taxability in a foreign country may give rise to a range of company obligations, from registrations with the tax authorities to company filings to employer taxes to the operation of payroll. With sourcing of employment income for taxation purposes often based on where the employee's duties are physically performed, including under bilateral double-tax agreements (DTAs), employees working outside the home country have the potential to trigger company tax exposure.

In addition to domestic tax laws of the country where the employee is working, attention should be paid to the existence of double-tax treaties and bilateral social security "totalization" agreements. Assessing tax exposure has not changed significantly as a consequence of the pandemic (see below for...