31 May How Global Mobility Specialists Handle Challenges of International Remote Work

The rise of international remote work presents unique challenges for US-based companies and their global mobility professionals. While remote work offers significant opportunities for talent acquisition and retention, it also introduces complex legal, tax, and operational issues.

According to Worldwide ERC, US companies, like those in Northern California, must navigate a web of international tax laws and labor regulations. The concept of “permanent establishment” is crucial as having employees work remotely from other countries could inadvertently create tax liabilities for the company in those jurisdictions. This is why many US-based companies prefer to hire expatriates, as having employees based outside the US can complicate the process.

For example, if a US company has an employee working remotely from France for an extended period, it might be considered to have a permanent establishment in France, making it subject to French corporate taxes. This complexity can be a deterrent for employees and employers alike.

Compliance with local labor laws

US labor laws, such as the Fair Labor Standards Act (FLSA), may not apply to employees working abroad. Therefore, companies must thoroughly understand local labor laws in each country where remote workers are based. This includes adhering to local minimum wage requirements, working hour restrictions, and mandatory benefits, which can vary significantly from US standards.

Data security in a remote work environment extends beyond domestic regulations like the Health Insurance Portability and Accountability Act (HIPAA). US companies must also comply with international data protection laws such as the EU’s General Data Protection Regulation (GDPR), which has extraterritorial scope. This necessitates robust data security measures and potentially revising data handling policies to ensure compliance across all locations where employees are working remotely.

Maintaining corporate culture and comprehensive benefits packages for a global remote workforce presents challenges. For instance, providing equitable healthcare benefits to employees working in countries with nationalized health care systems requires careful consideration and potentially partnering with international benefits providers.

Teams working across multiple time zones face challenges in scheduling and communication. Companies need to implement flexible work schedules and utilize asynchronous communication tools to ensure productivity and collaboration.

US companies are increasingly developing global remote work policies. These policies often include provisions for “work from anywhere” arrangements, but with limitations on duration and location to mitigate compliance risks. Some companies are also exploring the use of Employer of Record (EOR) services to handle local compliance and payroll in countries where they don’t have a legal entity..

Global mobility teams need to be involved in discussions about implementing international remote work. From a compensation and benefits perspective, policies must align with other practices in the mobility suite.

Challenges and solutions

The first hurdle in managing international remote work is compliance, particularly regarding the right to work in the chosen host country. Employees should take ownership of their immigration needs, and if they cannot legally work in the host country, their request for flexibility should be denied.

Additional compliance and regulatory challenges must be addressed, including income tax liabilities. Ensuring employees are compliant with tax obligations can be complicated when the source of income is different from the employee’s location.

Corporate tax liability and the risk of creating a permanent establishment are also significant concerns. Limiting the duration of international work and restricting certain duties can mitigate these risks. Employer of Record (EOR) services can also be a solution but have limitations.

Determining which labor laws apply to remote workers is crucial, requiring consultation with employment law specialists. Data security is another important area, as remote employees must comply with international data protection laws like GDPR.

Companies need to consider the impact of different tax and social security systems on employee salaries. Providing guidance on these issues helps employees make informed decisions about working overseas.

Flexible work location is an attractive benefit for employees, aiding in talent attraction and retention. Companies must develop clear policies to manage international remote work requests effectively.

In summary, international remote work requires a comprehensive approach to address the legal, tax, and operational challenges. By developing robust policies and maintaining a focus on compliance and company culture, US companies can successfully implement global remote work strategies.