Engaging Remote Workers: Are You Headed Towards a Payroll Disaster?
Even though the pandemic is behind us, there is no sign of the remote work trend dying out. On the contrary, according to Upwork Survey, remote workers will make up 73% of each department by 2028. Despite the benefits of remote work, companies still have to consider global payroll risks before getting rid of their office buildings.
Brett Sipes ' article in Bloomberg Tax highlights how to deal with tax and compliance problems in the remote work era.
He explains why companies are the responsible party in the case of a global payroll disaster in a remote work era. The author discusses some of the risks organisations could face if they don’t keep track of their employees. Moreover, Sipes argues the 183-day rule is not a reliable guide when dealing with different jurisdictions around the world. At the end of the article, he proposed possible solutions companies should apply to avoid the risk of their global payroll going wrong.
Read the full article HERE
SUMMARY:
?? Who is responsible in case of a “disaster”?
For starters, companies need to be able to identify in which location their employees are working. It sounds like a mission impossible when you have hundreds or thousands of workers around the world. However, at the end of the day, companies will have to face the consequences if there is any evidence of misreporting or underreporting payrolls.
?? What are the risks companies could face?
Playing with taxes is a dangerous game. Workers who don’t report a new location from which they are working could trigger tax authorities. Since the company is responsible for knowing where their employees are, they will first knock on the company’s doors to inspect misleading information resulting in?payroll tax penalties.
Similarly, if your employees work remotely in a different state or country, there is a?corporate tax exposure?risk.
While it may be “easy” to pay fines, recovering?a company’s reputation?is a whole different story. Misreporting or underreporting payrolls will put a magnifying glass on all the global payroll reporting with tax and compliance authorities. Also, tax irregularities are not the best for attracting potential workers in the future.
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?? Is the so-called 183-day rule a myth?
Many corporate leaders believe in a 183-day rule. In a nutshell, this rule refers to working in any destination for 183 days without the need to provide additional reports on employees. Since each country and state has its own set of laws, the 183-day rule doesn’t apply. For example, if your employee works remotely in Canada for a few days, according to the Canadian Income Tax Act, the company is obligated to report wages.
?? Moving doesn’t mean erasing
While moving for many people means a new beginning, it still won’t erase possible obligations from previous locations. The only way for the company to understand employees’ tax and reporting duties is to know their job location history.
?? What are the solutions for avoiding risks?
From everything mentioned, you might question how can your company avoid all these problems. Here are a few tips Brett Sipes has shared in his article worth considering:
Read the full article HERE
?? Not sure how to avoid a payroll disaster or stay compliant?
At CXC, we specialise in helping ambitious businesses to hire remote contractors and employees around the world. We operate through a vast network of legal entities and can help you to compliantly and legally hire in over 65 countries.