Manage your workforce with agility and confidence

How do you pivot your organization to recovery?

It is important to understand how organizations will work, and how people will do business after the crisis. Many business leaders foresee long-term workforce and workplace change. Perhaps tightly controlled co-location will not be as prevalent. We expect to see a lasting impact, but to what extent remains unknown. As emerging workforce disruption trends evolve (i.e., remote work) many business leaders foresee long-term workforce and workplace change. Tax leaders need to understand their business leaders’ philosophy of adopting those trends (enabling remote work, alternative work arrangements like gig or contract workers) in understanding how dynamic they need to be as business enablers—and understand downstream regulatory and compliance impacts.

Here are four priority areas where tax leaders should continue to focus on during the recovery phase of the pandemic. Having a seat at the table ensures compliance realities are taken into consideration and helps you to build resilient, agile, and flexible policies for the future.

To learn more download: Manage your workforce with agility and confidence: A guide for tax leaders during the COVID-19 crisis

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Actionable steps you can take today

Understand cross-border employment and the related tax issues

The Organisation for Economic Cooperation and Development (OECD) has issued guidance on the tax implications of the employment changes coming about from the global pandemic involving cross-border matters. They have recommended local tax authorities provide guidance on the impacts of remote work, and while several countries have issued temporary guidance, many countries have not. Due to travel restrictions, cross-border workers may be working in locations where they did not plan to be, and those work locations may be unapproved by the company. These new patterns could lead to undesirable results for both the individual and company.

Remote working doesn’t necessarily mean employees are working from home—it could mean that they are unable to return to their home locations due to COVID-19. Knowing where people are during the crisis is essential. Remote work can be across jurisdictions—state and international—and it’s critical to understand permanent establishment risk, state nexus impacts, the payroll and income tax implications as well as inter-company cost charging protocols.

Questions about remote work locations may also surface compliance issues from prior years that need to be addressed. Understanding the tax implications of remote work can present opportunities to increase compliance and mitigate regulatory and reputational risk. However, addressing these issues may also increase the risk of uncovering more uncertainty.

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Workforce strategy

As companies respond, they need to implement measures to keep their employees safe, address travel restrictions, and agree to alternative and/or remote working arrangements. As businesses shift and move towards remote working, consider the effect on:

Mobility:

• Policy
• Personal taxation
• Employer obligations
• Corporate tax exposure (i.e., Permanent Establishment)
• Quarantine considerations

Employment:

• Temporary closure of operations
• Stand down of employees
• Meeting salary costs
• Alternative forms of remuneration
• Employee share schemes
• Redundancies

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Make informed headcount decisions

Rationalizing workforce cutbacks that run too deep and too early can have immigration consequences and a harmful impact on an organization’s ability to recover quickly. Governments have enacted stimulus packages and money is available for businesses. Consider how these provisions and funds can be leveraged to minimize workforce disruption and build contingencies for when stimulus money runs out.

Develop integrated business and workforce plans to identify hidden costs and benefits of workforce reduction. These decisions should consider various global governmental stimulus/incentive approaches and optimize globally rather than by line-of-business when appropriate. Country-specific relief measures may include use of tax savings to improve cash flow and tax planning to reallocate funds and stimulus-related payroll tax credits and deferrals.

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Keep informed and up to date on governmental tax, financial, business, and social measures

Governments around the world have rapidly mobilized to support businesses and individuals as they seek to mitigate the economic impacts of COVID-19. They include deferrals of tax payments and filings, new tax reliefs and incentives, and administrative simplifications. Measures do, however, vary from country to country and regulatory reactions are unpredictable. Expect inconsistencies across jurisdictions, tax changes that leave much room for interpretation and require further clarification, and uncertainty about time-periods for the relaxing of norms.

Recently released instructions from the OECD still requires monitoring and tax jurisdictional bodies have been encouraged by the OECD to provide clarified, documented guidance. Until local tax jurisdictional bodies issue this guidance, the local existing laws still prevail. Organizations and their leadership must stay current on tax legislative changes by country as they are announced and optimize measures for their organizations. Tax leaders need to scenario plan and obtain buy from with their business stakeholders to understand the implications of their decisions. Additionally, as the landscape is continuously evolving, it is important to revisit the scenario plans as they may need to be recalibrated. Asking difficult questions right now is paramount, such as: “What happens when treasuries are depleted, when stimulus money runs out? What’s next?”

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Deloitte COVID-19 Tax & Financial Measures

To lessen financial and operating impacts, keep informed on how governments are mobilizing to support businesses and individuals seeking to mitigate the economic impacts of COVID-19 and understand your eligibility.

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Get in touch

Jim Pickett
Principal
GES Global and US Market Leader
Deloitte Tax LLP
jampickett@deloitte.com

Michael Clarke
Partner
GES US Workforce Strategies Co-Lead
Deloitte Tax LLP
michaelclarke@deloitte.com

Nicole Patterson
Principal
GES US Workforce Strategies Co-Lead
Deloitte Tax LLP
njpatterson@deloitte.com | Read bio

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