Enhanced demand for flexible work options is raising new challenges

Support to develop your telework framework

Over the past few years, remote work has become a focal point in the global discussion on business strategy, organizational culture and the future of work. Teleworking needs have significantly increased, as our own 2022 “future of work” benchmark demonstrates. From human resources to operations, physical and cybersecurity, regulatory compliance, tax and social security, and even real estate planning – every aspect of your organization is impacted by this shift. Has your planning evolved to address the changes teleworking has brought with it?

People expect greater flexibility from their employers. Our study found that 45% of the interviewed HR Directors consider the ideal amount of remote work is 2 days a week, with 41% recommending to work from a virtual office the maximum amount allowed by their country of residence.

Attracting and retaining talent, not to mention meeting the needs of today’s evolving workforce, are the top factors driving the shift towards flexible work schemes. And while the vast majority of organizations intend to implement teleworking solutions in response to rising demand, only 10% have managed to do so successfully. What are the most common challenges you might be facing?

Hybrid work increases complexity for organizations: from regulatory constraints to operational and financial risks, or monitoring the remote framework

Diverse & moving regulatory frameworks

Fiscal status

• Company’s or employee’s fiscal regime
• Permanent establishment risk
• Intercompany agreements
• Transfer pricing

Social security

• Company contributions
• Employee registrations

Visas and work authorizations

Telework circular for CSSF regulated entities

Operational risks & diversity of setup

Review physical security policy and risk mitigation measures

Assess cyber security policy

Adapt systems to collect, secure, monitor and report relevant data

Design hybrid policy based on:

• Type of activities
• Employment status of the employee
• Limiting risks of contamination at the workplace

Attraction, retention & performance management

Enterprise philosophy and strategy

• Market evolutions & competitors’ approach
• Employees’ and candidates’ expectations

Workforce segmentation, activities and job profiles analysis

High-performance team in a virtual environment

What are the financial risks of remote work models?

Social security payout

What happens when your team members work outside of Luxembourg more than the established permissible amount? You may incur extra costs. Employees are affiliated to the country that they work in (‘Country B’), if they exceed the permissible amount of hours working abroad allowed by the country of tax residence (‘Country A’). Employers in Country A have to pay back social security contributions to Country B. The fees and extra costs vary depending on multiple factors, including the size of your company and number of non-resident staff that may not adhere to the appropriate remote work policies.

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*Estimate based on average amount of non-resident employees, and of neighboring countries’ social security regimes.

Corporate Tax consequences

Remote workers might create corporate income tax exposure in new jurisdictions (i.e., permanent establishment risk) and consequently impact credits and incentives as a result of workforce changes.

Recognition of a foreign permanent establishment might lead to multiple reporting obligations and attribution of income to such jurisdictions. Key challenges are:

• Producing separate (audited) financial statements
• Additional corporate tax cost further to profit allocation to the PE based on functional profiles
• Exposure to another tax jurisdiction from a compliance and risk perspective

Fines and commercial impacts

Non-compliance with telework requirements for CSSF-regulated entities, concerning data management of personal and confidential data, fiscal, social security and labor law in general, may lead to fines.

Potential reputational risks from data leaks should also be considered.

Evaluate your remote working framework to mitigate risks and impacts

Our 4-step approach to answer challenges raised by telework.

How can Deloitte help

In an evolving business landscape, you need a framework for flexible work options to navigate these challenges head on. No matter where you are in your telework journey, we can guide you step-by-step to smoothly transition to remote work for your teams. Turn teleworking into an ally for your business and your workforce.

Your unique case must be clarified for any decision making. What is acceptable in a remote working framework? Are there any pros and cons? Our teams can support with your benchmarking procedures, financial analysis and high-level impact assessment.