Driving productivity using remote working has been saved
Driving productivity using remote working
Written by Dion Thai, Deloitte Singapore Global Employer Services Tax Partner, and Jod Gill, Deloitte Singapore Tax Director. The below are their personal views and may not represent the views of Deloitte.
As published in The Business Times on 2 February 2021.
Before the Covid-19 pandemic, long-term trends such as the proliferation of new digital technologies, evolving demographics and rising social concerns about inequality and the environment were already changing the way work is done, by whom and where.
The global pandemic served as an accelerator and forced the vast majority of employers in Singapore to adopt remote working arrangements as an emergency measure to continue operating.
Many organisations have been surprised by the effectiveness of these emergency arrangements and are now focused on the potential cost, productivity, employee experience and talent attraction benefits that could be realised by making remote work a permanent option for employees.
According to a Straits Times survey, eight in 10 workers in Singapore prefer to work from home or have flexible work arrangements. Another survey commissioned by ServiceNow and conducted by market research firm Wakefield Research showed that 47 per cent of executives and bosses in Singapore believe that transitioning to the new normal will be even more challenging than the initial adjustment to Covid-19, highlighting challenges ahead for employers as this new way of working becomes more permanent.
In an analysis conducted by Deloitte, Singapore could have a potential remote workforce of up to 45 per cent across all sectors over a multi-year horizon. Few employers are likely to move to a full remote working model as the desire to collaborate, build meaningful relationships and continue to interact is likely to endure.
This will mean that many employers are likely to implement a selection of hybrid arrangements with some roles identified as being more suitable for remote work arrangements and a more general flexible policy that may allow employees to work a suitable number of days remotely on a long-term basis.
In recent years, the government has spared no effort in trying to train workers and redesign jobs for the future economy with initiatives such as SkillsFuture and Adapt & Grow.
To continue supporting employers and taxpayers, the upcoming Singapore Budget 2021 could take a long-term approach to help these groups adopt remote work policies quickly and effectively. This will ensure that the potential short- and medium-term growth and productivity benefits are optimised as Singapore seeks to bounce back from its worst-ever recession since independence.
Implications of International remote work
Employees working remotely outside of Singapore during the pandemic may request to formalise remote work arrangements which are likely to drive significant complexity for employers. The success of the recent unplanned remote work arrangements has prompted organisations to consider more creative virtual assignment models in the new normal of work.
As Singapore imposes tax on a territorial basis, working arrangements including overseas remote work in respect of a Singapore employment will not alter the fact that any income related to these Singapore duties is still a Singapore source and should be reported and taxed accordingly.
However, any continued presence overseas could create significant immigration and personal double tax issues for the individual and create complexity for employers as such arrangements could easily create significant permanent establishment risk, resulting in corporate profits being taxed overseas. Employers should carefully review their approach and employment models to such arrangements.
Financial support for home-office
In 2020, many Singapore-based employers that were impacted by remote working took action to support employees with the required adjustments. These were typically small and one-off measures, which included temporary loan of office assets such as monitor screens or providing a small cash allowance to employees to set up suitable workspaces at home. However, the personal costs associated with the physical setup including furniture, monitors, headsets, and high-speed Internet as well as to maintain a conducive work environment at home could be significant and recurring.
According to a report by Dell Technologies, 49 per cent of employees in Singapore feel that their employer is not doing enough to provide the necessary technology resources for them to successfully work remotely and 30 per cent feel that a more stable remote network with adequate Internet bandwidth is necessary.
The Inland Revenue Authority of Singapore (IRAS) has clarified that any expenses reimbursed by employers to help employees work remotely are non-taxable. Where such costs are not reimbursed, employees can claim a limited deduction for the increase in their electricity bill and their Wi-Fi subscriptions on condition that this was not in place prior to Feb 1, 2020. The IRAS has also confirmed that these costs can be shared between multiple taxpayers.
While these measures are welcomed, the limited support provided is unlikely to significantly encourage or optimise remote working setups, leaving the connected growth and productivity untapped. The measures are also likely to be administratively challenging for employees and the IRAS, with the need to keep and compare multiple years of electricity bills and to ensure that working couples are sharing the reliefs correctly.
A 2017 study by the National Council of Social Service revealed that there is an average return of investment of S$5.60 for every S$1 invested in a "workplace adjustment" like flexi-work arrangements and access to counselling as workers were more productive and made fewer medical claims. With 61 per cent of workers feeling more stressed since they started working from home, according to a National University Health System's (NUHS) Mind Science Centre survey, more companies in Singapore have expanded employee benefits to include mental health support.
However, there is still more that could be done since mental healthcare is typically not culturally supported compared to other developed nations.
Mental disorders such as depression and anxiety are included in the World Health Organization's list of work-related illnesses, and cost the economy around US$1 trillion worldwide each year due to productivity losses, as documented in the World Economic Forum Annual Meeting.
The importance of improving mental well-being in the workplace was further highlighted with an advisory issued by the Ministry of Manpower in late 2020. With the ongoing pandemic accelerating the level of worry and stress about health and financial security, further support measures should be considered.
Aggressive policies to drive productivity
There is no doubt that the Singapore Budget 2021 will include additional measures of support for employers looking to retrain existing talent but the approach needs to be complemented with a more aggressive policy to support better adoption of remote working and to unleash the benefits highlighted in this article.
Measures could include further incentives and deductions for companies to provide additional mental health support for employees.
The implementation of a more meaningful standardised deduction of home office expenses for employees would also help to stimulate capital demand, improve productivity and allow employees to invest in setups that support sustained remote work, which could have a much wider positive societal impact.