In recent times, several companies, mainly in the IT-ITES, e-commerce, fin-tech, and edutech sectors, have announced a flexible way of working. The pandemic has challenged employers to think about how and where their employees would work. An employee-focused approach that may continue after the pandemic abates will be the one which demonstrates flexibility for employees who prefer to work from an alternative location.

Remote work has enabled access to a wider and diversified work force. With skill description taking precedence over job description, remote work has gone beyond cities and even across borders. The ability to provide flexibility to employees and access to a wider talent pool from tier 2 and tier 3 cities, coupled with niche skill-sets from across borders, has been the key driver in fuelling organisation strategy towards remote work. Potential benefits such as reducing real estate footprint and, hence, lower costs continue to be another key driver. Hence, most employers have been actively evaluating the future way of working, based on business and talent alignment.

Having said that, the laws guiding remote work need to evolve fast. For example, “work from home” found a mention in the labour codes specific to the service sector. From a tax perspective, the employer would need to evaluate tax benefits and deductions available to various categories of workforce, be it permanent remote workers, those following a hybrid way of working or regular office workers. For example, would the exemption provided for office commute- related reimbursements continue to be available? Employees should evaluate the tax position for benefits provided to employees, such as communication and infrastructure facilities at homes, which were provided during the pandemic, and may continue in case the employee becomes a permanent or flexi-remote worker. With work from home being the new normal, the government may consider introducing additional standard deduction/exemption for additional costs incurred by an employee while working from home – which otherwise would not have been incurred in a regular office environment. Another consideration that may need to be kept in mind is whether employer obligations are to be met in case an employee works in a state different from the normal work location.

From a cross-border remote working perspective, tax authorities across the world provided intermittent reliefs for remote working through the pandemic which are now slowly being withdrawn as vaccinations have been given and things are slowly returning to normalcy. Employers would need to actively monitor the location of their employees to identify employees working away from their regular work country location. It is important to analyse whether those employees would trigger tax residency in the remote work location and an employment tax/social security liability or payroll registration obligation for the employer would arise. Cross country remote working may also lead to permanent establishment/corporate presence risk for employers depending upon roles and nature of work being performed. In addition to tax considerations, the employer will also have to evaluate whether the individual has a right to work in a particular country and does not violate local immigration or employment law norms.

The adoption of remote working as the future of work will vary from organisation to organisation depending on feasibility and other considerations. While intra-country work from home would be the new normal, adopting international remote working as part of an organisation’s long-term business and talent strategy would need an in-depth analysis of potential risks and consequent mitigation strategies from tax, immigration, and employment law perspectives. The employer may need to assess the rewards and benefits programme specific to remote workers, impact on data security and business protection policies while employees work from a remote location. Organisations implementing remote work as new way of work as part of long-term strategy, would need to develop and implement remote work policy with a defined guideline in place. The guideline may cover the quantum of remote work benefits to be provided, documentation to be maintained, governance framework to be put in place and regulatory obligations to be met.

Overall, when implementing a longer term remote working programme, the employer would need to adopt a holistic approach incorporating cross functional requirements across the organisation. This will ensure that the programme is not only fit from a talent and business perspective, but also remains solution oriented in addressing current and future regulatory requirements.

As organisations move beyond responding to the immediate crisis and look to strategies for accelerating business recovery, it is likely they will use this opportunity to rethink the future of work – including what work is and how it is delivered, who performs the work, and where it is performed – and course-correct.

The author is Partner, Deloitte India

Vijay Bharech is Senior Manager with Deloitte Haskins and Sells LLP

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