Holiday travel season is here. How can HR manage the compliance risks?

After millions of people travel for Christmas and the New Year, what no one will wonder, besides HR pros, is how many compliance risks employees created. As of September, 45% of full-time employees (in the US) continued to work partly or fully remotely according to a Gallup survey. Whether they vacation for leisure or a close-quarters suffer-fest with family, most will work while traveling, assuming the Omicron variant doesn’t derail their trip.

Working across jurisdictions may sound harmless, but revenue-starved tax and immigration authorities would beg to differ. While the risk of being caught by them on any one trip is low, the potential consequences are high—particularly for companies. Let’s examine why the holiday travel season is rich with compliance risks and talk about how HR can address them—without pouring gasoline on the Great Resignation.

Most employees don’t report their location

Here’s the core issue: during the pandemic: employees have said they don’t report where they work, but HR professionals think they do. Specifically, my company, Topia, found in its annual Adapt survey that 28% of US- and UK-based employees worked outside their home state or country during the pandemic, but only one-third reported all those days to HR. Meanwhile, 93% of surveyed HR professionals were confident that they know where most of their employees are working, and 78% were confident their employees self-report when working in another state or country.

In other words, numerous employees may have created tax and immigration exposure, unbeknownst to HR. That puts HR in the awkward position of hoping that employees violated tax and immigration laws successfully. For example, an American employee who travels to California for the holidays would be expected to pay tax on income exceeding $3,500. If HR doesn’t know about the trip, then HR is praying that the California’s Franchise Tax Board doesn’t know either.

Similarly, if an employee from the UK flies to France for a month of work and play in a ski chalet, they must lie to French immigration that they’re traveling for leisure, otherwise French authorities may turn them away at the border for failing to have the right work permit. Even worse, if that employee is, say, a managing director who signs a new client contract on day one of the trip, then congrats: the company might now have a permanent establishment in France. Perhaps the only risk greater than potentially being caught by authorities would be telling employees they’re not allowed to work remotely and having them quit as a result.

Remote work is untouchable

Thanks to the Great Resignation, HR leaders have limited leverage to question employees about their travel plans or tell them where they can and can’t work during vacations. In an August survey conducted by PwC, 65% of US employees said they were looking for a new job, and in September, a record 4.4 million workers – about 3% of the U.S. workforce – left their jobs voluntarily. Employers are struggling to keep and replace employees, especially if they don’t support remote work.

This year, 49% of remote workers told Gallup they would be likely or extremely likely to look for a new job if their employer eliminated the option to work from home (and demanding to work from anywhere is a small leap of logic away). One HR consultant estimates that employers are missing out on 50% to 70% of job seekers by not offering flexible-remote work options. In Topia’s Adapt survey, 91% of employees agreed that they should be able to work from wherever they want as long as they get their work done.

Saying “no” to remote work during the holidays (you mean I can’t do my job on vacation?!) is a sure way to lose talent and scare off recruits. What alternatives do HR leaders have?

A talent and compliance strategy that optimizes for “yes”

Employers that want to retain and attract talent must be able to say “yes” to as many remote work requests as possible. To say “no” around bonus season, after which employees have nothing to lose by quitting, is especially risky.

So, how do HR leaders say “yes” more often and make “no” more understandable?

1. Set clear, fair parameters around remote work

Plenty of companies have announced remote work policies ranging from “work from anywhere” (often not true) to a hybrid policy requiring several days per week in office. Many employers, however, don’t have a coherent response for when employees request a month of remote work from a Caribbean island that is advertising its remote work visas during the holidays.

Before being caught off guard, set parameters. Should employees have to meet a minimum tenure and performance rating to qualify for extended remote work? Should they have to work within specific time zones depending on their role (e.g., customer service) or on where their team is located? How many days can an employee spend in a given state or country? Should employees be restricted to locations where the company has a legal entity? What about all of these new remote work visas popping up? Decide before employees put HR on the spot.

2. Use software to document where employees are working

In Topia’s Adapt survey, 94% of employees said they would be comfortable with an employer tracking their location at the country, state, and city level. In other words, employees probably don’t report their location to HR because they’re either unaware of the compliance risks or unwilling to deal with the hassle.

That means employers could implement automated, private tracking solutions for the explicit purpose of enabling remote work in more places. The location data would enable finance teams to comply with payroll withholdings and allow HR to address immigration risks before employees overstay their welcome or impact work down the road.

For instance, many UK-based employees don’t realize that leisure and business travel both count towards the 90-day limit they can spend in the European Union’s Schengen area over a 180-day period. After a two-month stay in the Tyrolean Alps, that leaves one month of EU business travel for the next six months.

3. Encourage travel to locales that welcome remote workers

An increasing number of countries recognize that remote work can boost tourism during the pandemic. Antigua and Barbuda, Barbados, Costa Rica, Croatia, Estonia, Portugal, and Spain, among others, have introduced visas that enable visitors to work remotely, without tax obligations or other compliance risks, during an extended stay. HR should keep a running list of these countries and nudge employees with wanderlust to take advantage of them.

4. Have policies in place for safety

If an employee requires medical care during their remote work holiday, does the company’s insurance policy cover it? If the employee checked the “leisure” box on immigration forms, will the insurer deny the claim? Employers need to decide whether expanding their health insurance coverage for remote, international work is worth the investment. If not, HR needs to be upfront with employees that travel insurance, health expenses, and evacuation costs (e.g., in the event of a natural disaster) are on them.

The 2022 talent strategy

Into the holidays and 2022, the most competitive talent strategy will attempt to make every remote work request and dream come true. Although the Omicron variant may stifle travel over the next month, it will also delay office re-openings and reaffirm that remote work is here to stay.

Unfortunately, tax and immigration authorities believe in rules, not cultural norms. Until their policies evolve to embrace and enable remote work, HR can’t ignore the compliance risks.

Steve Black is chief strategy officer at Topia.