Employee Mobility: Work Anywhere?

With remote work becoming the new normal for many, more companies are now willing to hire remote workers and hire them from anywhere. According to a recent survey by The Conference Board, more than one third say they are willing to hire 100 percent remote workers in the U.S. or internationally. In that same survey, just 12 percent were receptive to that approach before COVID-19. Compared to before the pandemic, companies are now far more willing to hire remote workers (52 percent willing before COVID-19 vs. 88 percent now). However, half still prefer that employees live within commuting distance to the office location.

That being said, in a recent KPMG article titled “Work Anywhere, Together” Joseph Parente states, “Generally, a state or municipality can impose business income taxes on a business when it has a physical location or employees operating within the jurisdiction’s boundaries. In some jurisdictions, even a single employee working in a state may be enough to create nexus, meaning a sufficient connection between a state or municipality and a business that allows the state or municipality to impose a tax on the business.

Businesses should be equally wary of employees working in states that have not issued revised nexus policies for employees’ teleworking there due to the coronavirus. Florida, Connecticut, North Carolina, New Hampshire, Virginia, and Tennessee are among the states that have not done so. It is not yet clear whether an employee teleworking in one of these states will trigger nexus with an out-of-state businesses.

The same issues hold true for employees who seek or have left the country to work in Wi-Fi cafes and beaches.  Employers need to be aware of both employee taxation and inadvertently creating a permanent establishment on foreign soil.