Closed borders and workplaces open immigration, tax and legal issues

Article by: Marc Burrows, KPMG

Before the Novel Coronavirus (COVID-19) pandemic, many of us took freedom of movement for granted. Business trips have become easy to arrange, cross-border commutes and short-term assignments are common, and younger generations expect their careers to include global travel. But measures to contain COVID-19’s spread slammed the brakes on cross-border travel, stranding business and other travelers in foreign locations and leading many businesses to send their employees to work from home. 

For the leaders of businesses with globally mobile workforces, the most immediate priority is finding where their people are and doing what it takes to protect them and their families. Even prior to this time, tracking and monitoring employee movement was a huge challenge, and companies that have invested in global mobility management systems are realizing the benefits. Other companies are finding it harder to determine the location of all their employees, whether domestically and abroad, or to help their business travelers navigate the quickly changing conditions, responses and protocol being put in place by countries and territories worldwide.

Over the longer term, critical measures to slow the virus’s spread and ease pressure on healthcare systems, such as physical distancing, quarantines and stay-at-home orders, will be with us for an unknown length of time — as will closed borders, stranded employees and work-from-home arrangements. These measures are hugely important, but for as long as they endure, they can not only erode general workplace effectiveness, they can also create new complexities, discussed below, for immigration, tax and employment law, and for workforce engagement and productivity.

Immigration issues in a world of closed borders

The speed with which companies and their employees needed to react to protect their people put them in the crosshairs of compliance rules governing immigration, work permits and business registration.

As countries and territories everywhere enact and update response policies and emergency measures, it’s critical to confirm that employees have and retain the legal right to work at their current global locations during the outbreak. For example, new or temporary immigration rules may affect staffing, so special measures may be needed to manage employees relocating to their homes or safer jurisdictions.

Mobile employees who are stranded outside their usual assignment location may also need to review their host location/jurisdiction work permit. These may become invalid after extended absence from the country or territory/location/jurisdiction and the employee may be required to be physically present in the country or territory/location/jurisdiction for renewals. While we expect countries and territories will be flexible, this is often left to the authority’s discretion and the process may be unclear, so it is important to take steps to address these issues early.

Immigration complications may also arise when employees come home. For example, even with all the appropriate immigration paperwork in place, returning employees can face strict quarantine requirements on when they enter their home countries or territories, and it’s important to warn them about what to expect and support them through their quarantine period.

In such situations, cultural differences can raise significant risks. Many countries and territories, including the US, Canada and several jurisdictions in Asia, have made it a criminal offense to breach self-quarantine rules, but these rules have been ignored in some locations. We have already seen cases of assignees having their permanent residence status revoked for such breaches and being forced to leave the country or territory. Such an offense would trigger an automatic dismissal clause in many employment contracts.

Domestic employees also need to be considered. Like international assignees, third-country or territory nationals employed under a work permit often need to work a certain number of hours in the office, and there may be minimum pay or management and supervision requirements. Working from home full-time or other changes to employment conditions may breach these conditions. We are asking the authorities in many locations to clarify the immigration implications of complying with COVID-19 related measures.

Personal and employment taxes and COVID-19 relief

Personal and employment taxes always need to be considered where a person is working in a different country or territory from where they are employed. These same tax issues arise at this time, especially with large numbers of employees moving quickly without time to prepare. These exposures need to be reviewed together with the local emergency measures that countries and territories are adopting to address the financial fall-out.

Permanent establishment risk is one of the most important issues. Businesses need to closely monitor any tax exposures created when people work for an entity in one jurisdiction while located in another. We expect tax authorities will show forbearance in the circumstances, but this remains to be seen. The Australian Tax Office recently issued guidance[1] advising, among other things, that it will be lenient about permanent establishment issues during this time, but the policy does not yet cover personal tax exposure for employees, or employer payroll and reporting obligations. The OECD has also released a helpful paper outlining their recommendations on how tax treaties should apply to various employee mobility scenarios.[2]

When deciding whether to allow a stranded employee to work from the overseas jurisdiction they find themselves in, consider whether a tax treaty applies that could potentially prevent new tax liabilities and payroll obligations being imposed on you as their employer.

To help workers and businesses stay afloat during this time, jurisdictions around the world are extending tax filing deadlines, deferring tax payments and other important concessions. These local emergency measures can significantly improve cash flow and ease the pressure of tax compliance on your business. We expect to see more concessions being announced in more countries and territories in the coming days and weeks, so it will be important to monitor these developments as we move forward.

For a jurisdiction by jurisdiction overview of tax deadlines and other measures, see our tracker of jurisdictional measures and government reliefs in response to COVID-19.

Employment law considerations

Managing the employee experience at this time is top of mind for many employers, but they must also ensure the business continues under severe financial strain. For many companies, this means thinking about adjusting employment arrangements to stem the loss of jobs, and this can have legal implications.

Local employment laws do not usually provide for pandemics, so any changes to employment arrangements at this time likely require an agreement between the employer and employee, preferably in writing. All correspondence leading up to the agreement by the employee should also be documented to avoid disputes later on.

Common areas of concern and questions for employers to ask are as follows:

  • Remote work arrangements: Employers need to decide whether these arrangements are suitable and whether there are better alternatives. With their employers at home, companies also need to decide how they will monitor productivity, and how they will continue to foster inclusion and support diversity.
  • Unpaid or part paid leave: Financially stressed employers may have to make hard decisions about putting employees on unpaid or part paid leave, or requiring them to use annual leave to cover absences. As noted, you may need to gain the employee’s agreement in some jurisdictions.
  • Current assignees: For employees on foreign assignment who want to come home, employers need to know the legal terms under the assignment and employment contracts about the right to continued employment, as well as early repatriation benefit and allowance entitlements.
  • Workplace safety: Many jurisdictions require employers to provide safe working environments, creating legal obligations to safeguard the health of business-critical workers who still work at the company’s premises. Also bear in mind that these rules apply even when employees work remotely.
  • Overtime:  Overtime is a big regulatory issue that employers often overlook. Remote working makes it more difficult for employers to control overtime and for employees to prove their hours. In these situations, closer performance management and more regular time reporting can help.
  • Equality:  Managing employee circumstances in a crisis rarely allows perfect solutions for all employees. Despite the time pressures, employers need to be careful to avoid decisions or policies that do not consider the diversity of their employee population or may lead to discrimination.

Keeping workers safe and engaged — The 5C model

Employee relations and respect for employee rights is as important as ever to maintain trust and sustain your business. Ongoing communication is absolutely critical. Business leaders and those who support employees, including Global mobility, tax and legal teams, need to be visible and accessible to the employees they support, especially those with heightened concerns or unique situations that require insights and guidance.

Remember that it’s okay to not have all the answers. The best approach is to stick to the facts that we know today and avoid speculation amid rumors and predictions.

While work-from-home policies are being advocated and implemented widely at this time, some businesses are addressing this staffing issue for the first time. These businesses need to determine how remote working arrangements are practicable or suitable for their operations — sometimes after the employees have already been sent home to work.

Amid the global economic slowdown, managing surplus capacity to align with business needs and control costs is also important, raising issues around employee pay as schedules change to meet fluctuating or reduced workforce demands. Some governments, including those of the UK and Canada, are introducing schemes to underwrite or supplement worker’s pay so companies may keep more of the workforce employed.[3]

The five C’s model offers a framework to help you decide what needs to be done to maintain a connected, engaged and productive workforce.

  • Compliance: What are the regulatory implications of remote working for a sustained period? For example, how does your social media and digital communication policy apply to remote working?
  • Connectivity: How will teams stayed connected and engaged in this emerging environment? For example, what steps can you take promote the mindset that we’re all in this together.
  • Cost: How much will the workforce cost to run as we ensure business continuity? For example, are part-paid leave or unpaid leave on the table? When should this be initiated, how would it be monitored, and what are the implications for people and compliance?
  • Capacity: Are there enough resources in the right locations, and can they do what’s needed? For example, what is your plan to promote well-being and protect productivity? Do you understand the diversity of your workforce and the home environment that will work in?
  • Capability: What skills and capabilities are needed to keep your workforce operating effectively for a sustained time period? For example, can you set up remote mentoring and knowledge sharing programs to ensure continuous learning?

Finally, it’s important to look ahead to the other side of this. Many of us have quickly adapted to innovative ways of working – more flexible, more digital, more sustainable – and we need to hold on to these to benefit our businesses in the years ahead. The way you manage this challenging period with your employees — as well as your customers, suppliers, regulators and other stakeholders — can help strengthen your brand as the recovery sets in and lay a foundation for your future success.

Source

1. COVID-19 frequently asked questions
2. OECD
3. Government to pay 80% of salary for furloughed workers and  Additional Details on the Canada Emergency Wage Subsidy

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