6 Questions From: Hybrid workplace considerations for employers
As employers continue to craft and refine their remote work strategies and policies, there are a number of operational, legal, and tax implications to take into consideration.
In the January 2022 installment of the CohnReznick National Tax Webinar Series, members of Lindabury, McCormick, Estabrook, and Cooper, P.C.; Consilium Partners, an affiliate of CohnReznick; and CohnReznick offered an overview of key concerns to think through, on topics including:
- Hybrid, telework, and payroll
- Employee misclassification concerns
- Vaccines: Mandates, exemptions, and federal vs. state preemption
An on-demand version of this webinar is now available here; register to watch.
Read on for six additional takeaways on taxation, technology, and other hybrid work matters, based on questions asked during the event, with answers provided by presenters Lance Rothenberg of CohnReznick and Richard Mirliss of Consilium Partners. (Questions have been revised for length, clarity, or applicability.)
Written by Lance Rothenberg, CohnReznick
Q: Should a company review its corporate income tax filing requirements as a result of employing remote workers?
A: Yes. Employing a remote workforce may trigger a host of new tax obligations. Remote employees working in a new jurisdiction will very likely trigger physical presence “nexus” for the employer. As a result of having nexus with the new state(s), the employer should evaluate whether it has a new corporate income tax or business entity tax filing obligation in that state(s).
Q: When an employee works from a jurisdiction that is different from where they reside, is there a set period of time that triggers a tax change?
A: Employing a remote workforce or having employees working from within different jurisdictions can present a variety of complex tax compliance considerations for both the employer and the employee, and there could be a variety of different time frames that impact tax changes depending upon the issue and the jurisdiction. The employer will want to understand the location of its workforce so that it can evaluate whether it may have new compliance obligations due to both where its workers are performing services and for how long (i.e., the location and duration of their work). Withholding tax requirements, for example, vary state by state, and the employer might be subject to new registration and withholding obligations. The employee, on the other hand, will want to understand whether their own presence within a jurisdiction triggers a nonresident filing obligation, whether they might be at risk of being treated as a resident in more than one jurisdiction, and the impact of multiple withholding upon their resident credit in their state of domicile. These can be complex issues.
Q: We are a New York employer, but since the onset of the COVID-19 pandemic, we have had employees who have continued working from their homes in neighboring states. How does New York’s “Convenience of the Employer” rule impact our withholding requirements?
A: The impact of New York’s “Convenience of the Employer” rule is a common source of complexity and questioning among New York-based employers. In brief, the Convenience of the Employer rule is a wage sourcing rule that looks to treat the income of a New York nonresident employee who is assigned to an office location within New York as New York-source regardless of the actual location where the employee performed services, with certain exceptions. In other words, if a New York nonresident works from home rather than from the New York office for their own convenience (as opposed to at their employer’s direction), the Department of Taxation and Finance takes the position that this income is New York-source income, because the employee is otherwise assigned to the New York office but chose to work from home. This is true even with respect to teleworking arrangements throughout the duration of the COVID-19 pandemic. As such, New York will look for withholding tax. On the other hand, the employee’s home state may also require withholding under certain circumstances. These issues merit careful consideration.
Written by Richard Mirliss, Consilium Partners, an affiliate of CohnReznick
Q: What technologies are we seeing emerge as critical for a successful hybrid workplace transition?
A: The key elements technology has addressed thus far have been to accommodate or enhance the following functions: space scheduling, hoteling, productivity, onboarding, workflow management, communication, and collaboration. As technology continues to evolve and adapt to the changing needs of corporate America, more enhancements and solutions continue to come to market. We have used many products and services in each of these categories to assist organizations with hybrid migration. Overall, our feeling is that technology is the last piece of the puzzle (but critical) and that the “organizational change” initiatives and manner in which the technology is implemented have had the most powerful impact for employees and their acceptance/enjoyment of the transition.
Q: What are some ideas and best practices to enable going 100% remote or allowing very limited attendance per week?
A: The strategy and organizational change created and implemented by senior management has been critical to any adjustment to a new operating environment. If the strategy is supported and reinforced on a day-to-day basis, we’ve seen that any arrangement is possible and can become successful. 100% remote is certainly feasible for any operation as long as its business model is sustainable in such an environment. If face-to-face interaction with clients, manufacturing of a product, employee management, and/or services administration can all be handled without a physical presence, then such a dramatic shift may not be a problem.
Q: What are the major concerns for the hybrid work environment going forward?
A: Innovation, collaboration, and commitment are the major issues we hear over and over as pressing management concerns. Employees appear to love the flexibility and productivity of working in a hybrid environment. Employers, on the other hand, fear the longer-term impacts it may have on the organization. Because they can’t have their “finger on the pulse” of the organization the way they have been accustomed to, they may question the “feel” of managing and momentum.
Hybrid Workplace: Operational, Legal & Tax Considerations for Employers
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