The future of remote working: Are virtual assignments the future of mobility after COVID-19?
As corporate global mobility teams respond to the myriad of challenges of COVID-19, many are considering a completely new approach and exploring the concept of virtual assignments.
What is a virtual assignment?
There are two main types of virtual assignment:
- An employee living in country A is employed by and working for the benefit of an affiliated company in country B.
- An employee living in country A is employed by a company in country A while working for the benefit of an affiliated company in country B.
What are some of the challenges?
Each type of virtual assignment presents challenges that need to be overcome in order to respond to home and host country compliance requirements. The list below summarises some of the main areas to be reviewed for both types of virtual assignment:
- personal tax: where is the tax payable?
- social security: where are the social security contributions payable?
- employer obligations: which company needs to withhold tax and social security contributions?
- immigration/labour law: even if the assignment is virtual, what are the immigration/labour law requirements?
- permanent establishment: does carrying out the majority of the duties in the home country create a permanent establishment risk?
- corporate residency: what is the impact on corporate residency if key management decisions are taken outside the host country by executive/ C-suite virtual assignees?
- corporate tax/transfer pricing: how should employee cost re-charges be structured?
There are other non-compliance- related matters that might also need to be considered, such as time zone differences and the need to travel to the host country to spend time with team members and host country management, and the frequency of such visits.
How can Global Mobility teams prepare themselves?
Standard global mobility policies are not usually written with virtual assignments in mind. A new set of policies and internal guidelines often need to be created to provide clarity for these types of assignment.
Virtual assignments may not in all situations respond to the actual needs of the business. Before suggesting a virtual assignment, Global Mobility teams would be well advised to connect with the business leaders to understand their exact requirements and weigh up the advantages of a virtual assignment compared to a traditional one. In spite of the challenges, virtual assignments have many advantages. We list some of them below:
- virtual assignments can be substantially less expensive than traditional ones.
- virtual assignments can increase diversity and inclusion as traditional assignments are not always practical for certain employee groups, such as dual career couples, parents and care-takers.
- it may be possible to undertake a virtual assignment much more quickly than a traditional assignment.
It’s perhaps too early to say that virtual assignments are the future of mobility they remain an interesting option. However, compliance challenges should be addressed before `sending’ someone on a virtual assignment. In addition, virtual assignments may not be the right choice, depending on the mobility goals of the business and management. They also require careful planning and appropriate policies, just like traditional assignments.
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