What to know when your staff works in another jurisdiction
A growing number of countries are offering remote work visas to encourage employees to work remotely in their jurisdictions (Westend 61/Getty Images)
Over the past two years, organizations have become adept at sustaining a remote workforce. But, while “remote” has often been used to refer to working from home, the notion has been expanding to include other geographical locations as well.
“There is definitely a trend of companies enabling employees to work in locations outside of their home base,” says Sonia Gandhi, CPA, partner and national leader for KPMG’s Global Mobility Services (GMS) in Toronto. “This has become an incredibly important area for employers.”
If you have employees who want to work in different jurisdictions or if you are considering expanding your remote work policy, here are some facts to keep in mind.
RESEARCH PAYROLL AND TAXATION RULES
For employers, it’s important to start by looking at the implications of working out of province from a payroll, as well as a personal and corporate tax perspective.
As Howard Levitt, senior partner with Levitt Sheikh in Toronto, explains, companies that have a remote workforce carrying on business in other jurisdictions (outside of Ontario, for example) will be subject to the laws of those jurisdictions. “They may require different accounting, taxation and regulatory procedures than Ontario.”
There is often the question of which provincial or territorial tax table to use for workers in Canada. The CRA’s policies on place of employment provide essential guidelines to follow. “However, the government hasn’t taken a look at all this with all the remote work that is taking place today,” says FCPA Bruce Ball, VP of taxation with CPA Canada.
KNOW THE INTERNATIONAL LANDSCAPE
“An even bigger issue is hiring outside of the country,” says Ball. “You can’t count on a country having the same rules as we do—especially if the employee is making key decisions and entering contracts. If you’re employing a permanent resident outside of Canada, employers may be obligated to register with another country’s tax authorities and withhold tax there. Other tax issues beyond the employment relationship could also arise depending on the circumstances.”
If an employee asks to work abroad for an extended time, it is important to determine if they have the appropriate immigration status and certification to work in that country. A growing number of countries are offering remote work or nomad visas to encourage employees to work remotely in their jurisdictions, says Gandhi. “These types of remote work visas increased over the past year.”
Transfer of qualifications and licensing should also be taken into account, says Levitt. “You cannot hold yourself out as having a designation such as professional engineer, pharmacist or CPA in a jurisdiction if you are not licensed with that [designation] in that jurisdiction.”
EXPLORE HEALTH COVERAGE AND PAY REQUIREMENTS
Employers also need to find out if their coverage extends to outside jurisdictions and, if not, find a different provider with wider geographic coverage or a separate carrier based on the employee’s location. That was a prime consideration for Josh Zweig, CPA, CEO of LiveCA LLP, which has a remote workforce of 110 members who often travel to locations around the world.
“Rather than spend hundreds of dollars on a benefit that an employee may not use, we wanted to ensure that our benefits were expansive enough to ensure people can take advantage of them even when they’re outside of the country. For example, we implemented a health spending account that allows employees to submit expenses incurred outside of Canada. There are other options on the market, such as nomad insurance.”
Determining pay levels can prove tricky as well, Zweig adds. “If you pay a top provincial rate for everyone, you might be overpaying for some roles and underpaying others who live in different provinces. It’s important to have a very clear compensation strategy that employees can understand in view of these discrepancies.”
REVIEW EMPLOYMENT STANDARDS
Companies should also consider other legislative areas such as provincial or international employment law standards, overtime provisions, privacy laws and security requirements.
“In Canada, the general rule of thumb is that the law of the province or territory where the employee resides governs their employment,” says Emily Siu, employment, labour and contracts lawyer at Spring Law in Toronto.
Siu adds that when you look at other countries, standards get more complicated. “In most cases, the [remote employee] may be governed by that country’s law, even if their employer is in Ontario, all the work they do is for Ontario, and they are being paid in Canadian dollars.”
“A key consideration for employers is making sure you know where the remote employee is working,” says Ball. “Some employers may institute work at home rules prohibiting the employee from working outside Canada other than during short personal trips.”
One of the biggest issues can be termination, says Siu. “Other aspects to consider include overtime and work hours. These elements will differ from jurisdiction to jurisdiction based on different employment legislation and could open up an employer to liability.”
Finally, there are practical concerns around employees working in different time zones and the arrangements needed to accommodate them. Security and health and safety requirements should also be considered.
The tax complexities and uncertainties for managing fully remote workers will continue for a while as legislation catches up, says Ball. “The best course of action is to get advice from a taxation specialist.”
BRUSH UP ON REMOTE WORK RULES
Find out more about the implications of remote work on taxes, as well as the tax consequences of working abroad or leaving Canada permanently. And learn about programs and policies that can help you engage, inspire and retain staff, and ways of building a thriving team culture when you are working remotely.