In the first of a series of blog posts looking at international remote working, we will introduce the basic concept, look at some historical context and also explore the different ways in which companies are currently utilising it. Later blog posts in this series will then focus on the many complex compliance challenges associated with this type of cross-border working, as well as looking at salary and benefits considerations.
Although some companies may have slightly different definitions, in general international remote working can be defined as an employee working remotely ‘in’ Country A whilst they are physically located in Country B.
However, it is by no means simple to define the location ‘in’ which work is being carried out. Companies may consider the location of the ‘role’ based on factors such as the nature of the work being carried out, which company pays the salary, or the physical location of colleagues who directly report to the employee. In most cases it will ultimately come down to the location of the company which is the beneficiary of the work being done by the employee, but again this is not something which is always easy to determine.
Indeed, international remote working can often be interpreted differently by tax authorities around the world too and may be different from how the company itself interprets this. Our recent blog post on the growth of the ‘economic employer’ concept also explores this challenge.
The related tax compliance challenges involved with remote working will be covered in our second blog post, but we can perhaps expect governments and organisations such as the OECD to begin clarifying the rules and recommendations around how to define the location of work in response to the recent rise in this type of working.
When talking about international remote working, we can broadly split it into two types. The first category is virtual assignments, where the employer specifically requests that the employee works for an overseas office. Typically, this will involve the employee remaining in their home or current location but performing a role for a branch or division in a different country. The second type, where the employee requests to work from a different country to the one in which their role is located, is often referred to as ‘international flexible working’ (this is the term we will use) but can also be known as ‘work from anywhere’ or ‘digital nomad’.
Whilst these two types might initially seem similar, from the employer perspective they are fundamentally different and consequently require different considerations in terms of compliance, cost management and general policy considerations.
Current uses for virtual assignments
Although the Covid-19 pandemic has led to renewed consideration of virtual assignments among companies, they are not a new concept and have been discussed as a potential replacement for physically relocating employees for as long as technology has made it viable for people to communicate instantly in different parts of the globe. In fact, twenty years ago, as part of our 2001 Expatriate Salary Management Survey, 22% of companies reported organising virtual assignments. Furthermore, at that point nearly three-quarters of organisations expected the volume of virtual assignments to increase in the following three to four years.
That increase clearly did not come to pass, however, and according to our 2021 Managing Mobility Survey only 27% of companies currently use virtual assignments. Therefore, despite the expectations of those companies back in 2001 and the vast improvements in communication technology since then, there has been a very slow uptake in virtual assignments.
Our data on how companies are using virtual assignments shows that currently the majority are using them as short-term solutions to the specific challenges presented by the Covid-19 pandemic. The chart below from our 2021 Managing Mobility Survey shows that over 70% of companies are using them to enable employees to begin working in the host location before physical relocation has occurred. Furthermore, the next two most common uses are to enable employees to continue working in the host location after the employee has repatriated (either temporarily or until the assignment ends), and to work for the home entity while they are still physically located in the host location and unable to travel home.
These three uses all point to virtual assignments being used as additional components of long- or short-term assignments when people are temporarily unable to physically relocate, and not as a standalone assignment type. The fourth most common reason driving virtual assignments is also related to the Covid-19 pandemic, where companies have used them to negate health and safety concerns about the host location.
However, there are companies that have been using virtual assignments since before the pandemic and others using them during the pandemic for non-Covid related reasons. The drivers include providing flexibility, saving on costs, alleviating family concerns associated with physical relocation and enabling people to start work for the host entity more quickly. Additionally, some of the health and safety concerns about host locations causing companies to use virtual assignments may not necessarily be Covid-related.
Future uses for international remote working
Similar to what we saw in 2001, there are indications that companies expect to see increases in the use of virtual assignments, with nearly three-quarters of companies again reporting that they expect to see more of them in the next few years, according to our 2021 Managing Mobility Survey.
Virtual assignments are likely to be used for the reasons indicated in the chart above, but also for employees’ personal considerations. Employees may be unwilling to relocate to a new country for a variety of reasons, such as safety concerns, dual-career families, disruption to children’s education, or the likely refusal of entry visas to same-sex partners. In these circumstances virtual assignments may enable companies to choose assignees from a wider pool of talent that would otherwise be unwilling or unable to go on a physical assignment. The cost savings of using virtual assignments may also mean that companies are now able to offer a greater number of assignments, helping develop more employees through international exposure without the extensive costs associated with a traditional assignment.
In terms of international flexible working, the vast increase globally in the number of people working from home over the last year has demonstrated the viability of remote working across international borders and we have already seen an increase in employees requesting to work from locations other than their current ‘home’ country. We also expect to see companies exploring the hiring of international remote workers as contractors rather than employees, and the impact and compliance challenges associated with this will be discussed in our next blog post. In response to the increase in international flexible working, companies will need a clear policy as well as internal mechanisms for approving and tracking these requests in the future.
For both types of international remote working, Global Mobility teams should be involved in the discussions and decisions that companies are increasingly making about the potential implementation of these methods of working across international borders.
As we have seen, despite the advances in technology since 2001 and the expectation of an increase in the use of virtual assignments, this has not happened just yet. Whether Covid-19 will prove to be the spark that results in a large increase in the coming years remains to be seen but companies need to be prepared to assess whether international remote working is a possibility for them. The next instalment in this blog series will explain some of the reasons why companies have so far struggled to implement international remote working, and whether these challenges can be overcome.