In the first of a series of blog posts looking at international remote work, we will look at the basic concept of what this means, provide historical context, explore different ways companies are currently using it and what should be considered if you are thinking of adding international remote work to your suite of Global Mobility solutions. Later blog posts in this series will focus on compliance challenges associated with this type of cross-border work arrangement, as well as salary and benefits considerations.
Generally, ‘international remote work’ means a scenario where the employee is not based in the same country as their employer. However, conversations with clients show that companies have slightly different definitions of international remote work. Some companies consider the location of the ‘role’ to be determined by 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. To complicate matters, international remote work can also be variously interpreted by tax authorities in different jurisdictions, sometimes differing from how the company itself interprets it. Our blog post on the growth of the ‘economic employer’ concept also explores this challenge.
What is international remote work?
From our perspective, and also for the purpose of this article, international remote work means a scenario where the employee is not present in the country where the organisational entity which is benefitting from the employee’s services is located. At present, there are two main types of international remote work arrangement:
- Virtual Assignment; and
- International Flexible Work.
A Virtual Assignment is one where the employer requests the employee to perform roles for an entity in another country. This typically involves the employee remaining in their home location but performing the role for a branch or division in a different country. International Flexible Work arises where the employee requests to work from a different country to the one in which their role is located. It is also commonly known as ‘work from anywhere’ or ‘digital nomad’.
Both of these types of international remote work arrangement are widely thought to have arisen in response to the Covid-19 crisis. However, although the pandemic did lead to a significant increase in interest in them, they are not new and have been considered as potential alternatives to 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, over twenty years ago, as part of our 2001 Expatriate Salary Management Survey, 22% of companies reported that they organised 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 did not come to pass, however, and in our 2021 Managing Mobility Survey only 27% of companies used Virtual Assignments, a rise of just 5%. Therefore, despite the expectations back in 2001 and the vast improvements in communication technology since, there has been very slow uptake of Virtual Assignments.
Why is international remote work offered by companies?
In spite of the slow rate of growth in adoption, there has nonetheless been an increase in organisations using international remote work arrangements. It seems, however, that they are more commonly adopted on a contingency basis when other types of cross-border work are not possible. The chart below from our 2021 Managing Mobility Survey shows that over 70% of the companies which used Virtual Assignments did so in order to enable employees to begin working in the host location before physical relocation occurred. Furthermore, the next two most common uses were to enable employees to continue working for the host entity (either temporarily or until the assignment ended) after they had repatriated, and to work for the home entity while they were still physically located in the host location and unable to travel home.
These three uses all point to Virtual Assignments being used as an alternative to 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 their usage was also related to the Covid-19 pandemic: where companies 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 for doing so 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.
When speaking to our clients we find that Virtual Assignments are often of limited use. They are simply not possible for certain industry groups and job roles (for example, certain roles in the manufacturing, technology, pharmaceutical and engineering sectors which require an employee to be in situ). At the same time, in roles where international remote work patterns are possible, companies who have decided not to embrace this arrangement indicate that the remote nature of the roles remains a hindrance that technology has not been able to overcome. Often too, rather than being classified as a Virtual Assignment it is simply the case that employees are performing a role or taking part in projects virtually across borders as a natural part of their work.
Future uses for international remote work
In spite of these limitations, according to our 2021 Managing Mobility Survey, three quarters of companies still expected to see increases in the number of Virtual Assignments in future. However, the reason behind such predictions was the growing occurrence of these assignments being employee driven. Employees may be unwilling to relocate to a new country for a variety of reasons, such as safety concerns, health considerations, dual-career family consideration, 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 from a wider pool of talent than would otherwise be the case if relocation to the host location was the only option.
Additionally, the vast increase in the number of people working from home during the Covid-19 pandemic led to employees requesting to work from locations other than their current ‘home’ country. While companies may not be willing to permit this arrangement on a long-term basis, International Flexible Work has been used effectively as a benefit to offer employees, especially within certain industry sectors, or relating to specific types of roles or among a younger staff cohort, where it is often most feasible. The compliance risks involved will be discussed in a future blog post, but there is also a danger that not offering this option can adversely impact an organisation’s talent attraction and retention strategy.
The cost savings of using Virtual Assignments and the fact that they were used effectively during the Covid-19 pandemic may also mean that companies are now more likely to consider international remote work more seriously. In spite of potential compliance risks and costs, they offer organisations the opportunity to give employees greater international exposure through in-depth collaborations with colleagues in other locations without the extensive costs associated with a traditional assignment. It was likely no coincidence that the optimistic expectations for Virtual Assignments in 2001 came during a recession, and today the global economy remains in a delicate state even as we recover from the Covid-19 pandemic.
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.
What should Global Mobility do?
For both types of international remote work – Virtual Assignments and International Flexible Work – Global Mobility teams need to be involved in the discussions companies are increasingly having about the potential implementation of these methods of working across international borders. From a compensation and benefits perspective, policies need to align with other practices in your suite of mobility solutions: excessively incentivising people to accept a Virtual Assignment may limit your ability to physically relocate key staff to the host location.
Moreover, while international remote work options can enhance organisations’ mobility solutions, they may not be suitable for everyone. 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 significantly yet and Covid-19 was not a big enough spark for large-scale adoption. Meanwhile, compliance issues have led many to scale back their ambitions with regard to international remote work. Therefore, when designing policies or processes it will be just as important as with other types of employee mobility arrangement to ensure compliance risks, such as those associated with employment law, immigration and tax, are fully considered. The next instalment in this blog series will explain some of the reasons why companies have so far struggled to implement international remote work, and whether these challenges can be overcome.
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Have a look at the other blog posts of the series to learn more about international remote working: