Pay cuts, taxes, babysitting: what will another year of remote work look like

Among the questions companies are trying to solve: Who should bear the tax costs when employees move to new locations while working remotely? And what’s the most effective way to support working parents?

Companies say there’s a lot at stake, from employee happiness and productivity to regulatory consequences, if they make these bad decisions.

Employee relocations to new cities, states and countries have businesses and workers struggling with tax issues.

Facebook Inc.

Last year, CEO Mark Zuckerberg told employees that starting in January, the company will use its virtual private network, or VPN, which employees use to access company systems to determine where they work. for tax purposes.

The question is whether workers who told Facebook they had moved from places like California and New York – and therefore shouldn’t be paying state and local income tax – really moved, according to one person close to the case. Additionally, if an employee has moved to another state or city where there are local income taxes, the business and worker could be held liable for not paying them.

Facebook ultimately decided not to track the locations of its employees based on their VPN usage. The company now says that when its employees apply for – and are approved for – long-term remote work, they must confirm their new location with the company, as it could affect their taxes. Facebook also said salaries for some remote employees could be affected if they live in a location where the cost of labor is different from their previous location.

Lyft Carpool Service Inc.

recently told its US-based employees that staff members must work in one of Lyft’s 36 registered states for tax purposes depending on where the Lyft company is registered. If an employee lives outside of states where Lyft is registered as a corporate entity, such as Maine or Wyoming, they have until March 31 to switch back to another, according to an internal email reviewed by the Wall. Street Journal.

Additionally, if Lyft workers plan to live outside the state they worked in before the start of the Covid-19 pandemic for 60 days or more, they must submit a form by March 31 so that the company can tax them in this new state – but they can only submit that request once, according to the email.

Companies such as payments company Stripe Inc. have offered employees leaving San Francisco, New York or Seattle the option to relocate for a one-time bonus of $ 20,000 if they agree to a pay cut of up to 10%. . Others, like Microsoft Corp.

, indicated that benefits and compensation may change based on the company’s pay scale by location.

A number of Fortune 500 companies across all industries are considering changing their pay if an employee moves from a city like San Francisco to Texas, says Jimmy Etheredge, North America general manager of consulting firm Accenture PLC.

“Almost all of them have a cost of living element in their pay,” he says. “As they reflect on this future of work which may involve more remote working, which may involve talent in places they didn’t necessarily have before, they will be looking to make adjustments.”

Other tech companies continue to pay people the same regardless of zip code. Spotify technology AT,

the Swedish-based audio streaming company recently told its employees, whom it calls “band members,” that they can work from anywhere in their assigned country and keep their same pay.

“When you move, we won’t change that,” said Katarina Berg, director of human resources at Spotify. The company, which has around 6,500 full-time employees, will adopt national pay scales for each job based on the compensation of competing companies and set by the prevailing salary in high-cost cities like San Francisco or New York, where many many Spotify workers are based.

The protracted estrangement puts pressure on companies to do more to help parents care for their children, while making sure not to disturb workers without dependents.

Some companies have offered Covid-related allowances that workers can use for everything from babysitting to training equipment. Palo Alto Networks Technology Company Inc.

now offers workers a $ 1,000 allowance that can be applied to a menu of options. Parents can use the money to help their children, while others can apply it to a Peloton bike.

“No two employees are the same in the support they need,” Nikesh Arora, CEO of Palo Alto Network, said in a blog post announcing the benefits.

Others offer special benefits to parents and guardians. Bank of America Corp.

offered eligible employees, including those working in its branches, up to $ 100 per day for child care expenses. The company also increased the number of days employees can use emergency child or adult care facilities to 50 per year, from 40.

For workers who were used to frequent business trips before the Covid-19 era, another question arises: will their customers want visitors when the pandemic ends?

Brad Preber, CEO of Grant Thornton LLP, one of the world’s largest tax and accounting firms, says some clients are starting to say they prefer work to stay virtual. That’s because remote working worked well, he says, but also because face-to-face visits from accountants and consultants could be disruptive, especially when many offices reopen at less than 100% of their capacity. employees.

For road warriors who have thrived on near constant business travel, the change could be a bummer, he says.

“I also miss human touch,” says Preber, “but the rules of the game have changed.”

Write to Chip Cutter at [email protected] and Emily Glazer at [email protected]