For tax and payroll teams, remote work is no longer a drill
Worker mobility is here to stay, survey shows, as tax and payroll experts navigate a complex matrix of new risks and requirements.
All things considered, changing where and how people work was easy, right?
In less than two years, companies have quickly adapted to the new reality of remote workforces, hybrid offices, and the permanency of telecommuting and even a few virtual happy hours. Decades of expectations about how the workplace works fundamentally changed in a relative blink of an eye—and that toothpaste is not going back in the tube.
But now, for those details. Human Resources (HR), information technology, and information security teams surely have myriad new demands, but perhaps no area of the business has faced more moving targets than the tax and payroll departments. The rapid increase in worker mobility across multiple states (and even countries) has brought a crush of new complexities, including:
- Expanded tax liabilities,
- Reporting requirements, and
- Compliance risks.
It’s enough to make the tax and payroll professionals feel like…well, like they’re trying to put toothpaste back into a tube.
Yes, remote work is here to stay, and so tax and payroll teams are now laser-focused on the related new risks while trying to plan accordingly, as we outline in our report, Employer trends in the remote work world.
Survey demographics
Company type (business classification)
Company size (number of employees)
Sizing things up
Many of the professionals surveyed were still knee-deep in assessing the full scope and complexity of the new challenges, especially since remote work regulations continue to evolve at the federal, state, and even local levels. Indeed, just 26 percent of respondents felt like they had a full handle on all potential state payroll reporting and withholding requirements.
Despite that gap, a big overall theme from the survey was an awareness that how and where companies and their people operate have irrevocably changed, and so while the tax and payroll teams might not have all of the answers today, they are committed to figuring them out. Some topline observations from the report:
- Four out of five (81 percent) of those surveyed said their companies were now fully committed to hybrid work arrangements.
- One-third of the companies had at least 10 percent of their employees working in a state outside of their primary office, and one in five had more than 20 percent of staff out of state.
- More than half (59 percent) indicated that the commitment to flex work was now an important part of their talent acquisition and retention strategy amid a highly competitive labor market.
Another overarching theme that came through: While the sudden and rapid shift to remote work may have started as a response to the pandemic, it is now a permanent way that most companies will operate moving forward.
Location, location, location
Knowing exactly where employees work—and the matrix of related obligations—was the single biggest concern that emerged in the survey.
The unprecedented amount of movement has challenged tax and payroll teams to keep up, adding significant new risks and workload as they rapidly assess new hurdles like additional tax liabilities and reporting requirements. Half of the surveyed companies reported that they had to file payroll taxes in new states, and two-thirds were digging in on new state-specific telecommuting rules.
Further complicating the picture is that most payroll processes and systems were not designed to handle a scattered workforce across multiple jurisdictions. And, even if they were, many companies still lack the data integration they would need across their HR, payroll, and reporting systems, although they are trying to find ways to keep up. For example, 67 percent of the companies reported they have specific processes in place to track employee locations for payroll reporting, but just 47 percent were doing that before 2020.
67%
Companies that reported having specific processes to track employee locations for payroll reporting.
47%
Companies that reported having a process for tracking employee locations for payroll reporting prior to 2020.
Planning for permanence
Final considerations for the respondents centered around the larger strategic questions on areas like employee privacy and properly investing in the additional tax and payroll infrastructure that will be needed to support a workforce that clearly will continue to become more mobile.
On the privacy front, companies are sensitive to avoiding a Big Brother perception—tracking employee locations through digital tools, for example, or restricting where people can work. On the other hand, they risk multiple tax and compliance issues if employees don’t do a great job of letting them know something as basic as: “Hey, I moved!”
Perhaps the biggest sign of the times: 74 percent of the companies said their remote work procedures were, essentially, still a work in progress. Download the full remote work report for more.
Amid a 'great resignation,' the big fear is losing out on top people by failing to accommodate the desire for flexibility. Nearly 3 in 5 organizations surveyed now include flexibility as part of their talent strategy.
2021 Remote and Multistate Payroll Reporting Survey Report
2022 Chief Tax Officer Outlook
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