Wage cuts, taxes, childcare: what will another year of remote work look like?

Among the questions companies are trying to solve: Who should bear the tax costs if employees move to a new location while working remotely? And what is the most effective way to support working parents?

Companies say there is much at stake, from employee happiness and productivity to regulatory consequences, if they make these decisions wrong.

The relocation of workers to new cities, states and countries has caused businesses and workers to grapple with tax issues.

Mark Zuckerberg, CEO of Facebook Inc., told employees last year that starting in January, the company would use its virtual private network, or VPN, that employees use to access corporate systems to determine where they were working for tax purposes.

The question is whether employees who told Facebook that they had left locations like California and New York – and therefore shouldn’t have to pay state and local income taxes – had really moved, according to a person familiar with the matter. If an employee has moved to another state or city where local income taxes apply, both the company and the employee can be held responsible for not paying them.

Facebook eventually decided not to track its employees’ locations based on their VPN usage. The company now says that when its employees request – and are allowed to do so – for long-term remote work, they must confirm their new location with the company, as this could affect their taxes. Facebook also said some remote workers’ salaries could be changed if they live in a location with different labor costs than their previous location.

Ride sharing service Lyft Inc.

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

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

Companies such as the payment company Stripe Inc. have offered employees leaving San Francisco, New York, or Seattle the opportunity to relocate for a one-time bonus of $ 20,000 if they agree to a pay cut of up to 10%. Others, such as Microsoft Corp., have indicated that benefits and rewards are subject to change based on the company’s compensation scale by location.

A number of Fortune 500 companies in various industries are considering potential pay changes if an employee moves from a city like San Francisco to Texas, said Jimmy Etheredge, North America CEO at Accenture PLC consulting firm.

“Almost all of them have some element of the cost of living in their compensation,” he says. “As they reflect on this future of work that may involve more remote work, involving talent in places they didn’t necessarily have before, they will try to make adjustments.”

Other tech companies continue to pay people the same regardless of zip code. Spotify Technology SA, the Sweden-based audio streaming company, recently told its employees, calling it “ band members, ” that they could work anywhere in their assigned country and keep the same pay.

“If you move, we don’t change that,” said Katarina Berg, Spotify’s Chief HR Officer. The company, with approximately 6,500 full-time employees, will apply national salary scales for each job based on compensation at competing companies and determined by prevailing wages in expensive cities such as San Francisco or New York, where many of Spotify’s employees work. based.

The long-term remote ban is putting pressure on companies to provide more childcare help to parents – while being careful not to harass employees without dependents.

Some companies have offered Covid-related stipends that employees can use for everything from daycare to training equipment. Technology company Palo Alto Networks Inc. now offers employees a $ 1,000 allowance that can be applied to a menu of options. Parents can use the money for tutoring for their kids, while others can use it for a Peloton bike.

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

Others are rolling out special benefits for parents and carers. Bank of America Corp. has offered eligible employees, including those who work in its affiliates, up to $ 100 per day for childcare costs. The company also increased the number of days employees can use child or adult care backup facilities from 40 to 50 per year.

For workers accustomed to a lot of business travel 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 largest tax and accounting firms, says some clients are starting to say they prefer to work rather than virtually. That’s because remote work has worked well, he says, but also because in-person visits from accountants and consultants can be disruptive, especially when many offices reopen with a capacity of less than 100% of their employees.

For road warriors who did well on near-constant business travel, the change could come as a disappointment, he says.

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

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