Explainer: Challenges And Opportunities Of Cross-Border Remote Working
While flexibility is vital to attracting and retaining talent, workforce evolution is slow. So how can organizations de-risk distributed workforces?
This article covers:
- Key questions business leaders ask regarding cross-border remote working
- New models designed to empower workers and enable flexibility
- How “work-from-anywhere” and CBRW might develop in the coming years
Of the dozens of articles published on Crowe Global’s Art of Smart hub since the early days of the coronavirus crisis in 2020, content focused on hybrid and remote working has consistently performed the best regarding clicks and shares.
Given that the Art of Smart explores the challenges and opportunities presented by emerging trends and technologies to inform and inspire business leaders to make smarter decisions, perhaps this popularity is no surprise.
Because it’s clear that precious few organizations have perfected their post-pandemic way of operating, and those companies that have been progressive in their thinking and approach to transforming processes are evolving their model.
Indeed, hybrid or remote working touches all four Art of Smart pillars for smarter decision-making: boldness, growth, innovation, and diversity. One area increasingly of interest to decision-makers is cross-border remote working (CBRW).
The pandemic closed doors physically but opened minds and made new places and people accessible online. As a result, there was a general realization that the talent pool was genuinely global and available to those willing to explore further.
More recently, taking the lead from companies such as Spotify that have offered “work-from-anywhere” policies, employees desire more flexibility and submitted requests for CBRW.
Using a laptop computer anywhere in the world and proceeding with work seems straightforward. However, there are risks and consequences for employers—from compliance, financial, commercial, and people perspectives.
This article considers many of the key questions business leaders are asking—or too afraid to ask, or perhaps hadn’t thought about—regarding CBRW. It leverages a research series, Reshaping Global Mobility, published from November 2022 onwards by Santa Fe Relocation in partnership with Crowe UK, to which over 100 global organizations contributed, and additional qualitative research from the latter, including one-to-one interviews with HR leaders.
What is the employer sentiment about optimal cross-border remote working today?
“The ‘handshake’ has changed with the employee-employer relationship, and there has been a two-year ‘experiment’ due to the pandemic,” continues London-based Jangra. “For employers, it’s about being competitive [in the job market]. To be competitive, you must change the way you manage your people. As the research shows, employers have to respond to the trend of agility.”
However, the tone of many of Jangra’s interviews with the HR leaders indicated that top talent is calling the shots and almost forcing the company to rewrite its working policies reluctantly. “If someone is important to the business, they can tell the business what they want, and it will probably happen,” he says. “So are employers getting ‘bounced’ into these decisions to go with the flow?”
Patrick Harteveld, Head of Expatriate Management at multinational insurer Assicurazioni Generali, says his organization has been on an “innovation journey to create additional flexibility” for employees in recent years. “Our hybrid working model means we believe in working both from the office and from home, or wherever. We want to give people flexibility, and ownership, so we don’t fix too much on the fact that you must be present for eight hours every day in the office.”
But there is a trade-off. “Employees have a duty to be productive, without having the necessity to be physically present in a certain location. But, if you already have this model, why not extend it to an international setting?”
To answer this question, Milan-based Harteveld and his team researched the challenges and opportunities of CBRW. Four models were identified. “There were the two extremes: either companies, such as Spotify, that accepted and encouraged full flexibility, or those at the opposite end that refused any kind of remote working,” he continues. The other two models are in between, the third being restrictive with lots of checks using technology to determine the risk of an employee working remotely, and the second being less complicated but adaptable and compliant.
This last approach has been used by Generali. “Taking into account tax treaties and social security issues, and other elements, we came up with a 30-working-days threshold [for CBRW],” says Harteveld. “That period should not create a taxable presence in the other country and therefore minimize the cost and risk exposure for the organization.”
Jangra offers an even simpler list regarding a company’s approach to cross-border remote working and work-from-anywhere (WFA) policies: “encourage, tolerate, or stop.” Business leaders should ask themselves which of the three of his models they are most like today, where they want to be tomorrow, and if it’s different, how to change the culture.
Key takeaways from an in-person roundtable event in London, hosted by Crowe UK in July 2023, on the topic of global mobility can be found here, with Jangra and others featuring. He also shares a decision funnel that business leaders can use to determine whether an employee’s request for WFA or CBRW could—and should—be accepted. As the diagram below illustrates, numerous practical challenges might be considered before agreeing to approve such a request. However, as the research suggests, barriers are often removed to retain the services of top-valued talent. Besides, the retention cost is far outweighed by the necessary recruitment and training should a key member depart.
The ‘handshake’ has changed with the employee-employer relationship, and there has been a two-year ‘experiment’ as a result of the pandemic. For employers, it’s about being competitive [in the job market]. To be competitive you have to change the way you manage your people. As the research shows, employers have to respond to the trend of agility.
Dinesh Jangra
Global Practice Leader
Global Mobility Services at Crowe Global
What are the best examples of a successful cross-border remote working policy?
The music-streaming giant also changed its salary bands, recalibrating them by nation rather than city or region. Again, that seemed a popular move: 6 percent of its 11,453 employees moved countries after introducing this policy. Notably, Spotify claimed staff churn was lower than pre-pandemic levels and, as a direct result of the policy, workforce diversity had been significantly boosted.
“We’ve learned that more flexibility gives employees true autonomy at work,” says Anna Lundström, Spotify’s Vice President of Human Resources. “At Spotify, we believe that work is not something you need to come to the office for; it’s something you do independently of where you are, and therefore you should be able to work from anywhere.”
We’ve learned that more flexibility gives employees true autonomy at work. At Spotify, we believe that work is not something you need to come to the office for; it’s something you do independently of where you are, and therefore you should be able to work from anywhere.
Anna Lundström
Vice President of Human Resources
Spotify
What are global leaders saying about cross-border remote working?
The Crowe research found CBRW and WFA policies are almost exclusively employee driven—yet only 13 percent of survey respondents said it is effective for all work roles. Further, 37 percent of organizations quizzed do not limit or cap cross-border remote working by time, but 34 percent stop it at three months or less.
The edited comments below are gathered from Jangra’s and Crowe UK’s independent research in late 2022.
“We’ve been quite restrictive on our policy; honestly, we are not encouraging CBRW.”
Technology services company with a global headcount of 82,000 operating in c 40 countries
“The formation of a CBRW policy is not something we’ve felt the need to address simply because we have not received any requests from our employees to work remotely from another country permanently. On the other hand, we increasingly receive requests from our employees to tag work on holidays—for example, when visiting family abroad—and these cases are dealt with on an ad hoc basis.”
Consumer goods company with a global headcount of 2,750 operating in c 30 countries
“The issue is always employee driven. We see two types of arrangements: employees wanting to tag on a short period to a holiday or return to their family home country; and then a longer-term arrangement where they will live in a country that is different to employment and role. We’ve made some allowances—and accommodated CBRW—for those people because they’re unique talents. If finding the right talent anywhere else is difficult, we will look at a CBRW arrangement. However, it’s not something we want to do as it involves extra costs and compliance.”
Consumer goods company with a global headcount of 33,0000 operating in c 20 countries
“As the organization grows, you simply can’t keep a decentralized approach. What’s interesting now is that countries and businesses demand more centralization and standardization. For CBRWs, we could set a marker of what’s acceptable from a global perspective—say 45 days each year per country—and then the local country process would have to align over time. If taxes or social security are triggered in these arrangements, that difference is for the employee. We do not help with that. However, we have no choice around compliance and would set up payroll and operate and report, which are our costs.”
IT consulting company with a global headcount of 340,000 operating in c 50 countries
“The size of the issue [CBRW] is unclear as there isn’t a proactive approach to identify cases. It would not be unusual to have two cases a week that need some degree of review. We have not openly advertised our approach, as there is a degree of paranoia about creating issues and opening the floodgates. If we promote our approach, we may face a deluge of requests, requiring resources and costs to manage.”
Consumer goods company with a global headcount of 70,000 operating in c 50 countries
“My team came together to discuss potential issues, and we provided some input as there are complications from a compliance perspective with payroll, corporate tax issues, and so on. We created a paper and shared it with the European Commission to ensure they know the challenges enterprises like ours would face.”
Consumer goods company with a global headcount of 150,000 operating in c 100 countries
“My main advice is to tackle CBRW with a group of people that touch the topic—HR, Legal, Tax, Global Mobility—because that’s the best way to get a decision. Not all CEOs are focused on this area, and educating and informing leadership is critical. Transparency is key.”
Healthcare company with a global headcount of 75,000 operating in c 40 countries
“When you monetize risk rather than just talk about risk, it does focus the minds of our people because project-based managers with budgets will do anything to save a dollar. If the commercial business case stacks up and they are a senior person, we will work with the business to make it a short-term formalized assignment.”
IT consulting company with a global headcount of 300,000 operating in c 40 countries
What are the pros of cross-border remote working?
There are four clear advantages for employers. They are as follows:
- Access to a broader pool of talent As alluded to above, by hiring employees in external countries, organizations can access a wider pool of talent with a greater variety of skills and experiences. This can be especially beneficial for companies looking to expand into new markets.
- Cost savings Cross-border remote working can save organizations significant money on office space, utilities, and other overhead costs. Additionally, employers might pay remote workers less than in-house employees, depending on the cost of living in the country where the employee is working from.
- Increased productivity Various studies have shown that remote workers tend to be more productive than in-house employees, and for those that successfully request cross-border remote working there might be an additional bump in motivation. This is because they can work in a distraction-free environment and, effectively, set their own hours. The shift to cross-border remote working is also evolving desired performance to be output rather than time based, which is an underlying, longer-term trend.
- Improved employee satisfaction Remote workers are often more satisfied with their jobs than in-house employees. This is because they have more flexibility and control over their work-life balance.
What are the cons of cross-border remote working?
- Communication challenges One of the biggest challenges of cross-border remote working is communication. Communicating effectively with employees in different time zones and who speak other languages can be difficult.
- Cultural differences Another challenge of cross-border remote working is cultural differences. Employees from different countries may have different work styles and expectations. It is important to be aware of these differences and to make an effort to accommodate them.
- Legal challenges There are also several legal challenges that organizations need to be aware of when hiring remote employees from different countries, and enabling CBRW. These challenges can vary depending on the country where the employee is located.
- Inefficient use of time, cost and resource Suppose an organization has 80,000 employees, of which 400 have remote cross-border arrangements. In that case, the paradox is while they represent 0.5 percent of the workforce, the time to provide advisory support and track them is disproportionate.
- Associated risks and penalties These include creating a permanent establishment and exposure to tax on corporate profits, breach of compliance regulations and breach of contractual client obligations, leading to possible loss of work.
What additional responsibilities do managers and HR professionals have for remote workers?
According to the research, the shift from formalized or structured “global mobility” programs in 2019 to today’s more unstructured global workforce cases has increased the complexity and volume of workload for those managing cross-border people issues.
During the three years to 2023, there was significant growth in international direct hires/permanent relocations, short-term assignments and cross-border remote workers. And 2023 poses more challenges from external factors. On top of compliance, cost, and employee experience—the main responsibilities, pre-pandemic—there are now the following factors to consider:
- Duty of care
- Tax authority coordination
- Awareness of the regulatory environment
- Recession impact
Related to this, Crowe UK’s Crowe Casts podcast explored the subject of managing workforce costs in August 2023. Listen to the 16-minute recording here.
What might the future of CBRW look like?
Harteveld pointed out “a first indication of change” is a new proposition from the European Union to extend the period that people can work from another country for social security purposes. He explains: “Typically, there was a 25 percent threshold, meaning that if you’re hired, say by a company in Italy, and you want to work in Germany, you can do so up to 25 percent of your time, without shifting social security to Germany. The new framework seems to extend that to 50 percent of the working time.”
Finally, Harteveld argues that organizations should view upgrading or revamping working policies as business-critical, as it engages and motivates employees, and should improve their experience and productivity. “It’s a win-win situation,” he adds. “It’s about employee wellbeing, and if they are entrusted with additional flexibility they will work better in the environment they desire. Companies are being forced to open up about this, as top talent will now refuse a position that doesn’t offer flexibility.”
Employees have a duty to be productive, without having the necessity to be physically present in a certain location. But, if you already have this model, why not extend it to an international setting? Taking into account tax treaties and social security issues, and other elements, we came up with a 30-working-days threshold [for CBRW]. That period should not create a taxable presence in the other country and therefore minimize the cost and risk exposure for the organization. It’s a win-win situation. It’s about employee wellbeing, and if they are entrusted with additional flexibility they will work better in the environment they desire. Companies are being forced to open up about this, as top talent will now refuse a position that doesn’t offer flexibility.
Patrick Harteveld
Head of Expatriate Management
Assicurazioni Generali
What are the key questions business leaders should be asking about CBRW and WFA policies?
- Who takes ultimate responsibility for approving cross-border remote working in your organization?
- Have you asked your employees what they want—from WFA and related subjects—and how this dialogue could be better?
- What can you learn from those early movers, and how could the organization’s governance improve?
- How can WFA and CBRW be a win-win and used to improve employee engagement and experience?
- Does the board-level philosophy to enable this new way of working need to change, and if so, how would you communicate this??
- What are the best tips to encourage innovation in a remote work setting?
- Where is your company now in terms of “encourage, tolerate, or stop” and how
- How could—and should—your organization improve remote working to attract and retain talent?
- Where is the sweet spot for your organization? For example, if it becomes more complex from a compliance (and management) perspective, is it worth it if it is more than three months?
- Is your remote working plan adaptable and evolvable, and are you using as many data sources and expert partners to ensure lasting value?
- Are you ready for a move away from command-and-control leadership?
- How might global mobility be affected by a worldwide financial crisis?
- What steps is your business taking to deliver a standout client (and employee) experience?
- How do you think WFA and CBRW policies will generally evolve by the decade’s end, and how will your organization measure up in 2030?
