COVID-19 has driven considerable changes to the way people do many things. Top among those changes is the expansion of remote work. This has led to developments in the legal landscape of remote work. As employers adjust to remote work as a long-term solution, there are compliance issues they should consider.
In March, nearly every company had some employees work from their homes during stay-at-home orders. Even as states began to reopen, remote work has grown from a short-term measure into a long-term strategy for many employers. Indeed, many employees don’t want to return to the office five days a week. While some employees want to collaborate in-person for one or two days per week, employers are increasingly viewing assigned desks in a fixed office space as an unnecessary expense. Some companies, including Twitter, Hims & Hers and Motus have made the transition to fully remote. Others are moving to a hybrid approach, be it short or long term. Under either of these circumstances, employers have new obligations.
After being considered a perk in the past, remote work has become typical for many. Suddenly employees are carrying costs that their employers carried before the pandemic. When employees incur costs for their employer’s benefit, there can be legal obligations to keep employees whole.
There are two types of expenses related to remote work that employers need to consider. One is new or increasing costs. For example, employees that did not use their personal phone or internet connection for business are now doing so because their home is also their office. Employees working from home are also likely to see a corresponding rise in utility expenses, and the demands of their work may require an upgraded home internet service. When employees incur increased costs or must use personal assets for business purposes, employers should reimburse them.
The other expense types are fixed, such as rent or mortgage for the space where business is conducted. While the employee’s cost does not change, employers still benefit. In specific states like California, employers cannot offload these operational expenses on the employee – even if the cost to the employee doesn’t change – without reimbursing a reasonable allocation of that cost. Now that remote work is no longer a phenomenon limited to a month or two, reimbursing for home offices is becoming more important.
Some states have higher obligations than others for reimbursement. The work mobile movement, where employees choose to move from place to place, is gaining popularity as companies decentralize their workforces. This can complicate an employer’s obligations to specific employees when they move to different jurisdictions. This is a good reason for employers to establish a policy that covers their obligations across the entire U.S.
There are a few things to keep in mind when crafting a reimbursement policy. First, be sure the approach is fair to all employees. Costs differ depending on where employees live, so offering everyone a flat rate may result in creating winners and losers. In other words, paying a flat rate to employees in different places can result in over-reimbursing some and under-reimbursing others.
Accuracy is critical when calculating reimbursements. Companies that don’t offer a large enough reimbursement expose themselves to employment law risk, and offering too much reimbursement could be viewed as compensation by the IRS. Compensation must be taxed, which costs both employers and employees.
Substantiation is the other element of a strong remote work reimbursement policy. This means that reimbursements must be tethered to receipts or some form of data documentation to avoid taxes. When reimbursements are not substantiated, the IRS views them as additional income.
This pandemic has been an issue for many months, and is likely to continue for some time. Some of the changes companies have made to work forward may be temporary. Others may persist well beyond COVID-19. We’ve already seen several companies shift to remote work in a more permanent capacity, and having a strong reimbursement policy that addresses associated employee expenses is part of the recipe for success. If your organization needs help navigating the legal landscape of remote work, Motus has the tools and expertise to help. Take our assessment to discover possible savings through remote work.