Companies with a growing remote workforce could have significant mobile equity compliance problems brewing, and the consequences could land on IT’s shoulders. Tara Hagen, director at Global Tax Network, points out the mobile equity compliance risks that are growing on the horizon and break down ways IT can avoid the onslaught of extra work it could create.
Have you or someone at your company worked remotely recently? Chances are, if you work in technology, the answer is a resounding “yes.” Remote Technology, Inc. recently found that of the six million job adsOpens a new window it analyzed, most remote jobs were for web developers and software engineers. Data scientist, data analyst, and cybersecurity jobs also ranked in the top 10.
Unfortunately, if your company offers remote work or has mobile employees, it could raise compliance risk—primarily when equity compensation is provided to those employees. For most types of equity compensation, there can be additional reporting and withholding requirements when the employee has lived and/or worked in multiple locations during the life of the award. The calculations are often complex and rely on tracking days spent in each location during the awards earning period and the need to consider where the employee is located at the taxation point.
However, at the moment, most companies have not set up the processes and technological infrastructure to keep up with mobile employees—let alone keep them tax compliant. When employees are living and/or working from different locations—whether due to remote work, a short-term or long-term assignment, or a permanent transfer—and the company isn’t tracking their location information, it could trigger violations, fines, reputational damage, or lost compensation. That’s why IT must brace for new requests from across departments and start championing innovations now.
Why Corporations Need to Prepare for Global Mobility Challenges
Mobile employees are employees who work from more than one location. That could include digital nomads, full-time remote workers, hybrid employees, or business travelers.
Mobile work has been growing for years, but many corporate leaders are just now realizing the extent of their mobile employees’ tax risks—or they’re beginning to search for technological solutions to solve compliance messes. Mobile employees put extra pressure on your HR, payroll, and equity teams to share information across departments faster.
If a mobile employee works in multiple locations, their tax withholding requirements could shift from place to place. At the same time, HR must understand where employees are to follow through on their duty of care obligations. Since any misstep puts the company in danger of misreporting and could put the company’s reputation at risk, the uptick in mobile work increases the workload that HR/mobility, tax, payroll, and other departments need to take on.
See More: Plain Vanilla Enterprise Mobility Management Services Are Insufficient
Mobile Equity Compensation Is Increasing Risk Even More
Mobile equity compensation adds an extra layer of complexity to the issue. To stay compliant, teams need to keep track of every employee’s work location, even if they’re bouncing around from state to state. From there, they need to examine the tax laws for each jurisdiction, pull in employee-by-employee equity compensation figures from a broker, calculate totals, double-check taxation rules, and more.
Here’s a common scenario to illustrate the challenge corporate leaders face:
- Your company awards you restricted stock units while working in place X.
- You move before your stocks’ vesting period, and those units vest while you live in place Y.
In this example, you may be on the hook for reporting and withholding in places X and Y. This applies to international and state-to-state travel. As a result, if corporations aren’t tracking all of their employees’ whereabouts, staying ahead of each jurisdiction’s tax laws, and reporting appropriately, their compliance risk will spike.
See More: 5 Reasons to Focus on Workplace Equity Alongside Diversity and Inclusion
What IT Needs to Consider to Avoid Mobile Equity Compensation Pitfalls
In response to this upswing in tax compliance risk, corporate leaders will need new technology to stay ahead of a more mobile workforce. For IT, finding ways to link multiple systems and safely share information across those platforms. For instance, IT will need to find a way to connect its human resources information system to mobility systems, payroll, and third-party broker platforms.
For most IT teams, that task proves more complicated than it seems. Here are a few types of technology problems companies will need to wrestle with as they address global equity compensation risks soon:
- Custom solutions often cause headaches: There are already horror stories from major software companies that have tried to solve their mobility problems via custom solutions. In one case, a significant software company built its global tax projection software, only to realize it needed to work in constant maintenance to keep up with tax laws, immigration rules, and compensation nuances—and none of those critical areas of expertise existed in the company.As tempting as building an in-house solution to manage the mobile workforce may be, remember that global mobility stretches into specialized areas. To stay compliant, an organization may need input from every department, including legal, payroll/employment tax, corporate tax, equity, HR, and more.
- Corporations need to be able to track employees’ work locations: Companies must know their employees’ work locations to avoid mobile equity compensation nightmares. In some cases, corporate leaders will ask IT to build an employee tracking system integrated with a third-party financial software program, such as Workday. In other cases, you may be asked to develop a system that pulls location data from your travel management software.
No matter what tech solution you come up with, encourage your corporation to avoid manually tracking location data in Excel spreadsheets. This method could cause messes as mobile work continues to pick up.
- The organization needs to be able to transfer data securely: To manage equity compensation, corporations must quickly share information with brokers or other third parties. That all means IT should work on building secure pathways where they can keep employee financial data safe.
Tips to Stay Ahead of Mobility Challenges
Tech leaders don’t have to sit back and react to global mobility and related equity tax compliance challenges after they hit. Here are a few ways tech teams can stay ahead of these global equity technology challenges:
1. Make sure you’re gathering tracking data
As your IT team works to develop employee tracking solutions, here are two tips to consider:
- Search for legal solutions: If you aren’t careful, employee tracking can unearth additional legal and ethical problems. Especially if you’re tasked with building a custom employee tracking solution, collaborate with your legal and HR teams to ensure your solution isn’t jeopardizing the company.
- Discourage manual solutions: Managing mobile equity compensation tax requires teams to track laws, tally advanced calculations, sort through location data, check if they’re enforcing tax rules correctly, and more. The more manual input into this process, the higher the chance for employee overload and errors. That’s why it’s a good idea for IT to start digging into automated solutions that can lessen the need for a manual process.
2. Prepare for a security upgrade
If your company isn’t already, it will likely work with immigration, relocation management, external brokers, and tax teams to avoid mobile and related equity compensation complications. Ensure these third parties have the security to keep your company and employees’ data safe. You can also prepare by mapping a secure path between these external groups and your equity, payroll, and mobility departments.
3. Spearhead your organization’s automation efforts
Corporate leaders often overlook how much work goes into keeping mobile employees tax compliant. IT professionals can help by encouraging automation. Identify your equity providers if your company rewards mobile employees with equity compensation. From there, dig into ways to transfer automated reports between your external broker/advisors, equity payroll, and mobility teams as easily as possible.
Tech Teams Can Lead Their Companies to a More Compliant Future
To keep up with mobile employees, companies must find new solutions to transfer information across departments, and between experts, with as little friction as possible. However, by preparing now and adopting a proactive stance, IT can build systems and lead their organizations past this increasingly risky environment—without being hit by too much at once.
What steps have you taken to assess compliance risks at your organization? Let us know on FacebookOpens a new window , TwitterOpens a new window , and LinkedInOpens a new window . We’d love to hear from you!
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