Topia, the leader in Global Talent Mobility, today released the results of its annual "Adapt" survey, which finds that remote work has created massive tax compliance risks—and strategic opportunities—for enterprises. The 2021 survey finds that since the COVID-19 pandemic began, 28% of employees have worked outside their home state or country, but only one-third reported all those days to HR. Consequently, their employers may have failed to withhold payroll taxes appropriately but didn't realize it. Unless HR monitors where employees work—something 94% of employees are open to—enterprises risk hefty penalties in the event of an audit.

Topia's annual Adapt survey polls employees and HR practitioners about employee experience and talent trends and how organizations are responding to them. This year focused on the dynamics of COVID-19 and remote work in the enterprise.

"HR leaders recognize that remote and distributed work offers a competitive edge for attracting and retaining talent and for building diverse, highly-skilled teams," said Shawn Farshchi, CEO of Topia. "As flexible work becomes a mainstay of business culture and talent strategy, HR and finance leaders must collaborate to make it work from a compliance perspective. The potential advantages are too important to ignore."

High Enthusiasm for Remote Work

Employees said the flexibility to work remotely is now the second most important attribute in an employer—behind high pay and ahead of both professional development and culture.

• 91% of employees agree that they should be able to work from wherever they want as long as they get their work done.

• 82% of employees now agree that "Teams should be built based on experience and skill sets needed, not location." 90% of HR pros concur.

• 94% of HR pros believe that increased remote work will enable them to build more diverse teams.

Tax Compliance is a Blindspot

Despite this enthusiasm for remote work, enterprises are unprepared from a compliance standpoint. Some employees forget to report days worked outside their home state or country. Others appear to hide their location to avoid cost-of-living adjustments to their salaries. The risks are hard to overstate:

• 93% of HR professionals are confident they know where the majority of their employees are working, and 78% are confident their employees self-report when working in another state or country.

• However, in reality, only 33% of employees report all those days, and 24% reported none at all, even though 61% are aware of the tax compliance implications.

• HR professionals were more likely to have worked in a different state or country (42%) but still struggled to report these work days, suggesting that self-reporting is a challenge, even for those that know the rules.

Location Tracking is Welcome

Although the compliance situation is dire, there is a potential solution: technologies that log employee work locations while respecting their privacy. With better location data, finance departments could, for instance, comply with payroll withholdings for employees, and HR teams could manage immigration risk, no matter where employees choose to work.

• 94% of employees are comfortable with an employer tracking their location at the country, state, and city level.

• 81% would even be comfortable with location tracking down to the street level.

UK HR Pros More Confident Than US Peers

UK employees were slightly more likely than their US counterparts to report all days worked outside their state or country. That doesn't mean UK enterprises are at less risk. In fact, overconfidence among UK HR pros may place their organizations at even higher risk.

• 46% of UK employees were unaware of the tax implications of working outside their home state or country compared to 32% of US employees.

• 70% of UK HR pros were "very confident" they knew where employees were working compared to only 50% of their US counterparts. They were also far more confident that their employees reported days worked outside their home state or country (46% v. 24%).

• 36% of UK employees reported all remote workdays outside their state or country v. 31% of US employees. That does not justify the 20-point confidence gap between UK and US HR.

"The mobility landscape has shifted dramatically in the past 12 months.  Now, every remote employee is a mobile employee," said Richard Tonge, Global Mobility Services leader at professional-services firm Grant Thornton LLP. "Most critical for employers is the need to manage remote work policies once they've been implemented.  To do that most effectively, Leveraging Topia's technology is a highly effective way to automate location monitoring and tax compliance for employees."

The 2021 "Adapt or Lose the War for Talent" survey, conducted by CITE Research on behalf of Topia, took place between December 11, 2020 and January 12, 2021 and included 1,250 employees. Half were located in the US, half in the UK, and all worked for international companies with at least 2,500 employees. 250 of the participants were HR professionals.