Is your organisation ready for hybrid working?
The pandemic has changed working practices forever, with the benefits of remote working hard for some employees to relinquish. Many will want to continue working in this way, however there are some who may want to return to the office. Others may prefer a more ‘hybrid approach’, splitting their time between home and the office.
Collective consideration is needed across the business to decide whether hybrid working is right for the organisation and its employees. Hybrid working affects every part of the employee lifecycle, including induction, learning and development, reward and recognition, performance management, wellbeing, employee engagement, recruitment, and communication.
While hybrid working appears to be here to stay and will undoubtedly create opportunities for efficiency and better work life balance, a move to hybrid working inevitably results in changes that could have an impact from an employment tax perspective. Examples of this are changes to the permanent workplace, the provision of equipment for employees, amendments to the expense policy and potential impact on the demand for certain benefits in kind that enable you to attract and retain the best staff.
The Government introduced a number of temporary tax reliefs as a response to the pandemic, to support homeworking. Many of these have now been extended until 5 April 2022, but there is no certainty that they will continue. So, it’s important for employers to consider the long-term tax and cost implications of providing such support to their employees.
The homeworking allowance is a good case in point. Pre Covid-19, the tax exemption of £6 per week, or £26 per month, only applied where a payment was made by the employer and the employee worked from home under a formalised homeworking arrangement. As a response to the pandemic, HMRC has allowed employees to make direct claims for tax relief where their employer makes no such payment, and latest HMRC figures suggest that more than three million taxpayers made such claims in the 2020/21 tax year. While the ability to make a personal claim has been extended until 5 April 2022, there is no indication that this will be extended further. Employers therefore need to consider whether they should make qualifying payments to employees and, if so, whether these should commence now or from April 2022.
Another important consideration will be the impact on the permanent workplace of employees for the purpose of business travel claims. There are limited circumstances where HMRC accepts that home is a permanent workplace when considering tax relief on travel. Employers therefore need to consider the tax and legal implications if a change is being made to employees’ contractual workplaces and when setting any new policy around the extent to which employees need to spend time at the employer’s workplace.
Where hybrid working results in employees working remotely overseas, there will be additional tax, legal and HR considerations. These include potential local payroll withholding tax and social security implications; any impact on the employer’s own tax position; whether the employee has the legal right to work in that country; and whether the employer is complying with local employment laws.
RSM’s People Advisory Services team can guide your organisation through these challenges, helping you decide which approach is best for you and working with you to implement a structure to mitigate the legal, tax and HR risks.
If you have any queries or questions, contact David Williams-Richardson on:
