Tax and Legal News - January 2022

Editorial: Where are your employees?

If all your employees are working on site, be it in production or the office, you might as well stop reading – or, if you like, you can read on and see the “joys” you're missing out on. If your people work at least partly from home, read on.

The foreign but apt term “home office” has been around in Czech for a long time, but in the last two years it has entered the vocabulary of employers who, pre-pandemic, considered it to be almost a dirty word. We’ve all pretty much gotten used to working from home and have learned to work with staff from their home offices. Companies often discuss with us what and how much they should reimburse their employees (it’s not much and requires heaps of administration), whether they should tax it (they usually do, especially if they want to pay employees a lump sum) and also what they should reconfigure in their operations to keep their business running as it should (there’s a lot).

But there’s one area that’s virtually shrouded in myth and legend – working from anywhere, which looks very tempting. Why sit at home in the kitchen when you can work somewhere by the sea under an umbrella? Employees often crave such opportunities and employers are understandably wondering how to accommodate them. However, the legislation is unprepared for such a revolutionary (albeit natural in today’s circumstances) development and usually offers no specific or simplified rules. Since the beginning of the pandemic, it has become clear that working from anywhere is potentially problematic; the authorities are not very understanding and employers shouldn’t turn a blind eye to the associated risks. But anyway, we’ve heard a thousand and one ‘true’ stories and have actually seen with our own eyes companies that allow their people to work from the seaside, the mountains or grandma’s cottage in Slovakia without any time limit.

Yes, there are companies that make this possible. But they’ve either done a lot to make it happen, for example, registering for taxes or insurance in selected countries, changing internal regulations and employment contracts to comply with local legislation, or have simply stuck their heads in the sand, claiming “no one will notice”. At the same time, a number of countries have already happily declared they’re looking forward to taxing new ‘beach workers’; some countries are actively looking for established permanent establishments and others are encouraging employers to register for social and health insurance. After all, budget shortfalls exist everywhere.

A number of risks can be significantly reduced, for example, by limiting home office time abroad. But chance is unpredictable. So, you may find yourself investigating a work-related injury to an employee on the other side of the world (according to a recent German judgment, going from bed to computer is a work-related journey and slipping on the stairs from the bedroom is a work-related injury). You may be dealing with the expulsion of your manager who set up a home office on the beach, but forgot he only has a tourist visa. You may already have a permanent establishment and corporate tax liability in a country so popular that statistically you’ll always have at least one employee there. And you may unwittingly take the mental health of your payroll accountant to task after the end of the year to recalculate the payroll of an employee who became a tax resident while abroad, meaning you have his Czech tax payments all wrong.

It’s good to accommodate employees, and in today’s job market you may not have a choice. But it’s worth considering whether enthusiastic employees working from anywhere is worth the risks involved. Part of what can help is at least having clear rules and an understanding of what you’re at risk of within the boundaries you set abroad and at home. The above-mentioned missing legislative provisions that would simplify everything may, at least when it comes to tax, be partly hidden in the currently discussed international taxation reform, but their completion and implementation are certainly some time away.

Be careful in the New Year, but also healthy and happy.