How remote work changed the way companies think about where to keep offices

  • The pandemic-induced move toward remote work has complicated corporate decisions about where to locate.
  • Experts say companies are looking for locations where workers want to live, especially with workers in short supply.
  • In industries that are not adaptable to remote work, like manufacturing, companies are also asking new questions about resiliency following the pandemic, and about diversity and inclusion.

The past year has taught companies and employees alike that people in many occupations can work from anywhere. So, does the location where a company decides to set up shop really matter anymore?

In a word, yes. And in many ways, it matters more than ever as the economy starts back up, people get back to work, and the nature of the workplace evolves.

“It really is creating a lot of opportunities for companies to really look at their portfolio, where they have facilities, and think differently about how to get close to talent, because talent is the driver of what’s going on in the economy right now,” said Christopher Lloyd, a site selection consultant at McGuireWoods in Richmond, Virginia, and Chairman of the Site Selectors Guild, an industry group.

Consultants like Lloyd, as well as company officials and state and local economic development leaders, tell CNBC they are seeing some of their busiest times ever.

“We’re seeing people, I believe as a result of the pandemic, really look at what matters most to them; really look at where is it that you would want to be located? Where is it you would want to have your company grow and blossom?” said North Carolina Commerce Secretary Machelle Baker Sanders.

With workers — who are already in short supply — becoming choosier, companies are increasingly seeking out worker-friendly locations.

“Things like child care and transportation are critical to getting the workers into their workspaces. So, businesses are talking to us about what are we doing for child care? What are we doing for housing, these things that they really see their employees need?” said Missy Hughes, Wisconsin’s Economic Development Secretary and CEO of the Wisconsin Economic Development Corporation.

Even the companies that have most enthusiastically embraced the move to remote work are still maintaining offices, though employees may only work there occasionally.

Twitter, which was already on the cutting edge of the remote work movement before the pandemic, accelerated those efforts when the virus first began to spread in March 2020. By May, it was telling employees they could continue working from home “forever” if their situation allowed it. But at the same time, the company promised that its offices will be “their warm and welcoming selves, with some additional precautions,” when it is safe to return.

‘The past is gone’: Salesforce CEO Marc Benioff
Salesforce, which was built on a model of large groups of employees working in big city office towers, declared that setup all but obsolete earlier this year.

“An immersive workspace is no longer limited to a desk in our Towers; the 9-to-5 workday is dead,” the company said in February.

Even so, most Salesforce employees will be working on a “flex” basis, coming into the office one to three days per week.

Salesforce CEO Marc Benioff told CNBC last month that he expects about half the company’s employees will continue working from home.

“The past is gone,” Benioff said.

But that still leaves a sizeable workforce on location. Plus, many of the remote workers will occasionally need to be in a company office.

“As people are slowly getting back to work, people are realizing they actually do like being in an office,” said Ryan Combs, Executive Director of the Research Triangle Regional Partnership, an economic development organization serving 12 counties in the Raleigh-Durham-Chapel Hill area in North Carolina.

Combs said his region barely missed a beat during the pandemic, attracting $11 billion in new investment, and 18,000 new jobs. That includes major projects announced this year by Apple and Google.

Battleground for company locations widens
Lloyd of the Site Selectors Guild agrees that physical company locations — and the intense efforts by the states to attract them — are not going away. But now, the battleground has widened.

“I think some new areas of the country, rural areas, are getting more attention than they used to because they didn’t experience some of the traumatic events of some of our cities,” he said. “A lot of people were predicting the death of the suburbs, but we’re seeing a renewed interest in suburbs as a company may continue to maintain a downtown office, but they’re spreading offices around the metro area to be closer to where people live on a day-to-day basis.”

At the same time, he said, cities are coming back to life, with early predictions of a mass exodus from cities proving to be unfounded.

Of course, much of the work that is done across the country can’t be done remotely. Lloyd said site selection consultants are seeing heavy activity in the manufacturing sector, as demand for consumer products and durable goods surges back to life.

Those companies are asking new questions, too — in addition to the usual ones about things like workforce, incentives and infrastructure.

“Many firms are asking about resiliency,” he said. “How did the states themselves or individual communities deal with the pandemic? Were they quick in setting up testing regimes? Were they quick in setting up vaccination programs? Because that demonstrates the capability of a state or locality to respond to a crisis.”

And, he said, more companies are asking about environmental and social issues, including diversity, equity and inclusion. Those, too, can vary widely by location.

“Obviously, it’s not just the pandemic, but the events of the past year,” Lloyd said. “They’re much more sensitive to what’s going on at the state and local level.”

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Remote Working Across International Borders: Key Risks and Issues


The COVID-19 pandemic has accelerated the remote working trend for organizations and workers around the world. Many employers are considering reorganizing their workforces to move to new hybrid or fully remote working models–with flexibility being a key feature at the top of mind for both the employer and the worker. These arrangements can take many forms, but one constant theme is the multiple risks and issues that arise when an employee continues to work for the same employer but has relocated overseas to do so.

Covington’s Global Workforce Solutions team is well-suited to assist with identifying and managing these risks, and handling the related benefits, tax, and employment issueswhich can be complex and challenging to navigate.

The alert below highlights critical matters to consider when employees work remotely across borders.

Key Legal Issues With International Remote Working

Below, we outline eight key legal considerations when exploring a remote working program.

1. Corporate Tax

2. Immigration

3. Income Tax and Social Security

4. Employment Rights

5. Employee Benefit Plans

6. Corporate Insurance

7. Data Security

8. Risk Assesment/Compliance with Local COVID and Public Health Requirements

1. Corporate Tax

For many employers, the most serious–but often the least appreciated–risk of global remote work is that an employee working overseas and generating revenue can create a corporate tax liability for the employer in the foreign country, which could lead to double taxation on those overseas profits. This can be the case if an employee creates a `permanent establishment’ (PE) of the employer in the foreign country. A PE can exist if the employee is working overseas from a fixed place of business (which could be a home office), and/or where the employee is deemed to be a `dependent agent’ of the employer, entering into contracts on its behalf.

Rules on creating a PE are multi-layered, and can vary from country to country. However, if it is concluded that an employee’s remote working arrangements likely create a PE, the profits attributable to this PE would generally be taxable in the overseas jurisdiction too. Employers can seek to reduce the risk of an overseas employee creating a PE by, for example, ensuring that the employee does not negotiate or conclude contracts. However, there has been a concerted international effort in recent years to limit the effectiveness of such practical workarounds, and there is a clear focus on policing this area, making it even more problematic for employers.

2. Immigration

Employees must have the right to both live and work in a country. Employers are usually legally responsible for ensuring their staff have the appropriate right to work, and documentation to confirm this. Failure to comply with immigration rules can lead to criminal liability, fines and audits by local immigration authorities for employers, and deportation for employees. Such enforcement action may also mean that an employer is ‘red-flagged’ for any future visas or work permit applications to that country, potentially hindering future access to that market.

Although many countries allow citizens from Western countries to enter only with a travel or business visa, these are usually time-limited (e.g., six months). A common misconception is that a business visa allows an employee to work in the host country. However, such a visa often only provides for an individual to enter the country to carry out ancillary actions such as attending business meetings, conferences or training, and not to establish a base from which they work permanently and perform their day-to-day duties. As such, even though an employee may believe they have six months to work in the country under a business visa, the nature of their working activities may in fact make those activities and their continued presence unlawful. As such, it is very important that any employee who might be working overseas regularly or who might have relocated due to the pandemic has their immigration status assessed.

“A common misconception is that a business visa allows an employee to work in the host country.”

3. Income Tax and Social Security

If an employee becomes tax resident in a new country, this may trigger withholding requirements for the employer. Usually an individual will automatically become tax resident in a country if they spend 180/183 days in it during a tax year. However, tax residency tests can also be multi-factorial and catch employees with lower day counts if there are other `connecting’ factors involved (e.g., family, assets or real estate in the jurisdiction, or a record of regularly visiting the country over a lookback period). Also, where an employee moves to a new jurisdiction and it is clear from the outset that they intend to reside there permanently, local income tax and social security obligations could be triggered from the first day of employment.

If tax residency is established, a new payroll may need to be set up to ensure the correct sums are remitted to the applicable overseas tax authority. Failure to assess and correctly deal with this issue can lead to retrospective assessment for back taxes, often including penalties and interest. If the employer has been remitting income tax deductions to the original home tax authority in the meantime, this has to be unwound (if possible), refunds claimed, and double taxation avoided, as far as possible. Special considerations must be paid to U.S. workers given the U.S. citizenship-based tax regime and global withholding and reporting obligations.

A similar issue arises in relation to social security, although this has different rules to income tax and therefore requires separate assessment. Depending on the jurisdictions and the nature of the foreign assignment, employees and employers could be responsible for social security taxes/contributions in the home country, host country, or both. Again, failure to establish the correct position could result in back contributions being required, plus penalties and interest.

4. Employee Rights

An employee working in a foreign country for a period of time will almost always acquire local mandatory employment rights, sometimes from the first day of employment in the jurisdiction. Very often these are `baseline’ legal rights and so cannot be contracted out of or derogated from, i.e., they will apply automatically. They may be contained in statute, case law, collective bargaining agreements (CBAs), civil codes or even international law or conventions.

Such statutory rights can take the form of termination rights (notice periods and severance pay based on statutory formulae (often using length of service as a criterion)), family leave rights (maternity and paternity leave and pay in particular), mandatory minimum vacation allowances, working time rights (maximum working hours caps daily and weekly), sick pay, minimum pay levels, health and safety protections, discrimination protections, etc.). Some of these rights can be enhanced by CBAs in continental European countries, where generally applicable `sectoral’ CBAs may make the rights even more protective and expensive. Another particular complication during the pandemic is that some countries have temporarily prohibited employee terminations during this period, to protect jobs.

In addition, contractual protections for the employer may not work as clearly in a foreign jurisdiction as they did in the employee’s original location. For example, for an employee post-termination non-compete restriction to be enforceable in France, Germany, Italy, China and certain other jurisdictions, the employer must generally pay at least 30-50% of the employee’s remuneration during the restricted period. U.S. and U.K. non-competes generally do not require this type of payment and are therefore not typically drafted this way, and so such non-competes would not be enforceable in those countries requiring payment. Even within the U.S., there is significant variation in employment rights and the enforceability of non-competes among the states. Other common employer protections such as confidentiality and intellectual property provisions would also need to be vetted for enforceability overseas.

A further enforcement complication for employers is the likelihood that due to the employee’s overseas location the employer would need to enforce (and potentially litigate) any dispute in the overseas jurisdiction in which the employee was living and/or working. Settling cross-border employment matters can also be more complex. Release agreements will need to validly waive claims and meet applicable legal and tax requirements in both jurisdictions.

5. Employee Benefit Plans

Employees may be participants in company health and welfare plans, pension and retirement plans, and equity plans. The impact on these plans of a participant employee working abroad would need to be assessed. For example, could an overseas employee remain in a tax-approved pension or retirement arrangement? Do the scheme rules allow for this? Would such participation (if allowed) potentially invalidate tax-approved status for the employee or even the plan itself? What is the correct tax and social security withholdings treatment by the employer on employer and employee contributions to the plan, particularly if the employee is no longer a tax resident in the home country and may no longer benefit from tax-free or tax-beneficial treatment? Is the relevant benefit a mandatory entitlement in the new jurisdiction, such that different limits or minimum coverage levels would apply? Does the employee’s relocation potentially subject previously earned benefits to higher levels of taxation on an unfavorable basis? Are there additional complications arising from any tax treaty between the home country and the new country?

In relation to equity plans, employees need to understand whether any grant, vesting or purchasing event will be taxed in the home or host country, and whether this alters the employer’s tax withholding obligations. Could the employee’s presence in a foreign jurisdiction trigger any securities law requirements for the employer in that country (such as securities registration requirements, which can be onerous), or run up against any foreign exchange prohibitions or limits? In some countries, variable compensation such as that received pursuant to equity plans can be counted as remuneration for the purposes of calculating mandatory employee severance or other employment-related payments, which can significantly increase the overall cost to the employer.

Another key question is whether employee-related insurance cover such as health, dental, life or income replacement insurance will apply outside the employer’s home jurisdiction. Many insurers will not cover out-of-country employees but often this is not discovered until an acute issue arises and a claim is made. If the employer has given a contractual promise to provide such cover to an employee, it may then face significant costs if it has to replace the insurance benefits from its own pocket due to invalid cover (in particular in relation to health, life or income replacement insurance).

6. Corporate Insurance

As with employee-related insurance, an employer would also need to consider the impact of overseas working on its corporate insurances. Will generic travel insurance apply if the employee is strictly not travelling on business, but has relocated abroad? If emergency hospitalization or repatriation is needed, will the insurance still cover this, or does additional cover need to be obtained? Will an employer’s public liability coverage continue to protect against an employee who is working overseas? Will the employer be covered against a catastrophic event caused by the employee? Even if the insurance coverage does provide for this, what are the risks and/or potential claims in the overseas jurisdiction? Is the employee carrying out regulated or controlled activities that might require additional insurance coverage or other protections to shield the employer from consumer or regulatory risks abroad?

7. Data Security

An employer should assess how data is protected. Does the employee need stronger security software and/or protocols to protect data from accidental disclosure or from third party or state interference? Where is the employee working and on what devices? How accessible and secure are these physically? Can cybersecurity insurance be procured to cover risks of data breach overseas? Which regulator would the employer be dealing with if there was a data breach overseas, and is there a data breach response plan in place to deal with serious and acute issues? If an employee is relocating into the European Union (EU) and then transferring personal data out of it, the EU’s stringent rules on data transfer may apply. Where the receiving country’s data protection standards have not been deemed adequate by the EU (e.g., the U.S.), intra-group corporate rules ensuring minimum data protection standards may need to be put in place in order to legally transfer data outside the EU. The EU’s data protection legislation (the General Data Protection Regulation) provides for a maximum fine for serious breaches of the greater of EUR 20 million or 4% of annual global turnover. Employers will often be bound by a web of contractual confidentiality obligations to third parties, whether they be clients, suppliers, vendors or partners. If a public disclosure of confidential information occurs due to the lower data security of an employee working abroad, could third party confidentiality provisions be breached as a result? If so, could this cause commercial contracts to be terminated by the counterparty, resulting in economic losses and/or reputational damage for the employer?

“….(the General Data Protection Regulation) provides for a maximum fine for serious breaches of the greater of EUR 20 million or 4% of annual global turnover.”

8. Risk Assessment/Compliance with Local COVID and Public Health Requirements

Given the current pandemic, an employer’s duty of care and health and safety duties (to provide and ensure a safe workplace, for example) are heightened if the employee is overseas and working from home. However, it will be much harder to make any risk assessments or to evaluate the situation without local knowledge or physical insight.

An employer should review the home country statutory health and safety obligations it has to its employees, and consider how these can be discharged when the employee is abroad. The obligations are still likely to apply if the employee is working from home, wherever that is. Do additional checks need to be put in place or a new risk assessment carried out? Would failure to do so invalidate reliance on any employers’ liability insurance? Can the employer foresee potential harm in the overseas remote working arrangement? Could it be liable in negligence if not considering, or ignoring, these issues?

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Many people don’t want to work unless it’s from home

If you’re one of the approximately 50 percent of Americans who worked remotely during the pandemic, you’re probably wondering if remote work is in the cards after the pandemic is over. The vast majority of people say they’d like to work remotely at least part of the time, but that desire is running up against the reality of there being fewer remote jobs than there are people who say they want them. Only about 10 percent of jobs on popular hiring platforms include remote work.

That’s a boon for jobs offering remote work. Take Zillow, for example, which saw a huge spike in applicants due to a new remote work option. The real estate marketplace announced last summer that it would allow the vast majority of its workers — 90 percent of its more than 5,000 employees — to work from home at least part of the time. That represented an about-face for a company that, before the pandemic, had demanded that most employees come to the office regularly.

The move also positioned Zillow, which is hoping to eventually add 2,000 positions, at a desirable spot in a very tight labor market, in which many companies are struggling to get enough staff. Nearly 56,000 people applied to Zillow in the first quarter of 2021, up 50 percent from last year when there were more jobs posted.

“If we weren’t doing this, I think it would be tremendously difficult to be filling our positions right now,” Dan Spaulding, Zillow’s chief people officer, told Recode. “We are doing this, and it is still difficult — but I think we found an edge.”

The company’s relative success amid a hiring crunch and resignation boom illustrates the immense draw of remote work. Employees are tripping over themselves to scoop up a relatively small number of partially and fully remote positions. Zillow isn’t the only company seeing a surge in applications for remote jobs. And while the overall number of remote jobs is increasing, there are currently far more people who say they want these jobs than there are open positions.

Before the pandemic, many Americans hadn’t regularly been able to work from home, but that changed during lockdown. And for many employers and employees, the new arrangement worked surprisingly well. People were just as productive as they were before but they got to skip their lengthy commutes and spend more time with their families. As it turned out, much of what people did in an office could be accomplished pretty easily with wifi, a laptop, and Zoom. Now, as companies reopen their offices this fall, the ability to work remotely is at the top of their employee wish lists, with some valuing it higher than a pay raise.

Indeed, up to a third of office workers say they’ll quit their jobs if they can’t work remotely at least some of the time, and people are quitting their jobs at the highest level on record. Some 4 million people quit their jobs in April, according to the Bureau of Labor Statistics, a figure that represents 2.7 percent of the workforce. And there are more jobs open than ever before.

Needless to say, employers are finding it difficult to fill positions. Companies that offer remote work are having an easier time. Companies that don’t offer it may want to start.

The growth of remote work and remote work demand

Data from a number of job sites illustrates the growing popularity of remote work, which for the purposes of this article includes jobs that allow working from home some or all of the time. On LinkedIn, the share of US jobs that allow remote work increased fivefold, from less than 2 percent in May 2020 to about 10 percent in May 2021. Those jobs are getting 25 percent of all applications. ZipRecruiter saw similar growth in remote jobs, which it says are getting four times the number of applications as jobs that don’t have any remote options.

“A lot of people are competing over very few [remote] jobs,” Julia Pollak, ZipRecruiter’s labor economist, said. “And then there’s very little competition for the in-store, at-workplace, in-warehouse kinds of jobs.”

Retail workers are leaving en masse, many lured away by other entry-level jobs offering higher wages and work from home.

“The biggest shift has been toward remote work being even an option for these lower-wage, less-senior jobs,” Pollak said. “That wasn’t a thing before.”

On LinkedIn, the most in-demand remote entry-level opportunities are in customer service (support, data entry), business development (which includes cold-calling), and product management.

Pollak says she’s noticed many industries that haven’t typically been associated with remote work are letting employees complete at least some of their tasks at home. Home health aides, for example, used to have to go into offices to complete their paperwork. Now, some of their employers are allowing them to do that portion of their job where they wish. Sales reps and even construction managers are finding that some employers are offering part-time remote positions.

Still there’s a gap between the desire for remote work and the availability, especially in fields outside of knowledge work.

Of course, the biggest growth in remote work options is where many would expect: the tech industry. Tech had already been facing challenges getting qualified workers. Given the current state of affairs, these software engineers and data scientists have an even stronger upper hand.


How remote work could benefit employers

This isn’t just employees getting what they want in a tight labor market. Many of the people Recode spoke to spun this as a way for companies to actually meet their diversity goals. Removing geographic and time constraints means employers can reach out to a much wider pool of qualified candidates. Women and people of color are much more likely to prefer remote work than their male or white counterparts, according to a recent Slack survey.

Women frequently cite child care as a reason. LinkedIn’s group product manager for careers products, Ada Yu, sees offering remote work as a way to attract more women, who disproportionately left the workforce during the pandemic.

“Flexibility of schedule will really help employers try to recruit, retain, and engage with parents in general, but especially women,” Yu said.

Black employees say remote work is better for their sense of belonging. They are 20 percent more likely to be open to remote work than employees on average, according to Hired’s Brenner.

“We’ve seen that once companies start opening up these remote searches, they’re able to also achieve their goals in terms of bringing in a more diverse employee base,” Brenner said.

The future of office space

It’s so far unclear what the rise of remote work will mean for office space, especially since many companies are adopting hybrid work plans in which employees will spend only part of their time in the office. How much office space they need will depend, in part, on how much their employees end up coming to the office.

Currently, only 9 percent of large companies say their office portfolios will get “significantly smaller” in the next three years, according to the latest employer survey from real estate services company CBRE. Some 72 percent of companies are anticipating modest office space reductions. Instead of drastically downsizing, companies are altering their floor plans to have fewer dedicated desks and more shared space for people to work together when they’re in the office.

Zillow, for now, is keeping its office space (though, to be fair, it held long-term leases so it doesn’t have much of a choice). Instead of downsizing, the company is redesigning its offices to be more geared for collaboration, which it says will be the main objective when its remote workers do come into the office.

About 60 percent of Zillow employees anticipate working from an office once a month or less going forward. The company plans on bringing in fully remote employees a few times a year.

“We do feel that in-person collaboration is still going to be really important coming out of the pandemic,” Zillow’s Spaulding said.

The vast majority of collaboration, however, will have to happen online.

For those who want remote jobs but are unable to get them, more jobs are likely to become remote in the future as companies use the perk as a way to attract much-needed employees. The desire to work remotely doesn’t seem to be going away, and more jobs can be remote than already are.

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