Steve Black, Co-Founder and Chief Strategy Officer of Topia
As distributed workforces become the norm, companies face major tax and legal implications. Here’s how to keep track of employee whereabouts to ensure compliance without undermining data privacy and trust.
The future of work is more distributed than ever before. While the shift toward global mobility had picked up steam over the last decade, COVID-19 accelerated the transition on a massive scale. Now, even for employees who had previously been told it was impossible to work anywhere other than their company’s office, employers have figured out a way to make it work in the name of business continuity and survival.
And, make no mistake: there’s no turning back. Now that we’ve proven what’s possible, employees will continue to demand the freedom and flexibility to work from anywhere—at home, the beach, a secluded mountain cabin or even their hometown, halfway around the world—to say nothing of those for whom business travel is, and will continue to be, a huge part of their job.
As companies adapt to this new normal, employees’ locations have massive tax and legal implications. For example, if an employee works more than two weeks a year in New York City, you must legally withhold NYC taxes from their paycheck. On the other hand, employees who used to work in NYC and are now working from home in the suburbs, or even Connecticut or New Jersey might actually be saving their employer millions in taxes.
The Trouble with Tracking
Of course, both employers and employees want to avoid overpaying taxes or paying penalties for violating local tax laws. But keeping track of employees’ whereabouts can be extremely difficult—even for employees themselves. Frequent travelers know all too well the enormously painful process of manually compiling their tax calendar at the end of each year, spending hours going through a calendar, travel history, emails and expenses trying to figure out exactly where they’ve been each day. It’s exhausting, time-consuming and the delayed look-back puts the company at risk for errors.
Not to mention, many HR teams don’t have the tools they need to track employee whereabouts in real time. When the COVID crisis hit, global companies were caught woefully unprepared when the antiquated spreadsheets they had been using to track employee location proved entirely inadequate. That left many scrambling to figure out who was in—and potentially trapped in—a hot spot, putting employees’ health and safety on the line.
Using GPS tracking software on mobile phones and laptops seems like a simple solution, but, it can also be a serious invasion of privacy. What if an employee is interviewing for a new job? Visiting a rehab facility for a group meeting? That’s none of the employer’s business, and this kind of precise tracking is not appropriate. Not only is it likely illegal in most jurisdictions, but it certainly undermines trust between the employer and employee.
The idea of being tracked at all is unnerving for many, especially as we’re already constantly warned about consumer mobile apps and social networks collecting and selling our location data. That naturally makes anyone bristle, even if the tracking is for their own benefit.
Tracking Done Right
While you may have entirely legitimate and mutually beneficial reasons for tracking employees (tax compliance and/or potentially huge savings for you and the employee), it must be done with a tactful approach and keen awareness of the perception. Here’s how to get started:
- Be clear about what data you will collect and why. Explain to employees that location tracking is solely to determine which jurisdictions employees spend time in so that the company can pay appropriate taxes or avoid penalties. You shouldn’t collect or see any data on the specific addresses an employee has visited. You only need high-level data on their whereabouts at a jurisdictional level, which should be no more detailed than what they would say if asked “Where are you located?” on a conference call. In most cases, city and state or country is sufficient.
- Implement a sound data security program. Be transparent with employees about where their data will be stored, who has access to it, who owns it and how long it will be retained. Be sure your location tracking program is subject to third-party security audits and that redundancies and routine audits are built into the solution.
- Give employees the option to opt-out. Regardless of safeguards, employees also deserve the right to decline electronic tracking and instead manually document their location, which can be done through travel and expense data they already submit. And, they should be able to deactivate tracking applications when they’re off the clock or traveling on personal time.
- Prepare for lots of questions. Expect that employees may be hesitant or resist the idea of location tracking, even if they don’t have anything to hide. The most effective way to combat trust issues is to have an open dialogue, answer employees’ questions transparently and provide reassurance that they won’t be scrutinized in minute detail.
A Hard but Necessary Conversation
Electronic location tracking may be a difficult subject to address with your employees, but the future of work makes it a necessity. As our work from anywhere environment continues, likely far beyond the COVID crisis, companies must take effective measures to protect themselves from compliance risk. Being careful to protect employees’ privacy and personal information in the process will go a long way toward encouraging their participation and maintaining their trust.