Explainer: Challenges And Opportunities Of Cross-Border Remote Working

“There are reactive and proactive things to consider,” says Dinesh Jangra, Global Practice Leader—Global Mobility Services at Crowe. He interviewed several human resources leaders at global organizations, and readers can find some standout quotations below. 

“The ‘handshake’ has changed with the employee-employer relationship, and there has been a two-year ‘experiment’ due to the pandemic,” continues London-based Jangra. “For employers, it’s about being competitive [in the job market]. To be competitive, you must change the way you manage your people. As the research shows, employers have to respond to the trend of agility.” 

However, the tone of many of Jangra’s interviews with the HR leaders indicated that top talent is calling the shots and almost forcing the company to rewrite its working policies reluctantly. “If someone is important to the business, they can tell the business what they want, and it will probably happen,” he says. “So are employers getting ‘bounced’ into these decisions to go with the flow?”

Patrick Harteveld, Head of Expatriate Management at multinational insurer Assicurazioni Generali, says his organization has been on an “innovation journey to create additional flexibility” for employees in recent years. “Our hybrid working model means we believe in working both from the office and from home, or wherever. We want to give people flexibility, and ownership, so we don’t fix too much on the fact that you must be present for eight hours every day in the office.”

But there is a trade-off. “Employees have a duty to be productive, without having the necessity to be physically present in a certain location. But, if you already have this model, why not extend it to an international setting?”

To answer this question, Milan-based Harteveld and his team researched the challenges and opportunities of CBRW. Four models were identified. “There were the two extremes: either companies, such as Spotify, that accepted and encouraged full flexibility, or those at the opposite end that refused any kind of remote working,” he continues. The other two models are in between, the third being restrictive with lots of checks using technology to determine the risk of an employee working remotely, and the second being less complicated but adaptable and compliant. 

This last approach has been used by Generali. “Taking into account tax treaties and social security issues, and other elements, we came up with a 30-working-days threshold [for CBRW],” says Harteveld. “That period should not create a taxable presence in the other country and therefore minimize the cost and risk exposure for the organization.”

Jangra offers an even simpler list regarding a company’s approach to cross-border remote working and work-from-anywhere (WFA) policies: “encourage, tolerate, or stop.” Business leaders should ask themselves which of the three of his models they are most like today, where they want to be tomorrow, and if it’s different, how to change the culture.

Key takeaways from an in-person roundtable event in London, hosted by Crowe UK in July 2023, on the topic of global mobility can be found here, with Jangra and others featuring. He also shares a decision funnel that business leaders can use to determine whether an employee’s request for WFA or CBRW could—and should—be accepted. As the diagram below illustrates, numerous practical challenges might be considered before agreeing to approve such a request. However, as the research suggests, barriers are often removed to retain the services of top-valued talent. Besides, the retention cost is far outweighed by the necessary recruitment and training should a key member depart.

While Spotify and a few other companies are enjoying success from WFA and CBRW policies, and generated global headlines, many other organizations are wary about being so bold—and many feel they don’t need to be yet. 

The Crowe research found CBRW and WFA policies are almost exclusively employee driven—yet only 13 percent of survey respondents said it is effective for all work roles. Further, 37 percent of organizations quizzed do not limit or cap cross-border remote working by time, but 34 percent stop it at three months or less.

The edited comments below are gathered from Jangra’s and Crowe UK’s independent research in late 2022. 

“We’ve been quite restrictive on our policy; honestly, we are not encouraging CBRW.”
Technology services company with a global headcount of 82,000 operating in c 40 countries

“The formation of a CBRW policy is not something we’ve felt the need to address simply because we have not received any requests from our employees to work remotely from another country permanently. On the other hand, we increasingly receive requests from our employees to tag work on holidays—for example, when visiting family abroad—and these cases are dealt with on an ad hoc basis.”
Consumer goods company with a global headcount of 2,750 operating in c 30 countries

“The issue is always employee driven. We see two types of arrangements: employees wanting to tag on a short period to a holiday or return to their family home country; and then a longer-term arrangement where they will live in a country that is different to employment and role. We’ve made some allowances—and accommodated CBRW—for those people because they’re unique talents. If finding the right talent anywhere else is difficult, we will look at a CBRW arrangement. However, it’s not something we want to do as it involves extra costs and compliance.”
Consumer goods company with a global headcount of 33,0000 operating in c 20 countries

“As the organization grows, you simply can’t keep a decentralized approach. What’s interesting now is that countries and businesses demand more centralization and standardization. For CBRWs, we could set a marker of what’s acceptable from a global perspective—say 45 days each year per country—and then the local country process would have to align over time. If taxes or social security are triggered in these arrangements, that difference is for the employee. We do not help with that. However, we have no choice around compliance and would set up payroll and operate and report, which are our costs.”
IT consulting company with a global headcount of 340,000 operating in c 50 countries

“The size of the issue [CBRW] is unclear as there isn’t a proactive approach to identify cases. It would not be unusual to have two cases a week that need some degree of review. We have not openly advertised our approach, as there is a degree of paranoia about creating issues and opening the floodgates. If we promote our approach, we may face a deluge of requests, requiring resources and costs to manage.”
Consumer goods company with a global headcount of 70,000 operating in c 50 countries

“My team came together to discuss potential issues, and we provided some input as there are complications from a compliance perspective with payroll, corporate tax issues, and so on. We created a paper and shared it with the European Commission to ensure they know the challenges enterprises like ours would face.”
Consumer goods company with a global headcount of 150,000 operating in c 100 countries

“My main advice is to tackle CBRW with a group of people that touch the topic—HR, Legal, Tax, Global Mobility—because that’s the best way to get a decision. Not all CEOs are focused on this area, and educating and informing leadership is critical. Transparency is key.”
Healthcare company with a global headcount of 75,000 operating in c 40 countries

“When you monetize risk rather than just talk about risk, it does focus the minds of our people because project-based managers with budgets will do anything to save a dollar. If the commercial business case stacks up and they are a senior person, we will work with the business to make it a short-term formalized assignment.”
IT consulting company with a global headcount of 300,000 operating in c 40 countries

• Communication challenges One of the biggest challenges of cross-border remote working is communication. Communicating effectively with employees in different time zones and who speak other languages can be difficult.
• Cultural differences Another challenge of cross-border remote working is cultural differences. Employees from different countries may have different work styles and expectations. It is important to be aware of these differences and to make an effort to accommodate them. 
• Legal challenges There are also several legal challenges that organizations need to be aware of when hiring remote employees from different countries, and enabling CBRW. These challenges can vary depending on the country where the employee is located.
• Inefficient use of time, cost and resource Suppose an organization has 80,000 employees, of which 400 have remote cross-border arrangements. In that case, the paradox is while they represent 0.5 percent of the workforce, the time to provide advisory support and track them is disproportionate.
• Associated risks and penalties These include creating a permanent establishment and exposure to tax on corporate profits, breach of compliance regulations and breach of contractual client obligations, leading to possible loss of work.

“Much will depend on how the tax laws evolve, because they are lagging behind recent developments,” states Harteveld of Generali. Organizations and employees realized what was possible regarding remote working during the pandemic. Yet those were exceptional times, and tax and social security measures were relaxed, he says. “I hope tax laws will catch up to what is happening and evolve.”

Harteveld pointed out “a first indication of change” is a new proposition from the European Union to extend the period that people can work from another country for social security purposes. He explains: “Typically, there was a 25 percent threshold, meaning that if you’re hired, say by a company in Italy, and you want to work in Germany, you can do so up to 25 percent of your time, without shifting social security to Germany. The new framework seems to extend that to 50 percent of the working time.”

Finally, Harteveld argues that organizations should view upgrading or revamping working policies as business-critical, as it engages and motivates employees, and should improve their experience and productivity. “It’s a win-win situation,” he adds. “It’s about employee wellbeing, and if they are entrusted with additional flexibility they will work better in the environment they desire. Companies are being forced to open up about this, as top talent will now refuse a position that doesn’t offer flexibility.”