In this blog we will explore what the implications that Work from Anywhere contracts have. We will focus on the IT Jobs market specifically in Ireland. We will also look at the advantages and disadvantages at these fantastic jobs have.
Firstly lets discuss some of the tax liabilities to working from anywhere. We will also explore why a business would hire people anywhere. And what the risks to the general IT remote worker community.
Companies may be at risk from remote work that crosses state lines in ways that aren’t always obvious.
The COVID 19 health emergency has caused adjustments in workforce arrangements for the majority of businesses around the world. We will keep the focus on the US and Ireland for this blog. Many workers proved they could operate efficiently from any location. This entailed, for the most part, working from a home office. Q rising number of employees have taken the phrase “work from anyplace” literally and may now be doing so from a variety of locations. This could include places where rent is cheaper and standards of living are better. Who could blame them right? In in most companies, they don’t alter the wage.
What is not understood by the IT workers community is the administration headaches that come with a work from anywhere contract, different tax jurisdictions etc. Now that’s no problem for a Facebook, Amazon or Google who have legal entities all over the world making it easier to shift head count. But that still needs to happen, or the IT worker will be liable for tax they are not expecting.
Exploring the tax side of things for the IT job market in a little more detail, firstly in the US.
- Employers withhold relevant state and local income taxes from employees based mostly on the location of the employee’s place of business, or their physical location, and sporadically on the location of the employee’s place of residence. Due to reciprocal agreements, several states allow withholding in just one state. Although fewer than half of the states have them, they may be relevant and useful.
- Employers are expected to abide by lengthy, intricate laws and regulations that specify how long an employee may visit a state temporarily for work-related purposes before the employer is required to withhold income tax. When an employer is held accountable for tax withholding, the state may seek payment from the employer if no tax is deducted from employees’ paychecks.
- The requirements for temporary presence vary depending on the state (usually 14 or 30 days), the quantity of earnings, or a mix of both. For instance, in order to trigger withholding requirements, a person must work for 23 days in Maine and earn more than $3,000. On the first day of travel into the state for work-related purposes, a nonresident employee’s wages are frequently taxable.
- Many states provided assistance during the COVID public health emergency by relaxing the temporary presence requirements for workers who were forced to work elsewhere than their usual workplace because of the COVID epidemic.
- Each state will have different tax requirements there will be corporate business activity tax for your employer also, Officials from the New York Department of Labour discussed their opinions on cross-border employment arrangements, stating that if workers are employed remotely in the state, all New York laws are instantly applicable. The Wage & Hour rules do not provide an application level or a provision for temporary or part-time presence that would relieve an employer from compliance, in contrast to tax withholding compliance.
- So do your homework before moving state. Consider workers comp, welfare etc.
In Ireland, the revenue commissioner do make this pretty clear. You can work from anywhere and be a tax resident of Ireland. There is an entitlement relief under the double taxation and you need to work outside of Ireland for over 183 days or more in a tax year to be considered not a tax resident in Ireland.
If your plans are to work in the sun for the summer that’s fine. You will pay Irish tax without the risk of paying tax wherever you decide to go as long as you stay within the EU. There are of course tax-free states that would be mighty appealing, but your employer needs a legal entity in that country for you to work there. Consult your employers finance or HR department before making those plans.
Exploring the jobs market for a minute and let’s look at the risks to the local work forces. If these work from anywhere contracts become even more common place. Let’s say a business located in the US or Ireland wants to expand and create 100 new Software Engineer roles, specialising in Java. They look at the local market, if the business is based in Dublin and they are currently paying an average salary of €80,000 for an Engineer, it doesn’t really matter. They look at the local market and decide the best approach is to offer remote working anywhere to make the IT jobs attractive.
If some of the candidates want to be based in Cork, Galway. Sao Paolo, Goa, Manchester, Manila etc, a question the business might ask is, should we pay local salaries or Dublin based salaries. If you consider the average Java Developer in Manila is paid €18,000 which is on the high end believe it or not. Seems like an easy answer for the business.
Some people insist on working remotely. “I have gotten use to it and don’t plan on going back to the office”. This would be a common sentence I hear. There is a cohort of people that are unlikely to return to the office. Why should they, if they don’t want to. If their skillset is like for like with a Java programmer outside ireland at a lower cost. Does it make sense for the business to hire there? Why should a business pay high rents & salaries in Dublin, if that same talent never crosses the door. At what point does a business set up operations in a lower cost country.
My question is. Can a remote Java Engineer on Dublin wages. Who insists on working from home full time compete with the same skillset based abroad. Take somewhere like The Philippines, which has excellent Java Engineers. Research has proven that people can be equally if not more productive at home. Senior Java Engineers can manage and mentor remotely too. Making use of the likes of teams or slack can be effective. Is it the same as being in person though? Imagine that same programmer is beside the Junior Engineer. Would they learn more?
Time will tell if those insisting on working remotely will soon be priced out of the market. If we are going to see a little wobble in the IT job space. Jobseekers remote or otherwise might want to give this blog a read. If you are trying to attract talent either locally or remotely please do get in touch here. Also feel free to read this blog about attracting top talent into your business.