The coronavirus pandemic (COVID-19) has dramatically impacted the way that many of us work and has clearly accelerated a move towards permanent hybrid working . As employers start to formulate their new policies it is important to consider the implications from a collective tax, legal and HR perspective. We would urge employers to consider all these factors together before finalising new policies.
The Government introduced a number of temporary tax reliefs as a response to the pandemic, to support homeworking. Many of these have now been extended until 5 April 2022, but there is no certainty that they will continue so employers need to consider the long-term tax and cost implications of providing such support to their employees.
The homeworking allowance is a good case in point. Pre COVID-19, the tax exemption of £6 per week or £26 per month only applied where a payment was made by the employer and the employee worked from home under a formalised homeworking arrangement. As a response to the pandemic, HMRC has allowed employees to make direct claims for tax relief where their employer makes no such payment, and latest HMRC figures suggest that more than three million taxpayers made such claims in the 2020/21 tax year. Whilst the ability to make a personal claim has been extended until 5 April 2022, there is no indication that this will be extended further. Employers therefore need to consider whether they should make qualifying payments to employees and, if so, whether these should commence now or from April 2022.
Another important consideration will be the impact on the permanent workplace of employees for the purpose of business travel claims. There are limited circumstances where HMRC accepts that home is a permanent workplace when considering tax relief on travel. Employers therefore need to consider the tax and legal implications when changing employees’ contractual workplaces and when setting any new policy around the extent to which employees need to spend time at the employer’s workplace .
Where hybrid working results in employees working remotely overseas, there will be additional tax, legal and HR considerations. These include: local payroll withholding tax and social security implications; any impact on the employer’s own tax position; whether the employee has the legal right to work in that country; and whether the employer is complying with local employment laws.
It is a legal requirement to provide employees with a statement of terms setting out prescribed information about their employment from the first day of their employment. Usually this is in the form of a contract of employment and includes details such as the employee’s hours of work, place of work, pay and benefits. It is therefore important to appreciate that any changes to how, where and when employees work as a result of a move to a hybrid working model will require a change to their contracts of employment. Before such changes are made though, it is important that consideration is given to:
- the employment tax and cost consequences - for example, changes to the workplace may have unexpected consequences on the tax position of travel expenses; and
- consultation with employees - changes to contracts of employment require agreement with employees and HR should therefore engage employees in a consultation process to gain their agreement before introducing any changes.
The last year has been extremely challenging and businesses are likely to continue in a period of transition for some time yet as many employers consider moving to hybrid working.
People processes will need to undergo substantial reform to be able to attract and retain top talent. Over the last year we have seen key themes emerge around: better performance management; team working and collaboration augmented by technology; diversity and inclusion; and, ensuring new ways of working, such as homeworking, aren’t adversely impacting parts of the workforce more than others.
The pandemic has also highlighted the magnitude of employee stress and mental ill health, and employers and employees now have a genuine opportunity to try and address the impact work has on employee wellbeing for the future.
Effectively managing this next phase of change, including hybrid working, will require employers to:
- understand employee views about new ways of working – times, location, work-life balance etc;
- ensure lessons are learned from the last year so that the best bits of home and office working can be combined for the future;
- equip managers with skills for managing a more disbursed workforce;
- set clear expectations; and
- pull everything together with an effective communications plan.
A holistic view
Whilst hybrid working is here to stay and will undoubtedly create opportunities for efficiency and better work life balance, employers need to ensure that they take a long-term view factoring in tax, legal and HR considerations.