Pay cuts, taxes, child care: what another year of remote work will look like

Facebook considered tracking its employees. Lyft is making some workers move before April. Here’s how big companies are wrestling with thorny work-from-home issues.

Employees’ relocations to new cities, states and countries have companies and workers grappling with tax concerns.

Companies are anticipating another largely remote work year, and new questions about compensation and benefits are weighing on managers.

Discussions about the future of work, such as whether to reduce the salaries of employees who have left high-cost cities, are priority items in board meetings and senior executive sessions across industries, according to chief executives, board members and corporate advisers.

Among the questions companies are trying to resolve: Who should shoulder tax costs as employees move to new locations while working remotely? And what is the most effective way to support working parents?

Companies say there is much at stake, from the happiness and productivity of employees to regulatory consequences, if they get these decisions wrong.

Employees’ relocations to new cities, states and countries have companies and workers grappling with tax concerns.

Facebook Inc. CEO Mark Zuckerberg told employees last year that, beginning in January, the company would use its virtual private network, or VPN, that employees use to access company systems to determine where they were working for tax purposes.

At issue is whether workers who told Facebook they left locations such as California and New York – and therefore shouldn’t pay state and local income tax – had really moved, according to a person familiar with the matter. Also, if an employee has moved to another state or city where there are local income taxes, both the company and worker could be held accountable for not paying them.

Facebook ultimately decided against tracking its employees’ locations based on their VPN usage. The company now says that when its workers request – and are approved for – long-term remote work, they must confirm their new location with the company, as it could affect their taxes. Facebook also said some remote employees’ salaries might be changed if they live in a location with a different cost of labour than their previous location.

Ride-sharing service Lyft Inc. recently told its U.S.-based employees that staffers must work from one of Lyft’s 36 registered states for tax purposes based on where Lyft’s corporate entity is registered. If an employee is living outside of states where Lyft is registered as a corporate entity, such as in Maine or Wyoming, they have until March 31 to move back to one, according to an internal email reviewed by The Wall Street Journal.

As well, if Lyft workers plan to live outside the state they worked in before the Covid-19 pandemic began for 60 days or longer, they have to submit a form before March 31 so that the company can tax them in that new state – but they can only submit this request once, according to the email.

Facebook’s campus in Menlo Park, Calif. The company decided against tracking its employees’ locations based on their VPN usage. Picture: AFP

Companies such as payments firm Stripe Inc. have offered employees leaving San Francisco, New York or Seattle the chance to relocate for a one-time bonus of $20,000 if they agree to a salary cut of up to 10%. Others, such as Microsoft Corp., have indicated that benefits and pay may change based on the company’s compensation scale by location.

A number of Fortune 500 companies across industries are considering potential pay changes if an employee relocates from a city like San Francisco to Texas, says Jimmy Etheredge, chief executive of North America at the consulting firm Accenture PLC.

“Almost all of them have a cost-of-living element in their compensation, ” he says. “As they’re thinking through this future of work that may involve more remote working, that may involve talent in places that they did not necessarily have before, they will look to make adjustments.” Other tech companies are continuing to pay people the same regardless of ZIP Code. Spotify Technology SA, the audiostreaming company based in Sweden, recently told its employees, which it calls “band members,” that they could work from anywhere within their assigned country and maintain their same pay.

“When you move, we will not change that,” Katarina Berg, Spotify’s chief HR officer, said. The company, with roughly 6,500 full-time employees, will adopt national salary ranges for each job based on compensation at competing companies and set by the prevailing pay in high-cost cities such as San Francisco or New York, where many of Spotify’s workers are based.

The prolonged remote spell is putting pressure on companies to give parents more help with child care – while being careful not to rankle workers without dependants.

Some companies have offered Covid-related stipends that workers can use for anything from child care to workout equipment. Technology company Palo Alto Networks Inc. now offers workers an allowance of $1,000 that can be applied to a menu of options. Parents can use the money on tutoring assistance for their children, while others can apply it toward a Peloton bike.

“No two employees are the same in the support they need,” Nikesh Arora, Palo Alto Network’s CEO, said in a blog post announcing the benefit.

Others are rolling out special perks to parents and caregivers. Bank of America Corp. has offered eligible employees, including those working in its branches, up to $100 a day toward childcare expenses. The company also increased the number of days that employees can use backup child- or adult-care facilities to 50 a year, up from 40.

For workers who were accustomed to frequent business travel before the Covid-19 era, another question is emerging: Will their clients want visitors when the pandemic ends?

Brad Preber, CEO of Grant Thornton LLP, one of the biggest tax and accounting firms, says some clients are starting to say they prefer work to remain virtual. That is because remote work has worked well, he says, but also because in-person visits from accountants and consultants could be disruptive, especially when many offices are reopening at less than 100% capacity of their employees.

For road warriors who thrived on near-constant business travel, the change could come as a disappointment, he says.

“I miss human contact, too,” Mr. Preber says, “but the rules of the game have changed.”

The Wall Street Journal