Taxing times for remote workers
The tax code does not offer remotely enough to home workers
Members of the SL Controls team Deirdre Loughlin, Paul Clarke, Shane Loughlin, Keith Moran (CEO), Darragh McMorrow and Norma Mulligan
After almost two decades in business, this year Keith Moran of SL Controls hired the company’s first fully remote worker. Now he wants to take on many more.
The company, which is headquartered in Sligo, develops automation systems for manufacturing clients that span all aspects of healthcare, from Abbott to Zogenix. It was established in 2002, and currently employs 90 people in offices in Dublin, Galway, Limerick and Florida, as well as Sligo. Now a major new recruitment drive will see it hire 50 more.
Of the positions on offer, many will be open to those looking to work remotely. “It is part of our business growth strategy,” he says.
Remote working allows for a better work-life balance, does away with commutes and enables employees to manage home and work responsibilities in a much more flexible way. It benefits employers too.
“It could provide potential savings if we reduce the size of our offices at some stage,” he says.
But remote working can only sustain if people have a suitable place to remote work from. Moran has looked at providing dedicated home working spaces for some employees, such as in a garden room. It proved a non-starter.
“The benefit in kind implications for the individual are too great. Revenue’s position is ‘how do we know the person isn’t using it for themselves at weekends’?”
Benefit in kind relates to non-cash remuneration and is taxed as such, impacting on the individual’s take-home pay. As more people choose to work from home long term, it is a potential barrier to enterprise that is beginning to come under the microscope.
Level playing field
Moran says clear rules that specify exactly how much an employer can spend equipping a worker’s home office would ensure a level playing field between resourced-pressed SMEs and deep-pocketed multinationals.
He says Covid has pushed remote working to the fore, and collaborative solutions such as Teams, Slack and and Zoom have showed what is possible. “It has broken down mindsets and shown us how things could be done better. What we need now is a tax framework to support it.”
The current situation is an opportunity to be seized, he says, but to do that “we need to know how much we can give an employee to build an office out the back”.
The Government’s Remote Work Strategy report, published earlier this year, found 94 per cent of survey respondents want to work remotely after the Covid crisis recedes. That represents a rise of 10 per cent compared with a similar survey in May of last year.
The strategy aims to build on the progress made over the past 12 months with a view to ensuring remote working becomes a permanent feature of the Irish workplace.
The benefits are legion, it points out, including boosting labour market participation, making it easier for employers to attract and retain talent, enabling balanced regional development, alleviating accommodation pressures, and improving work-life balance for workers and their families. Reducing commutes also helps cut carbon emissions.
Employers have a duty of care to remote workers in terms of health and safety at home, just as they do for those in the office. Providing it may well require the creation of a dedicated work space, such as an office in the garden.
The Government has asked its Tax Strategy Group to review the current tax arrangements for remote working in respect of both employees and employers in advance of Budget 2022.
Currently the only financial support employees working from home are entitled to is a payment of €3.22 a day from their employer to cover utilities. That is just over €1 a day each towards the cost of electricity, heating and broadband. If the employer chooses not to pay it the employee can claim for the costs incurred, subject to strict limits.
Concern regarding the costs of working from home featured strongly in the Public Consultation on Remote Work Guidance. As yet there is no legislation governing costs associated with remote working, but the Workplace Relations Commission has indicated that in remote working arrangements costs are generally agreed between the parties and provided for as part of the terms and conditions or contract of employment.
More needs to be done, however, if remote working is to fulfil its potential.
“The problem is that the tax legislation was never designed for a remote workforce,” says Larissa Feeney of Accountantonline.ie.“Apart from the e-work allowance of €3.20 a day, there is nothing to benefit an employee about working from home.”
Feeney, who is based in Donegal, launched her online accountancy business in 2011. Four years ago, when she employed six people, she took on her first remote worker. Today she employs 45 people, everyone works remotely, and did so prior to Covid.
Being a remote-first business has brought enormous benefits to her business, helping to support growth. It has enabled her to retain talented personnel even when they moved abroad to live or travel.
One of her staff members is based in Istanbul, and another in Tokyo. Another spent an extended period of time travelling through Costa Rica while continuing to work.
“In an office context the employer is happy to pay the rent or mortgage for an office, but it is not possible for them to do the same for an employee at home or working from the garden because of Revenue issues about the personal benefit the employee may get from that space,” she says.
But in a globalised world employers are already well used to considering the tax consequences of having employees in different countries. “So we already know there is no ‘one size fits all’ when it comes to the tax code,” she says.
It’s an issue that, as a country, we now need to sort.
“Because of the length of time we have been in this pandemic we can be confident that this is a permanent shift. We have seen the huge benefits of remote working in relation to flexibility and work-life balance. I really can’t see the whole workforce wanting to head back to the office,” says Feeney.
What initially prompted her to hire her first remote worker was a desire to be able to recruit from a wider talent pool.
Over time enabling people to work remotely has helped her to bring a range of talents and skills into the business that she would have struggled to find locally. That has enabled her to compete for talent with big urban accountancy practices. It also boosted productivity.
“A remote culture leads to massive flexibility and a move to output-based deliverables-per-week rather than nine-to-five hours,” says Feeney, who believes that having a remote culture is what has underpinned the firm’s growth over the past four years.
“It would not have been possible for an accountancy practice in the northwest without remote working. Equally, it would not have been possible for me to do it as a small start-up in Dublin because I simply couldn’t have afforded to get an office to put everyone in.”
There are challenges to remote working, of course. It can be isolating. It can be hard for younger staff members in particular, many of whom are living in shared accommodation, to find adequate work space at home. And a home office in the garden will not help those renting apartments.
The use of community digital hubs, which offer co-working spaces that could be subsidised by the employer, is one solution.
But in situations where both the employer and the employee feel that a subsidised home office is the ideal solution, benefit in kind remains a major barrier to remote working, and one which many hope Budget 2022 will redress.
Variety of options
This will have to be approached with care, according to Fergus Sharpe, head of public affairs at Dublin Chamber.
“While many employers have already decided in favour of a hybrid of remote and office-based working post-Covid, businesses are still working out the details of what this will mean in practice and are considering a variety of options.
“There is no ‘one size fits all’ here, so it is important that any new tax arrangements don’t attempt to incentivise a particular model over others.
“There may be real long-term business costs associated with remote and flexible working, for example. So businesses will need time to figure out what works best for them and their staff. The focus should be on helping businesses to support their employees in adapting to change, not on dictating what that change should look like.”
“They are going to have to find a way out of this and catch up with the ways in which the world is moving,” says Feeney, “because there is a seismic shift in the way the world is working.”