As organizations around the world embrace flexible work models, many have also begun to implement policies and procedures for managing their remote workforce and ensuring fairness and compliance in hiring and compensation.
For many companies, this means offering working from home allowances. Here’s what you need to know about this benefit in various countries (which, in some cases, it’s even mandated) and tips for adding it to compensation packages.
Currently, the U.S. doesn’t have any federal law that requires employers to reimburse employees for home office expenses. However, some states have their own laws. For example, in Illinois, the Wage Payment and Collection Act requires that employers reimburse employees “for all necessary expenditures or losses incurred by the employee within the employee's scope of employment and directly related to services performed for the employer.”
In this case, cell phone and internet expenses may be classified as necessary expenditures. However, to qualify for reimbursement, the remote employee must make a request within 30 calendar days of the date the additional expense was incurred.
Even if it’s not legally required, many companies are still opting to offer home allowances as a competitive perk. For instance, according to COMPT:
- $60/month tax-free remote work stipend
- $1,000 cash bonus to work from home
- $250/month for remote workers
- $200/month (for everyone) health and wellness stipend
- $1,000/year (for everyone) continuous learning stipend
- $100/month coworking space stipend
- $100/month fitness allowance
- $100/month message allowance
- $1,000 for workstation setup
In response to the COVID-19 pandemic, Canada allowed employees to claim at-home expenses as deductions on their personal income tax returns. So long as they worked from home for more than half the time or at least four consecutive weeks, they’re eligible to take $2 for each day they had to work from home, with a $400 maximum in tax relief.
Similarly, Canada’s Revenue Agency (CRA), won’t consider an employee to receive a taxable benefit where their employer pays for or reimburses up to $500 of computer or home office equipment, as long as the employee submits receipts to the employer.
Finally, the Income Tax Act dictates that remote employees who have to pay for work-related expenses, such as those related to a home office, may be able to write off things like:
- Home internet access fees
- Maintenance and minor repair costs
- Rent paid for a house or apartment where you live
- Office supplies and phone expenses
The Australian government created a home allowance that’s tantamount to a tax deduction. For every hour of work a remote employee completes, they’re legally allowed to claim between .52 and .80 AUD in tax deductions. Additionally, they can separately claim the work-related portion of utility and equipment expenses, including:
- Phone and internet expenses
- Home office equipment and furnishing (up to $300 AUD)
- Computer depreciation
- Cleaning costs for dedicated work area
Some Australian companies have provided additional benefits for remote workers. For example, employees of the Australian health insurer Nib Group receive a $1,200 AUD allowance to cover their work from home costs.
In the United Kingdom, employers are not obligated to provide the equipment employees need to work. However, there are some key legal considerations employers must consider or else face a potential discrimination suit:
- Salary and benefits packages provided to remote workers must be the same as a comparable office worker.
- Women are more likely to request remote work arrangements than men. As such, if her request is rejected, a woman could potentially file for indirect sex discrimination unless the decision can be justified.
- For disabled workers, the employer is expected to make reasonable adjustments to support them.
Spain was one of the first countries to require employers to cover the home working expenses of their employees. Royal Decree No. 28/2020, which regulates remote work in Spain, includes a provision for equipment costs. Specifically, companies must pay for tools and resources employees need to perform their work.
These benefits would apply to employees who stay home for at least a third of their work schedule. Employers have the right to monitor their workers’ online presence, so long as they respect the worker’s dignity and privacy.
A home office agreement must be formalized and agreed to in writing by both the employer and employee. It must be an individual and voluntary decision by the worker.
Employers in The Netherlands can provide employees with a daily tax-free €2 remote work allowance, which is reimbursed by the government.
If an employee and employer have a written agreement for the days worked from home, they then qualify for the remote work allowance. However, this allowance isn’t mandatory.
Considerations for remote work allowances
Even if the country where your remote workers live doesn’t require you to make a home allowance, many companies choose to offer one to help make them more competitive as an employer. When formulating an allowance as part of a compensation package, consider the following:
Hidden costs of working from home
Although there are many benefits of remote work, it also has some hidden costs, especially for employees. For example, a Dutch study cited extra costs like higher electric, water and gas bills, not to mention little expenses like toilet paper, tea or coffee. Then there are more obvious costs like home office setup, connectivity and maintenance. As Cheryl Munk of Forbes writes:
“Employees may be incurring the costs of basic office supplies (think ink cartridges) and they may even be purchasing desks, chairs, monitors and other critical office items. Then there are even more under-the-surface expenses—like the potential cost of increased wear and tear on employees’ personal technology devices.”
International companies may have to worry about legal requirements for allowances in some locations, but not in others. Familiarity with and compliance to the regulations of each location where you have remote workers could help you avoid costly fines or penalties.
Regardless of whether any type of remote allowance is legally required, try and create a remote-worker compensation package that will be fair no matter what country you operate from.
Direct monetary payments aren’t the only ways to compensate and support remote employees. Consider creating a package that includes some of these alternative benefits, including:
- Health and wellness days
- Office equipment
- Educational assistance and management training
- Health club memberships
A work from home allowance program—and beyond
Providing a work from home allowance program can show your commitment to your employees and provide your company with a competitive edge as an employer. But it’s important be clear of any rules for allowances in all the countries where you have remote workers—and in the countries where you’re seeking new talent.
As you expand your remote workforce, a global employment solutions provider can advise you not only on working from home allowances, but other HR and payroll considerations in countries around the world. Have a specific question about employing or paying your international remote workers? Contact us to speak with a global solutions advisor today.