With the COVID-19 pandemic making remote working the norm, and choice-first working environments becoming the employment-perk of the moment, it’s important to understand the shifting guidelines in terms of both costs and benefits.
Remote working usually saves the employee money, whether that’s direct savings like a travel card, public transport or fuel prices – or even the indirect savings of hours spent commuting to the office each week, or productivity drags due to water-cooler or coffee-break escapades throughout the day. However, these financial benefits don’t stop at the employee. Global Workplace Analytics estimates that the average employer will save $11,000 per year if an employee works from home – even just half of the time.
If that’s the case, then should workers be paying out of their own earnings for essentials such as desks, internet, heating or lighting? With this in mind, many organizations have begun to offer home-working allowances, and some governments are also jumping on board. Where is this happening?
Home Allowances in the US
Federal law in the US does not require organizations to reimburse employees for expenses incurred due to working from home. However, it’s important to recognize that under the Fair Labor Standards Act (FLSA), you can’t ask your employees to pay for work-related expenses if that means their wages would drop beneath the federal minimum wage. (Currently $7.25 for hourly employees or $684 per week on salary.) If expenses do force employees to fall below the minimum wage – these would need to be reimbursed by the company.
However, outside of this broad ruling, some States have decided to create their own laws around WFH stipends, most notably – California and Illinois. Under the California Labor Code, any losses or costs that the employee has as a direct result of completing their role needs to be reimbursed by the business if the organization requires the employee to work from home.
This is obviously very broad, but California courts have included a reasonable percentage of the internet or phone bill (even when this is an unlimited plan). In Illinois, the Wage Payment and Collection Act has a similar scope, and includes equipment like computers and printers, as long as these expenses are requested with documentation within 30 days of purchase.
Employers take note!
Massachusetts, Montana, Pennsylvania, New York, New Hampshire, North Dakota, South Dakota, Iowa, and the District of Columbia have also put home allowance laws into place that vary by district.
Home Allowance Laws Globally
Different countries are implementing varied allowances and legal requirements for employees who have moved to work from home. Let’s look at a few in more detail.
Belgium – Just 5 Days From Home Classifies You as a Home Worker
Employers in Belgium can choose between providing the necessary equipment for WFH, including internet access, or paying a stipend towards what they need. The minimum is €20 per month for internet, and €25 for buying a computer, and the employee would not need to pay any tax or social security on this allowance. For a second computer screen, or additional hardware such as a printer, the stipend is €5 per month per item, up to €10 per month for 3 years.
While this is the minimum, employers can also provide tax free allowances of up to €144.31 per month. Interestingly, while in most countries with home working allowances the home needs to be the place where the majority of your work is completed, in Belgium you can be eligible for the stipend as long as you work 5 days out of the month from home.
Australia – An Example of a Common Stipend Through Tax Deduction
The Australian government offers its home allowance in tax deductions, worked out per hour of home office work that the employee completes. For each hour, the employee can claim 0.52 Australian dollars in tax deductions. This is aimed at covering home office furnishings, electricity and heating, and the cost of any repairs of equipment. Employees will need to hand in a timesheet with the hours they have worked, or a representative sample of any four-week working period.
On top of this, employees can claim separately with receipts for stationary, internet, and phone – among other expenses. You can’t claim occupancy expenses like rent, or household goods – however delicious and necessary your freshly ground coffee might be.
Other countries that use a tax deduction to offer WFH allowances include Canada, where employees who worked from home due to COVID-19 are eligible for up to $400 tax relief.
United Kingdom – You Need to Be Obligated to Work From Home
In the United Kingdom, if employees are told that they need to work from home, and they do not have an option to work from the office – employers can offer £6/week (or £26 per month) for household expenses. This will be given as a deduction from the employee’s taxes, without the employee needing to collect documentation. This includes costs such as gas, electricity, water, and phone calls.
You can also pay lump sum cash payments for equipment, services and supplies that are only used for business purposes, without the need to report anything to HMRC. Any payments for private expenses that aren’t for business use will need to be declared, and employees will need to pay tax on these kinds of lump sum payments.
Spain: New Legislation Covers Expenses for Home Workers
Since the COVID-19 pandemic, Spain has also changed its laws on remote working. The new legislation states that workers need to be remote working from home 30% of their hours in a three month period, or the equivalent of 1.5 days per week to be considered a remote worker.
If so, an agreement needs to be drawn up between the worker and the employer, with no minimum or maximum amount considered for the home allowance, but employers are required to cover the provision and the ongoing maintenance of all resources, equipment and tools required for the employee to do their role from home.
This will be specific to each employer and worker relationship, and is deliberately left vague to account for a broad range of circumstances. The amounts covered will be based on a case by case basis according to the written agreement.
If a Stipend Isn’t Available in a Specific Country – is an Employer Exempt from Paying Expenses?
The short answer is, no. In many countries there is no specific legislation about tax breaks or home allowances, but covering business expenses is still the law. For example, in China, regardless of where employees are working, the employer needs to pay for office equipment and supplies.
In France, the law maintains that the employees usual rights and equipment are maintained even when they are not working from the office, for example if the employee is used to receiving lunch at work, this (or an equivalent stipend) should be offered at home. The amount offered is 100 Euros if workers don’t have an office to attend. In the Czech Republic, employees are entitled to Wear and Tear allowance as well as a subsistence allowance if they have worked for more than 3 hours per day.
|USA||Any costs that force employee wages below federal minimum wage.||10 states currently have their own work from home allowance laws in place on top of federal laws.|
|Belgium||Up to €144.31 per month.||Employers can provide this office allowance on top of paying for a lump sum purchase where relevant. Employees only need to WFH at least 5 days per month.|
|France||€100 per month if there is no office to attend.||Equivalent stipends should be provided to what the employee is used to in-office.|
|Australia||$0.52 AUD as a tax deduction for each hour you work from home.||Make sure to keep records of your WFH activities.|
|Canada||$400 CAD as a tax deduction||Only for employees who worked from home in 2020 for 50% of the time for 4 consecutive weeks.|
|U.K||£6/week for household expenses without any need to report.||Employees cannot claim this stipend if they choose to WFH.|
|Spain||Employers must cover expenses of home workers||No specific allowance, decided by written agreement case by case.|
For Employers, Home Allowances are an Evolving Category to Watch
According to a recent survey by Aon, more than 1 in 5 employers are paying for home-office equipment as just a single example. Whether you need to be aware of home allowances as a legal imperative in your location, or whether you want to join the ranks of Twitter, Basecamp and Google who are offering work from home stipends to stay competitive – it’s important to think about what works for your business.
At Papaya Global, we house a unique Center of Excellence model for global payroll, which means we have our finger on the pulse of the local regulations and trends around the world, and can help you to determine the right course of action for every country in which you do business. If you do decide to offer a home allowance, we can incorporate this into our total workforce management solution, so that tax and compliance requirements related to these stipends are handled with automation and zero errors.
Have a specific question about your obligations or best-practices in a specific location? Let’s set up a call.