Mobility tax considerations every business should be thinking about

Remote staff have always been a part of business. However, the pandemic made remote work a bold reality for nearly every global company. Having the freedom to work from almost anywhere, employees moved away from typically expensive office locations. Some moved out of town, some out of state, and others out of the country. Although back-to-office policies have brought many workers reluctantly back into the workplace, remote work is still a huge aspect of the employment experience. In fact, around 22% of U.S. employees (32.6 million) still work remotely or in a hybrid format indicating a lasting shift.* 

If your business has people working across borders, mobility tax is a reality for your HR department. Most importantly, the mobility landscape has changed significantly over the last several years. Hybrid teams and distributed workforces have blurred the lines between where work gets done and where tax obligations lie, so understanding the nuances of mobility tax is essential, now more than ever.

With that in mind, let's take a closer look at the major mobility tax considerations that businesses should have on their radar right now.

Taxation isn't just about where someone lives. It could be about where they work.

Where an employee lives vs. work can be one of the biggest misconceptions in mobility. You may have an employee whose official address is in Ohio, but they go into Pennsylvania every day to do work for your company. To track and determine where income was earned, your payroll department, stock plan administrators, and equity teams must become well-versed in mobile taxes. To stay ahead of any potential issues, it is important to create a few measures to ensure that the compensation and taxation differences are accurately reflected and communicated by worker location:

1. Stay diligent with internal campaigns to determine where employees are working, not just living. These days, people are digital nomads and can move around frequently.

2. Create a team specifically tasked with getting updated information from employees on where they're working. Employees tend to be very honest about this information.

3. Your team should be getting mobility information out in every available channel—email messages, intranet, town hall meetings, etc.

4. Update employees on their taxes. Once an employee work location is updated, send a message such as, "I see you are working in a new tax jurisdiction. You may have a trailing tax liability. Learn more at this website.

Most countries' tax income is earned within their borders, regardless of where the employer is headquartered. And in many cases, even short periods working out of state or country can trigger obligations. These include:

• Pay-as-you-earn (PAYE) or equivalent payroll withholding
• Corporate tax exposure
• Social taxes (international)
• Individual and company income tax filing requirements

Short-term travel for meetings, training, or project work can unexpectedly trigger these rules. Many tax authorities are getting better at tracking cross-border work, especially as immigration systems modernize.

As a rule, if your people are working in a different state or country, even short-term, communication is imperative since your business may have exposure.

The rise of stealth taxpayers

Remote work's popularity since the pandemic created a new category of tax risk: employees working from a different jurisdiction without officially updating HR or payroll teams.

Someone taking a "workcation" may assume that if their job is remote, their location doesn't matter. But from a tax standpoint, it really does matter.

Risks include:

• Permanent establishment (PE) risk: Could the employee's activities make it look like your company is "doing business" in that country?
• Unexpected payroll obligations: If you should have been withholding tax locally, authorities may pursue you (not the employee) for back taxes and penalties.
• Visa and immigration compliance issues: Working in a country without proper authorization can cause legal headaches for the company and the individual.
• Social tax complications: If employees aren't covered by a totalization agreement, you may end up paying social contributions in multiple places.

Remote work flexibility is a great benefit for your employees but always set expectations and establish guardrails to keep your business from accidentally finding trouble with the law.

Don't forget, immigration and tax are linked

Many businesses handle immigration with one provider and tax with another, and the two never talk. Avoid this by understanding that the two systems are deeply connected.

Here's a simple example:

If you secure a work visa for an employee in Country X, the government will expect payroll withholding and tax filings in Country X. If you do the immigration work but not the tax work, you're only halfway compliant.

Conversely, some employees perform work on a visitor visa without realizing they're violating immigration rules. Even a training session or internal meeting can be considered "work" in certain jurisdictions.

The safest approach is to treat immigration and tax as two sides of the same mobility coin.

Stay on top of cost-of-living and tax equalization policies

Mobility programs often include tax equalization or tax protection policies, especially for expats. But many companies are discovering that the old formulas don't align with post-pandemic realities. This is due to four distinct reasons:

• Cost-of-living differences have shifted dramatically. Living in New York City vs. Salina, Kansas have vastly different costs of living.
• High-tax versus low-tax jurisdictions are evolving.
• Remote work has changed where employees want to live.
• Governments are adjusting tax brackets, incentives, and rules more frequently.

If your tax equalization policy hasn't been updated in a few years, it's worth reviewing. These policies are expensive, and outdated structures can be either overly generous or unintentionally punitive.

Mobility tax support creates a better employee experience

Mobility tax isn't just a compliance function; it's also a part of your company's employee experience. Tax filings, payroll differences, and immigration rules can overwhelm your expat and mobile workforce. Employees who feel unsupported can become disengaged or frustrated, and work assignments may fail as a result.

A strong mobility tax framework can actually enhance employee satisfaction by:

• Providing clarity on expectations
• Offering professional tax support
• Reducing financial uncertainty
• Ensuring they feel protected and valued

When employees know the company has their back, they can focus on doing their job, not navigating a complex tax system.

Technology is the best way to track and support mobile employees

Simple fact: It's almost impossible to manage mobility tax obligations manually. Having one hundred employees scattered around the country or located internationally is hard enough to manage manually with spreadsheets or random notes. Having thousands of remote employees would be truly unmanageable. Then factor in employment laws, HR requirements, and other data points and you have a complex tapestry of items that need to somehow be maintained.

Partnering with an experienced accounting firm is a must, but when you're managing business travelers, remote workers, expats, commuters, and hybrid employees, tracking and compliance require contemporary technology tools as well.

Mobility platforms can help you:

• Track employee locations automatically
• Generate risk alerts
• Manage payroll
• Coordinate immigration and tax workflows
• Produce audit-ready documentation

While technology may not solve every issue that arises, it significantly reduces surprises.

Now more than ever, with a growing mobile workforce and heightened scrutiny from states and countries, tracking employee mobility is critical to avoid penalties and prevent employee disengagement. Our Mobility Tracking and Global Tax & Income Sourcing functionality simplify managing equity compensation across jurisdictions, helping companies stay compliant, strategic, and minimize employee tax risks.

- Randy Williams, Director, Project Management (Business) (PL)

Mobility tax is a major part of business now

Mobility tax is no longer a niche concern or something that affects only expats on long-term assignments. It has become part of everyday workforce management. As work becomes more flexible, global, and digital, the tax footprint of employees becomes more complex.

Embracing mobility intentionally can help companies win in this new environment. Mobility's here to stay, but nobody achieves perfection and a hundred percent compliance with it overnight. Being able to show progress towards having a mobility support team and plan, having the policies in place, the systems in place, the right support, and the right education is super important. Charles Schwab understands that the tax implications aren't just a compliance exercise, but a strategic advantage.