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Whether you¡¯re dreaming of working from an exotic island, moving somewhere with affordable housing, or can¡¯t wait to get back to corporate office life, ¡°there's a lot of diversity in terms of what it means to be working outside of the office, and any of those choices involve complexity for the company,¡± shared Rachel D¡¯Argenio, EY Americas' Mobility Markets Leader. ¡°EY surveyed 16,000 employees in 16 countries and found that:?

• 65% of employees said they felt that this hybrid mix will increase the company's productivity
• 65% said that it will support creativity
• 54% said that it will positively impact the ability to solve problems efficiently

So, you're hearing employees say they believe that it's tremendously valuable to move to a hybrid model and that it will increase productivity, creativity, and problem-solving within the organization.¡± Listen to Rachel and Jason Grunin, Senior Value Consultant for SAP »ÆÉ«¶ÌÊÓƵ, ¡°discuss the challenges related to remote work and the critical nature of keeping the dialogue going between HR, finance, leadership, and the employees.¡±?

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Transcript:

Jason Grunin:

Hello, I'm Jason Grunin, a Senior Value Consultant in the Value Experience Group at SAP »ÆÉ«¶ÌÊÓƵ. I've been at SAP »ÆÉ«¶ÌÊÓƵ for about a year and a half. And before that, I was responsible for efficiency, accounts payable, T&E, and other initiatives for a higher education institution. Here at SAP »ÆÉ«¶ÌÊÓƵ, our group is tasked with how to share best practices and helping our customers maximize the return on investment of their solution with employee-initiated spend. Today I have with me Rachel D'Argenio, from our partner, Ernst & Young. Rachel, would you like to introduce yourself?

Rachel D¡¯Argenio:

Thank you, Jason. Hi, everyone. I am the Americas Mobility Markets Leader for EY. I've been with EY for 22 years as of the end of this month. And I've previously worked with two other of the then Big Six accounting firms and also worked in-house at Goldman Sachs. I've spent my entire career focused on the cross-border tax and mobility issues that companies face due to the movement of their employees. It's great to be here, Jason.

Jason Grunin:

Thanks, Rachel. During the podcast today, Rachel and I are going to discuss the challenges related to remote work and the critical nature of keeping the dialogue going between HR, finance, leadership, and the employees. So on the topic of remote work, Rachel what are some of the global issues that organizations have been facing and managing into returning to the office, as well as what are some of those employee expectations?

Rachel D¡¯Argenio:

You know, Jason, that is truly the hot topic of the moment. And it's been fascinating to see the transformation that's underway. We are seeing now that the stakes are very high. Retention of employees, for example, is a real challenge for many organizations. And at the same time, there's tremendous opportunity for companies to redefine who they want to be right now. So as companies are thinking about this, they are thinking about new strategies. What are their approaches to hiring? What are their policies on where and how work will get done? And what is the technology or workplace changes that they need to make in order to support this new way of working?

I'd like to share some data with you. We completed, here at EY, we completed a survey in April of this year that surveyed over 16,000 employees in 16 countries. What it showed is that 67% of employees agree that productivity for a job can be accurately measured by their company, irrespective of where they work. Nine out of 10 employees want flexibility in where or when they work. On average, employees expect to work between two to three days remotely after the pandemic. Only 20% of them expect to work fully in the office post-pandemic. 54% of them are likely to quit if they aren't offered the flexibility they want, with Millennials two times as likely as Baby Boomers to quit, so that's a concerning statistic.

64% want better technology in the office, and 48% want home office hardware investments. Nearly two-thirds of employees want to continue business travel post- pandemic, which this is up from 49% from the survey we did last summer, so we see that more people, nearly two-thirds, want to continue business travel following the pandemic. And then finally, as employees continue to evaluate their total company offering and all the benefits that they receive, work location and stipends have the highest employee preference, and then their office desk policy has the lowest preference.

So what does this really mean for companies as they look to develop policies? As I'm talking to organizations right now, they're looking at do they have people come back to the office? Do they move to a remote policy where everyone is remote? Or are they moving to hybrid? And of course, most organizations have some combination of all three.

When you're looking at either remote or hybrid work, companies are then thinking about, well, do I allow work from home only, or do I allow work from anywhere and what does this really mean? With organizations that are saying I want to allow work from anywhere, it clearly is very attractive to employees who fantasize about working from either low-cost locations or really fabulous locations, like an island destination. On the other hand, other people are focused on working from home, but even that there's a lot of confusion. If I say work from home, does it mean that you literally have to be in your house? Could you be at a coffee shop? Could you be at a customer location?

So there's a lot of diversity in terms of what it means to be working outside of the office, and any of those choices involve complexity for the company, whether it be risk that the employee is creating because they're not sitting in their home and they're sitting in a place that creates potential new corporate presence for the company. It might mean the employees are on the move and there are implications for the company in terms of reporting and withholding obligations in more than one state or country. And it may mean that that employee is looking for reimbursement for expenses that they have, whether it's now coming to the office that they view not as commuting but as a business expense, whether it's commuting expenses but are coming from a new location where it's not really feasible to be commuting to the office.

And let me expand on that. This is a new trend that we're seeing where individuals want to move to a completely new location and companies are grappling with, well, what is allowable? How far is really too far from the office? If we move to a hybrid model and an employee is only in the office, for example, two days a week and five days a week they could be somewhere else, is it okay if those five days a week are spent two, three, four, five hours away from the office? What is allowable from a company perspective? And then, of course, if that employee does decide to move far away from the office, is the company going to consider reimbursing for costs to travel to the office?

And so this is where companies are getting into this really interesting debate about what do they allow their employees to do? And then what are the implications for them in terms of risk, in terms of expense reimbursement, in terms of even the compensation that's paid to that individual? Because, of course, now perhaps the individual has moved from say a New York City to a far less expensive location to live. Do we have opportunities to adjust the pay that that individual's receiving?

So it's a very complex discussion, and yet there's a lot of pressure behind it to make decisions because employees are demanding and everyone is looking forward to the end of this pandemic with great anticipation. And so they're interested to know, well, what happens when.

Jason Grunin:

Thanks, Rachel. You know, that really got me thinking about some of the ways that our customers have really adapted and managed those new normals, as you said. The reimbursement of travel expenses, managing new rates for our city pairs that you may not have had employees traveling on before. Do you now bring them back into the office every so often when they need to come for a customer or an in-person team meeting? You know, has budget increased for travel or has budget decreased? And have you factored that in into thinking about what are the expectations for those employees when they do come back? What's the appropriate way of getting from their new home location back to their previous core work location? Thinking about entertainment and customer meetings and business expenses that were happening on the road that may not have been part of the expense policy in the past but now need to be considered, such as paying for wifi in certain places or the new ways of people wanting to stay in non-hotel accommodations, and obviously the safety and security risks of all of those. Have those things been incorporated into your policy?

So maybe a little bit more. But Rachel, what does hybrid work really mean around that environment, and what are employers and employees around the globe saying?

Rachel D¡¯Argenio:

That's an excellent question. Hybrid is taking on a lot of different definitions within each organization, but there's a general consensus that most organizations are thinking hybrid work will mean that employees will spend two to three days a week working from home, two to three days a week working from the office. And as companies are thinking about what this really means, they're thinking through do we require presence for certain days? Do we leave it open for flexibility? What will really promote the best working environment and get from employees that experience they're looking for when they come together in the office? The collaboration and the innovation that comes from people sitting side by side, as well as the coaching and the training and all of the talent development that we need to have have happen, that can happen in many cases much better when people are sitting together.

What's interesting as well is we're seeing this huge desire, and it's really, I'm going to describe it as both a sense of empowerment and entitlement on behalf of the employees to work remotely. From an employee perspective, data shows that they believe a mix of onsite and remote work will increase the company's productivity. Again, referring back to that survey we did, 65% of employees said they felt that this hybrid mix will increase the company's productivity. An additional 65% said that it will support creativity, and 54% said that it will positively impact the ability to solve problems efficiently. So you're hearing employees say they believe that it's tremendously valuable to move to a hybrid model and that it will increase productivity, creativity, and problem-solving within the organization.

Now, from an employer perspective, what I'm hearing is they want to be responsive to employees, at the same time, though, they're extremely concerned about controls and compliance. And then ultimately, it also comes down to cost. As we're evaluating what a new policy should look like, there's a very significant discussion about cost.

And the interesting thing is that it's a very complex discussion. It starts with HR saying, and the CHRO will say this is critically important in terms of attracting and retaining the talent that we want to have, and they will make a case for why they want to support this. But then what we very quickly see is that, for example, the CFO will come in and say, well, I need to understand how this models out. As I think about this new policy, I have potential considerations in terms of do I scale back my real estate because I have fewer people in the office every day and therefore an aggregate, I need less office space? Do I need to expend more money on my real estate because I need to redesign what it looks like? If we're bringing people together so that they can collaborate, do I need to have spaces that encourage collaboration, for example? Do I need to offer something within my office that entices people to come in?

And so we see companies thinking about, well, what would be the right benefits to offer? Is it meals? Is it snacks? Is it a gym? What is it that would bring people into the office and encourage them to come in? We also see that there's a whole discussion about what to offer employees to support them when they're not in the office. And this is where I believe I had mentioned that employees are expecting that they're going to get help with, and they'd like to get help in terms of monthly stipends to defray internet costs because they need to have strong broadband at home, mobile phone costs, hardware at home, things like a printer, perhaps they need to have a better desk, or a better office set up at home.

And as we look at this on a global scale, we see that in many countries companies are required to offer certain things if someone's primary work location's going to be at home. In some countries, it's required that they have an ergonomic chair, for example, or that the company actually defray some of their monthly costs like internet. So it's understanding what are all of the costs that go hand in hand with this policy that I would like to bring forward.

And then I would be remiss as a tax partner to not also say that we want to think about the tax efficiency of all of this. If we're providing monthly allowances, for example, for things like internet or we're paying for office supplies, is there a tax-efficient way that we can do this? And then that brings up a whole new host of issues. If I am going to be offering these costs and I'd like to see tax reimbursement, how do I then ensure that I have the mechanisms to collect all of the necessary documentation and receipts to support a tax-free position? And so then there's a whole technology discussion as well as resource discussion to make sure that the company has the necessary support on the backend to process what could be four times as many receipts coming in on a monthly basis from employees. And so, and I had mentioned earlier, of course, there's also thinking through the infrastructure that you have from a technology perspective to support remote working itself.

So there's a lot of potential areas of cost, and there's a lot of balancing that needs to happen as we think through what's the right model and what's the right policy. When I was working with one organization, it was a project that was spearheaded by both the CFO and the CHRO, we did modeling across all of the countries where they had employees looking at this total cost picture in terms of shutting down offices, making investments in technology, providing stipends, looking at tax efficiency. You can imagine it was quite a complex analysis.

And what was also interesting as we went through this analysis was understanding that in so many countries, the company didn't have the infrastructure needed to, number one process all of these receipts that were coming in. They actually, I should share, they were a »ÆÉ«¶ÌÊÓƵ user, but they didn't use »ÆÉ«¶ÌÊÓƵ everywhere around the globe. And so they were very concerned about the volume of receipts and so were making a decision to move to cash in many countries because they just didn't feel like they could handle that administration. So they were basically agreeing to pay more and increase company costs because they didn't have the backend support that they needed.

And then secondly, they were realizing that they didn't have the infrastructure to track where people are on a daily basis, to make sure that they were reporting and withholding in the right jurisdictions. Because again, it's so easy, whether you're in the U.S. and you're crossing state lines or, I sit here in Pennsylvania, to cross local lines. Or in places like Europe, it's so easy to cross country lines, even on a hybrid model. And so you have to have that infrastructure as well to make sure that you can comply with the reporting withholding requirements in all the places where your employees are physically located. And so this company that had wanted to move towards allowing more freedom for their employees they had to scale it back and move to a work-from-home-only model so that they could control their compliance risk as well.

Jason Grunin:

Thanks, Rachel. You know, you make several great points and a couple of them I think also should be factored into this employee sentiment perspective, right? Employees living in major metropolitan areas could have spent anywhere from 30 to an hour or two hours commuting into an office. And what is the culture represented in terms of that newfound time could be four hours a day that now employees are working from home and picking up additional projects and working more around-the-clock perspective but still remembering that finding that balance is key.

As a platform, SAP »ÆÉ«¶ÌÊÓƵ is really scalable. And as Rachel, as you mentioned, whether you're operating in one or 50 countries, it's about setting the right backend infrastructure up to fit the needs of your organization and your business challenges. How are you managing that today? Do you have an integrated single platform across the globe allowing ease of access to all of the data and financial regulatory reporting requirements that you have at a country-by-country level? Do you have a single source of truth where there's an accountability system in place in order to deliver this data to regulatory and shareholder platforms?

You know, SAP »ÆÉ«¶ÌÊÓƵ, as a customer, you really have the opportunity to take this data and deliver meaningful reports at your own fingertips, whether they are bursted dashboards or integrated reports that deliver to other systems to look at metrics and KPIs that are important for your organization. But some of the things that you can be considering as you define your remote work strategy, looking at card adoption, looking at the workflow and submission data of how long is it taking your managers to approve or employees to submit reports. Are you giving digital receipts and storing all of those electronically rather than in boxes of paper sitting across the globe? And when you have an auditor come in, how are you able to then provide digital access through a secure mechanism for the auditability of those reports?

Do you have reporting in place to look at employee mileage, and how has mileage policy and procedures shifted within your organizations as more employees are preferring to drive rather than fly? Do you have vendor and travel spend negotiated rates? Looking at procurement, tracking and duty of care, where is this employee today and are they traveling on behalf of the organization? And where is their new home location? Has that been updated throughout the organization's duty of care policy?

And a hot topic today is really around sustainability. Are you able to define and report on your Scope 3 emissions, which is what is generated by your employees during business travel? Obviously, we've mentioned some of these work-from-home supplies and internet and cell phone reimbursement. So how has that tracking changed? And having disparate and separate systems often make this data impossible to access. And we're encouraging organizations to use the data from these tools, from this integrated solution to build trends so that leaders can implement the right return-to-work policy or remote work policy.

And as Rachel briefly mentioned earlier, what's your organizations doing with costs previously budgeted towards facilities? You know, employers are setting up ways to pay for expenses that would have previously been provided at the office, such as office supplies, internet, cell phone reimbursement, technology. What are those requirements look like today?

As one of the new features that SAP »ÆÉ«¶ÌÊÓƵ launched, we did an analysis that our customers have expensed over 1.4 billion U.S. dollars worth of Amazon purchases in the last year. And Rachel, what is the tax liability look like for that and how employees have shipped things to their homes and what is the impact on the audit and the tax requirements around those situations?

Rachel D¡¯Argenio:

That's an excellent question. And I was smiling, Jason, as you were just going through all of the data and you talked about having enough support for an audit. It is incredibly important, sadly, to be thinking forward about audit readiness. And the reason I say that is we all know the size of the subsidies that have been granted by governments over the course of the pandemic. The focus on generating tax revenue as we look forward is going to be tremendous. And there is no doubt that with the prevalence of remote work and the hybrid situations that are being stood up, that tax authorities are going to be looking for noncompliance.

And so it is critically important to be thinking now about what data you need to have to support a potential future audit. It is so important to be ready. We are expecting there will be a lot of activity, for example, here in the U.S. on a state-to-state basis. And we're hearing the same from many countries overseas as well. They see this as an area where there won't be a heavy focus from a compliance perspective. Companies just are not ready to fully comply as they should. And the volume of expenses that have been coming through is significant.

So Jason, you had pointed out that 1.5 billion has been spent with Amazon over the past year. From a tax perspective, this yields some very interesting results here in the United States when individuals incur home office expenses. So as a result of the Tax Cuts and Jobs Act of 2017, the old home office expense deduction that was allowable for employees has been eliminated. What this means is that unless you are a business owner, you have a part of your home dedicated to that business and it is regularly used as your primary work location, you're not able to take a deduction for expenses that you incur while working from home. So what this means is that there is even more pressure on behalf of employees who incur home office expenses to seek reimbursement from their employer because that is the only way that they can defray the costs that they have incurred. They're no longer able to take that deduction.

So as a result, we expect to continue to see a regular flow of requests from individuals seeking reimbursement, whether it's under a full remote work model or a hybrid remote work model. This does represent a great opportunity, though, for companies to be thinking about how they can leverage their procurement function, to look at what is being spent and how it's being spent, where it's being spent. To think about do you want to have employees purchasing off of Amazon, whatever it is that they may want to buy, perhaps within company guidelines, but still buying whatever it is that they'd like to buy, or does the company want to negotiate with a particular purveyor of office supplies, negotiate good pricing, and then perhaps facilitate the processing of those expenses in a streamlined way?

There's a lot of opportunity for companies to think about what's being spent and how it's being spent, trying to get their arms around it because hybrid work is here to stay. And so it is going to be important to get your arms around all of these expenses and the processing of these expenses. And then, of course, making sure that there's no fraud as well, that employees aren't purchasing things that are for personal use and then trying to run them through as business expenses as well.

Jason Grunin:

You know, on that note, SAP believes that organizations of all sizes should be able to manage employee- initiated discretionary spend while reducing risk, saving money, and helping ensure compliance, all without sacrificing employee productivity and satisfaction. This belief guides the innovation at SAP »ÆÉ«¶ÌÊÓƵ and how the solutions and integrations we've made available to customers through our partner ecosystem. Rachel and I thank you for attending today's podcast.

Rachel D¡¯Argenio:

And Jason, I would just like to thank you so much for this opportunity. We at EY are very focused on remote work. And as I mentioned at the beginning, I think this is a tremendous opportunity for companies to really rethink who they want to be and how they want to attract and retain the best talent.

Jason Grunin:

So on behalf of SAP »ÆÉ«¶ÌÊÓƵ, thank you for attending today's podcast. I hope these questions help guide your organization in developing the right remote and return-to-work policy for your business.

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Jason Grunin is a Senior Value Delivery Consultant within the Global Value Enablement, Value Experience team with a focus on Public Sector. In this role, Jason assists customers by creating and delivering value-based engagements to help recognize opportunities for optimization and program growth. By mapping business outcomes to solutions, Jason helps organizations discover areas to improve management of employee initiated spend. Outside of the office, Jason, his wife Mary, their daughter Kathleen, and their dog, Jack (an English springer spaniel) are residents of Tulsa, Oklahoma. They enjoy cycling, skiing, and outdoor activities. In addition, they are avid travelers and try to spend time exploring new places!

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