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The number of people working from home is rising, for a good reason. Working from home has many benefits, such as increased productivity and decreased stress levels. But before you start letting your employees work from home, you need to understand the different work-from-home allowances around the world.
Below, we will discuss the average allowances in various countries and what you should keep in mind when creating your work-from-home allowance policy.
Every country treats a work-from-home allowance differently, and some countries even have federal laws defining stipends and reimbursements.
Below is a comprehensive look into the work-from-home balances of countries with large remote worker populations.
No federal laws in the US enforce organizations to provide a work-from-home stipend or financial reimbursement. However, the Fair Labor Standards Act stipulates that companies are not allowed to ask employees to pay for their work-related expenses if the purchases drop their minimum wage below the federal standard.
If the work-related expenses drop the employee wage below the federal minimum, the organization must reimburse the employee up to the minimum wage amount.
Even though federal laws are lax regarding work-from-home allowances, some states have been proactive in creating their laws.
Illinois has implemented the Wage Payment and Collection Act which requires all employers in the state to reimburse employees for "all necessary expenditures or losses" the employee incurs related to the services they perform for their employer. California has a similar law but includes internet and phone bill expenses as part of the necessary expenditures and losses.
Other states, including Montana, Pennsylvania, New Hampshire, North Dakota, South Dakota, Massachusetts, and New York, have created laws that vary by district.
The Canadian government acted quickly in response to the COVID-19 pandemic and made legal changes to the home office expenses for employees category on tax returns.
The changes now allow employees to claim specific expenses on their tax returns to receive a deduction or a credit. To qualify, employees must work from home for more than 50% of their work hours or have worked from home for at least four consecutive weeks.
Employees who meet the criteria can take $2 for each work-from-home day up to $500 in total tax relief. However, if an employer reimburses an employee for a computer or home office equipment up to $500, the employee is no longer allowed to receive a taxable benefit. The employee must submit a receipt to the employer for the expenses.
Also, Canada has stipulated in their Income Tax Act that employees who pay for work expenses related to a home office can write off certain expenses like utilities, rent, internet, and office supplies.
Australia, like Canada, was quick to implement work-from-home allowances following the pandemic. Employees are now able to claim deductions on tax returns for specific expenses incurred that relate to work.
In order to claim any work-from-home expenses, employees must work from home to fulfill employment duties or incur expenses as a result of working from home. Running expenses like electricity expenses, internet, and phone are all included under the new changes. However, if an employer pays an allowance to cover work-from-home expenses, the employee must have it in their tax return.
Two methods for claiming work-from-home expenses are available for employees to choose from, and each one impacts you as the employer.
The fixed-rate method is a fixed dollar amount per hour worked for additional running expenses and expenses not covered by the fixed rate. The actual cost method is a total of all expenses incurred from working from home.
The UK has made alterations to work-from-home allowances in response to the growing trend of remote workers. The country has made it possible for employees to claim certain deductions on their tax returns for expenses incurred while working.
To qualify for tax relief, an employee must have a job that requires them to live far away from their office or be forced to work from home because the employer does not have a physical office.
However, employees are heavily restricted in what they can claim for work expenses. Only business phone calls, gas, and electricity to the work area are permitted. Employees won't be able to claim utilities for private and business use, like rent or internet access.
The employee can claim a total of £6 a week without any proof or evidence of the expenses or up to £26 a month. Extra expenses incurred by the employee above the weekly amount will require receipts.
As the employer, you can pay lump sum cash for equipment, supplies, or services used for business purposes. If the expenses aren't for business purposes, the cash payments will need to be declared, and employees will be required to pay taxes.
Spain has the distinction of being one of the first countries to change its laws regarding work-from-home expenses. Employees must work from home at least 30% of their working hours in any three-month period to qualify for any benefits.
Before you reimburse your employee for any expenses incurred, a contract must be created and signed by both the employer and the employee. The employee must make an individual and voluntary decision to participate in the contract.
No minimum or maximum home allowance amounts are required for the contract, although employers must cover ongoing maintenance for all work-related resources. This can include any tools or equipment employees need to perform their role from home.
You have the right to monitor your employee's performance online as long as you respect the dignity and privacy of the worker.
The Netherlands has also adjusted legislation regarding work-from-home allowances, although the stipulations could be clearer than other countries in this article.
As the employer, you can pay your employee a total allowance of €2 per day for every day they work from home. This is a tax-free stipend for the employee, and businesses will receive reimbursement from the government for the allowance.
A fixed monthly allowance may be given if you and the employee have settled on a written agreement pertaining to the work-from-home schedule. The agreement should clearly outline how many days the employee is allowed to work from home and the fixed monthly amount the employee is owed.
The agreement does not require any records to be kept to document the number of days worked from home or expenses incurred.
To correctly calculate the compensation to the employee, the 128/214-day rule has been created by the Netherlands government. The rule stipulates if an employee travels at least 128 days to a fixed workplace, the travel allowance is calculated as if the employee traveled on 214 days. Deviations from the agreement are permitted without adjustments according to the 128-day rule, but structural changes will require allowance reconsideration.
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Working from home avoids commuting, and fewer commuters result in
lower greenhouse gas emissions.
Beyond the legal obligations required for some countries, there are other important factors to consider when determining work-from-home allowances.
Below are a few key takeaways your company should consider before setting up work-from-home allowances for remote workers.
The pandemic forced many countries to adjust legislation regarding remote workers, but not all countries have adapted.
When expanding your business internationally, keeping up with any legal changes that might impact your ability to hire or manage employees in a certain country is essential. As remote work continues to trend upward and new laws are being implemented in real-life scenarios, changes in legislation are constantly being made.
If your business needs more resources to keep up with international law, it's best to work with a global HR platform like Skuad, which can handle comliance with local regulations and laws.
Making a mistake with your employee allowances will put your business at risk of international penalties and fines. Create a work-from-home compensation package that allows you to hire from anywhere in the world without having to second guess your compliance.
Even if a work-from-home allowance isn't mandatory in the country you are hiring, you should still consider the costs your employees might be incurring while working from home.
The internet connection, office equipment, office furniture, and supplies are just a few of your employees' potential work-from-home expenses.
If you want to attract top international talent, ensure your remote work compensation package is attractive and consider all the potential costs of working from home.
Providing work-from-home allowances is only one way to compensate your remote workers. There are many creative ways to show your employees you value their work, even when they're not in the office.
Some companies offer additional paid time off, flexible working hours, or access to exclusive online learning resources. Meal delivery reimbursements, health and wellness days, or even health club memberships are all benefits you can offer employees without giving direct monetary support.
Creating an inclusive compensation package for remote workers will make your business more competitive in the international hiring market.
As more of the workforce worldwide continues to operate remotely, the need for work-from-home allowances will only grow.
Not only do these programs help your employees with the costs of working remotely, but they also show that you are invested in their well-being and want to ensure they have everything they need to succeed. A work-from-home allowance is a simple way to create a more inclusive workplace and leverage your company as a more attractive option for international job seekers
Kate Jonson is a Software Engineer and Tech Writer. During the day, she writes codes and develops tech products. At night, she moonlights as a tech writer sharing her thoughts on work productivity and efficient HR management practices.
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