The impact of the pandemic means that in 18 months, we’ve moved from discussing theories around the future of work to debating the practicalities. Fully remote, fully back in the office, hybrid working, the discussion and the publicity around the decisions companies make will dominate the HR news cycle for months if not years to come.
One of the key advantages of remote working is the ability to broaden talent pools across borders. However, this does come with complications. To discuss the challenges and advantages, my guests this week are Shane Nolan, Head of Technology & Emerging Business at IDA Ireland and Louise Kelly, a tax partner with Deloitte in Ireland.
In the interview, we discuss:
▪ The work of IDA Ireland
▪ Productivity improvements from remote work
▪ Enhancing skills and retraining
▪ Tax implications of employers working remotely across borders
▪ When is remote too remote?
▪ From theory to practicalities
▪ Regulatory and compliance issues
▪ What will the next 12 – 18 months look like
Listen to this podcast in Apple Podcasts.
Transcript:
Matt Alder [00:00:00]:
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Matt Alder [00:01:14]:
Hi everyone, this is Matt Holder. Welcome to episode 360 of the Recruiting Future podcast. The impact of the pandemic means that in 18 months we’ve moved from discussing theories around the future of work to debating the practicalities. Fully remote, fully back in the office hybrid working the discussion and the publicity around the decisions companies make will dominate the HR news cycle for months, if not years to come. One of the key advantages of remote working is the ability to broaden talent pools across borders. However, this does come with complications. To discuss the challenges and advantages, my guests this week are Shane Nolan, head of technology and emerging business at IDA Ireland, and Louise Kelly, a tax partner with Deloitte in Ireland. Hi Shane. Hi Louise, and welcome to the podcast. It’s an absolute pleasure to have both of you on the show and I wonder whether we could just start with you introducing yourselves and telling us what you do. So Shane, would you like to go first?
Shane Nolan [00:02:23]:
Sure, Matt, and nice chatting with you. So my name is Shane Nolan. I head up technology and emerging business at IDA Ireland. So IDA Ireland is the Irish government’s investment development agency and we work with companies around the globe to either help them use Ireland for international market expansion or to scale their teams. We have about 1500 clients and they employ a little over a quarter of a million people and within that I head up our work that we do with mostly with technology companies, but also with fast growing scale ups.
Matt Alder [00:02:54]:
Fantastic stuff. And Louise?
Louise Kelly [00:02:56]:
Hi Matt. I’m delighted to be here today. So my name is Louise Kelly. I’m an international tax partner with Deloitte in Ireland. I work and help companies setting up operations in Europe, but particularly in Ireland. And I would include R and D hubs, principal companies, IP structures, customer support functions, and help them get established and advising on the tax impacts in particular.
Matt Alder [00:03:20]:
So, Shane, I’m going to start with some questions for you. I suppose first of all, tell us a little bit more about IDA and the work that you do.
Shane Nolan [00:03:29]:
Sure, yeah. So as I alluded to, we work with companies everywhere from San Francisco to Seoul, so globally, to help them understand what Ireland has to offer, either to help them break into the EU market or indeed to scale their teams if where they’re based is experiencing talent squeeze. So we have about 1500 clients, as I mentioned, and about half our time is spent making sure that we’re removing barriers to scaling for these companies and we’re helping them drive more value from their investment in Ireland. And then the other half of our time is spent working with the next wave of companies in that sector. So on the technology side, the big employers in Ireland would include folks like Intel, Apple, Facebook, Amazon, TikTok. So real kind of geographic mix and sectoral mix and you know, tech and digital is probably one of the fastest growing areas in terms of employment within Ireland right now.
Matt Alder [00:04:31]:
So we’ve obviously been going through, and indeed are still going through a very disruptive time when it comes to work. What’s been your experiences with the way that companies have been working remotely during the pandemic?
Shane Nolan [00:04:44]:
Yeah, like I know we’re probably 18 months into the experience now, but I think the sheer speed at which people transitioned is still pretty impressive. 18 months on, like when we look back to March 2020, which is when the big transition happened in Ireland to working from home because of COVID pretty much tens of thousands of workers left their office and transitioned into working from home over a weekend. Coincidentally, it was St. Patrick’s weekend as well. I don’t know whether that made it any easier or more difficult, but essentially once the following Monday arrived, everybody was online and working away. So I think that that’s been probably impressive aspect. I think since then, broadly speaking, our clients have told us that productivity has been mostly maintained and in many cases slightly improved. I think, you know, a lot of employers that we’re supporting or engaging with, you know, recognize that the challenges of homeworking as well, which is positive, you know, mainly challenges around maintaining employee engagement and social cohesion. But thankfully in Ireland we’ve had exemplars of homeworking or blended working already pre Covid. So we’ve had folks like Shopify, Amazon and Apple who collectively have had thousands of employees in Ireland working from home since before the Pandemic. So thankfully they’ve been sharing their playbooks around how they maintain culture and maintain and support employee engagement in a working from home environment. One of the other kind of trends that we’ve seen as well is around training. We have a workforce training organization in Ireland called Skillnets and unsurprisingly all of their courses around leading and managing remote have been over subscribed over the past 18 months. We’ve also seen interesting statistics from LinkedIn which would indicate that a lot of folks who are working from home are also using any spare time to enhance skills or do retraining. We’re seeing interesting moves across certain categories of roles as well. So we’re seeing folks move out of hospitality particular into digital and sales roles. I think that’s a trend that we’re seeing beyond Ireland as well, but also seeing a lot of consistency now in terms of what employers are looking for. I think in the early days of lockdown we were seeing quite extreme positions in terms of what employees were looking for. Were reporters be looking for. In some cases it was being reported that all employees wanted to work from wherever in the world world going forward and there’d never be a return. But I think you know what we’ve seen certainly from polls that we’ve run, conversations we’ve had, and indeed third party polls is about 15 to 20% of workers are counting down the days until they can return to the office. And this is typically the 24 to 34 age group because they’re missing the social aspects of work in particular and learning opportunities that come from observing colleagues when you’re at that phase in your career. About 60 to 70% are looking for flex. So, you know, one to three days per week working from home. And then about 15 to 20% want to be working from home full time. And the largest cohort in that group would be folks managing demanding family or extended family obligations.
Matt Alder [00:08:21]:
So many interesting things there. And yeah, this sense of certainly conversations that were going on 12 months ago about working, not just working from home, but working from absolutely anywhere around the world. I know that’s something that we’re going to dig into a bit deeper, deeper in a second. Before we do though, you mentioned sort of a number of US technology companies that you work with who’ve chosen to have their offices in Ireland. What are you seeing now? Is there an increase in US companies who want to come into Ireland? What’s sort of happening moving forward? How is the pandemic sort of shifting things?
Shane Nolan [00:08:58]:
Sure, yeah. Like I think what’s Been encouraging and you know, a little surprising is that foreign direct investment has remained pretty robust during the pandemic. We are still seeing new entrants into Ireland, a large COHORT from the U.S. you know, looking at Ireland as an entry point into the, into the EU market where they can pick up, you know, other tech skills for, you know, sustained product development or multilingual skills for indeed sales and customer support. But also seeing interest in Ireland from European companies. Obviously there was interest in Ireland from the UK around Brexit, particularly from financial services, but we’re also seeing interest from mainland Europe. Companies like Personio, which is I suppose the high profile SAS unicorn from Germany at the moment, are scaling up their international sales team in Ireland. So yeah, not just from the us, but the US we’re still seeing a lot of volume, also seeing growth from Asia PAC as well. So TikTok would have announced late last year that they grew by a thousand people did their team in Ireland during 2020. So quite dispersed in terms of the origin of investment. But yes, still seeing a lot of interest from the US And I think US companies find it quite comforting that they can land in an English speaking common law jurisdiction and then serve 27 diverse markets from the one centre.
Matt Alder [00:10:39]:
Louise, turning the conversation to you, what are you seeing in terms of employees returning to the office post pandemic? What are you seeing? What’s your view?
Louise Kelly [00:10:47]:
Yeah, certainly from speaking to a number of our clients, I think kind of a hybrid model is likely to be the kind of preferred approach going forward. I think there are some companies on both ends of the spectrum where some have announced that they intend to be fully remote, others have announced as was that they see the vast majority of their employees being back in the office for the majority of time. But I think a lot of companies are kind of in the middle where they will probably allow some greater flexibility than before. I do think most companies are focused on allowing that flexibility where their employees are in the country of employment. So for Irish companies or companies that have Irish hubs, the expectation is that their employees will be based in Ireland. So even if they’re not in the office 100% of their time, that is when they’re working remotely, that they would be doing that from Ireland. Certainly last year when the pandemic hit initially you had people returning maybe to other countries where they had family members or indeed people being in a location when the pandemic struck and weren’t maybe able to return to Ireland or to their country of employment. And I think there was some flexibility given to employees during that period of time. And indeed there was some flexibility given by some tax authorities that recognised that this was a fairly unique situation. And therefore the normal rules around employee taxing and the creation of a taxable presence for a company, in some cases, not all, but in some cases were kind of relaxed, I suppose, for that period in 2020 when there was new travel restrictions, etc. But I think we certainly have seen tax authorities kind of saying as we had gone into 2021, that some of those concessions were no longer available and there was an expectation that employees would be in their country of employment, or if not, well, then that the employer dealt with some of the additional tax burden that might arise if an employee was working as was outside of their home country. And I think some of those tax issues that need to be managed to the extent that an employee is not working in their country of employment is whether the company has an obligation to withhold payroll taxes in the country where the employee is located. And sometimes those rates can obviously be higher or indeed lower than the tax rates in the country of employment. There could be different Social Security rates and obligations. And then also the individual working in a different country could create a taxable presence for the company. So the company may now need to pay corporation tax in that country. And sometimes the amount of additional taxes may not actually be that significant. But the additional compliance burden for the tax team, for the payroll teams within an organization can be actually challenging, particularly if you have a number of employees being based in a number of different countries and therefore creating significant obligations. Some of the other tax considerations around individuals being outside of the country of employment would be to the extent you’re relying on particular incentives. For example, the Irish research and Development tax credit regime requires those R and D activities to take place in Ireland. Therefore, to the extent you have somebody doing that work no longer in Ireland, well, then that may impact your ability to claim that incentive. Or indeed, if companies have particular transfer pricing models where the intention is that profits accumulate in one particular country. But now, and that was based on the substance and activities happening in that country, but now some of those activities are happening across a wide variety of countries, wasn’t that might undermine the transfer pricing model within an organization? So I think as we look forward and as companies, as we try and bring their employees back, as we see, into the office potentially or into the office part time, certainly they’re probably putting some more rigor around what is acceptable within an organization as to where an employee can be based if they’re not in the office and for a number of companies they have said, well, the VAT needs to be in business, the country of employment. I think for a country like the US or indeed Canada, sometimes it’s not just sufficient that the employees back in the us, but as was given different tax regimes across different states in the U.S. or different provinces in Canada, there can actually be some different tax considerations even if somebody is working within the country, but in a different state or province. So for some organisations they’ve had to kind of grapple with that location or relocation around the country, not necessarily even outside of the country. But I think it will be interesting over the next 12, 18 months to see as companies return to the office and potentially to kind of that hybrid model where things will settle down once hopefully the pandemic is it over and maybe some of the social distancing requirements that currently exist in a number of countries get relaxed, you know, what the future will look like for a number of groups and strategically as was how they’re going to deal with the future of working and that kind of hybrid model.
Matt Alder [00:16:25]:
I think that’s really interesting because what’s certainly happening now is I think we’ve had a kind of a very theoretical debate about what happens at the end of the pandemic in terms of remote working and hybrid working. I’m not even sure we know what hybrid working even, even, even means in reality. Yet here we are now facing some sort of very solid practicalities, particularly around remote working. Just a couple of questions on that. I mean, you talked about in the U.S. different obligations in different states and how that might cause issues for employers. One of the things that obviously Shane mentioned right at the start of our conversation was US companies sort of basing themselves in Ireland and getting access to the market of 20. How does this work across the EU if the company is kind of its European headquarters in Ireland, but working remotely in other EU countries? What are the implications of that? Obviously it’s a complicated question, but just give us a kind of an overview.
Louise Kelly [00:17:26]:
Yes, so I suppose each, you know, so albeit as you have the EU kind of as a bloc, I suppose each country within the EU will have their own tax regime and therefore you, albeit on the continent, people can obviously travel very, very easily between countries by road or rail. If somebody is working in a different country from where they’re employed, then that is potentially going to create some tax obligations in that other country. So there isn’t, I suppose, a way to say, well, actually you’re still working within the EU from a tax Perspective, you’re still having to look at each individual country and analyse what the obligations might be. If somebody is now working in France rather than in Ireland, then there’s fringe considerations. I suppose from an immigration perspective there probably isn’t the same kind of visa requirements. If somebody obviously is entitled to work within the eu then that may be simplified. But from a tax perspective, each country will have their own tax regime and as US will want to tax an employee if they’re working in that country, regardless of the fact that they’re employed by a company that’s resident in another EU member state.
Matt Alder [00:18:33]:
And so what advice are you sort of giving to companies at the moment? What should they be looking out for? Are there kind of other regulatory HR issues that people should be aware of?
Louise Kelly [00:18:43]:
Yeah, I think the main kind of advice for companies is now that as things are settling, and particularly if companies are looking at as what their strategy is going to be going forward to ensure that as that strategy is developed, that all of the tax considerations that I mentioned also as was different, maybe working the different obligations that might be on a company by having people working in different countries and the fact that labor laws can differ between countries, that all of those kind of things are factored in so that the company can make kind of an informed decision around associate what they are willing to allow and what they feel should some of the rules or procedures be for ensuring some of those compliance type issues are managed. There are certain kind of tracking tools and kind of IT systems that would help companies to be able to track based on information being provided by their employees, where they’re based and maybe what some of the obligations might be because of that. But I think it is a case of taking a strategic view to it as opposed to just reacting to individual requests that might come from a part of the business if they’re looking to recruit in a particular country because they find a really good candidate there, or indeed a request by an existing employee that they want to relocate somewhere. So taking more strategic view and taking all those considerations into account, those would kind of be the key piece of advice, as I said, rather than kind of just reacting to individual requests.
Matt Alder [00:20:17]:
So a final question for you both, and this is something I kind of ask everyone who comes on the show. Making predictions is a very strange game at the moment, but I’m just really interested, sort of based on what you’re seeing, what do you think the future of work is going to look like over the next 12 to 18 months as we kind of move to this next phase? What are your thoughts?
Louise Kelly [00:20:37]:
Yeah, so I think initially there’ll probably be a lot of flexibility allowed by employers as employees kind of start phasing their return to the office. Because I think people will have different sensitivities in terms of being in the office with their colleagues depending on kind of vaccine rollout and all of that. And I think then probably by the end of this calendar year, hopefully as things may be settled, companies will probably continue to experiment a little bit in terms of what kind of the hybridity means for their organization and I suppose what they feel is important from a culture, a training perspective and the level of flexibility that employees should have to allow them, I suppose, to focus on those items but also be attractive to the marketplace. And then I think it’ll be interesting after probably that experiment period of probably 20, 22, things will probably then land in a bit more of a cohesive way for particular companies in terms of what they feel works for them and how they need to interact maybe with their clients, with their customers and indeed with their employees to try and maximize the engagement with their employees, but also their offering to the marketplace.
Matt Alder [00:21:51]:
And Shane, same question to you.
Shane Nolan [00:21:52]:
Yeah, pretty much seen very similar trends to the ones Louise described. We’re still in the, the great social experiment, although as I mentioned earlier, we have a number of clients who’ve been doing homework for decades and you know, have learned a lot during that period of time, particularly around how to facilitate employee engagement. Like one company or client in particular Shopify, who, you know, give their team members budget to rent meeting rooms and hotels so that they can work together in their area for a particular day just for that cohesion. So, so I think as Louise said, we’re probably going to see a kind of standard distribution in terms of the wants from workers. 60% are probably going to be in the office a number of days a week and then we’re going to see some interesting, I suppose, operating models or fit out models as evidenced by companies like Dropbox who’ve turned their building into a kind of collaboration and community building space with no desks. So we’re definitely seeing a trend of the kind of two Cs as we’re calling it. You know, most employers feel collaboration works best in their office building because the infrastructure is set up to do so. And you know, particularly in tech, given the age profile, a lot of tech workers live with their friends or in multi tenant houses. So the second C of concentration becomes really important. And again, the infrastructure exists to kind of do work in silent or concentrate on particular pieces of work in an office environment better than in a home home environment.
Matt Alder [00:23:26]:
Shane, Louise, thank you very much for talking to me.
Shane Nolan [00:23:29]:
Thanks, Matt.
Louise Kelly [00:23:29]:
Thanks, Matt.
Matt Alder [00:23:30]:
My thanks to Shane and Louise. You can subscribe to this podcast in Apple Podcasts on Spotify or via your podcasting app of choice. Please also follow the show on Instagram. You can find us by searching for Recruiting future. You can search all the past episodes@recruitingfuture.com on that site. You can also subscribe to the mailing list to get the inside track about everything that’s coming up on the show. Thanks very much for listening. I’ll be back next time and I hope you’ll join me.
