Insights into global expansion & employee retention

Published: June 9, 2022

What Is an Employee Working From Home Allowance?

Even as we emerge from the pandemic, there will be hangover effects from the societal shift that ripple throughout the entire global workforce, impacting the way businesses operate. While some behaviors and practices will be shed, others will be cemented in modern workplace culture.
What Is an Employee Working From Home Allowance

For instance, remote work—whether a full or hybrid approach—appears as though it’s here to stay. 

While this model can provide several advantages to both employers and employees, it isn’t without its own costs—the brunt of which wind up being shifted from the employer to the employee. To fix this disparity and attract and retain high-quality employees, companies have begun to offer employee working from home allowances. 

What Is a Remote Worker Stipend? 

As the name implies, an employee working from home allowance is a fixed amount of money or benefits that are paid out on top of the base rate salary. Ideally, it should compensate them for the additional costs they must shoulder to make their home a functional office, including office supplies, equipment and higher utility bills. 

In some European countries, there are laws on the book that even go so far as to calculate the cost of smaller expenses. For example, in the Netherlands, Dutch civil servants receive an additional two euros a day from their global HR  to cover expenditures like coffee and toilet paper.  

In addition to straight cash remuneration, various companies have decided to reward remote employees in creative ways with their working from home allowances, such as: 

  • Coworking space stipend
  • Fitness allowance
  • Health and wellness stipend
  • Budget for a workstation setup
  • Continuous learning stipend
  • Internet reimbursement 
  • Coffee and meal stipend  

Are Employee Working Remotely Allowances Legally Required?  

The answer to this depends on where your business operates. 

In the U.S., there aren’t any federal employment laws that require employers to cover remote work expenses. However, some states created laws that did compel some form of compensation. 

For instance, the California Labor Code Section 2802 states that an employee is entitled to reimbursement “by his or her employer for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer.” So, if the role doesn’t provide the option to work in person, the law applies. 

Outside of the U.S., most countries require some employee reimbursement of reasonable costs associated with remote employees. What that entails, however, may differ from one locale to another. In many cases, there are no remote work allowance requirements, but there are provisions for tax relief and tax deductions. For instance: 

  • Australia – Employees may be able to deduct expenses that aren’t reimbursed from taxable income, with a quick fixed-rate tax deduction of 80 cents per hour worked from home.
  • Belgium – The home work allowance is commensurate to professional costs linked to working from home, so long as it doesn’t exceed 10% of gross pay. 
  • Canada – Employees working from home can claim deductions from expenses associated with remote work, so long as the employers complete a T-2200 Declaration of Employment form.
  • France – Any equipment required for work and costs incurred in relation to work must be borne by the employer. They must also pay a monthly telework allowance for using their private space for a business activity based on the proportion of the home occupied by business equipment.  
  • Spain – Companies have to bankroll all employee business expense occurrences including equipment, furniture and utilities. 
  • The U.K. – The United Kingdom doesn’t have laws on the books that compel action. However, the salary and benefits packages must be the same as a comparable office worker. 

Benefits of Working from Home Allowance 

Even if it’s not legally required, providing your employees with a work from home allowance is simply good business sense. Benefits of offering a remote work stipend include: 

  • Improved employee engagement and retention – A remote work stipend is just one small way that a business can go above and beyond to make its employees feel valued. When employees are happy and appreciated, they tend to be more satisfied in their job and less likely to go looking for greener pastures. 
  • Attracting top talent – How do you get an edge over your competitors in a cutthroat hiring market? In the remote interview process, Offering perks like working from home and an allowance on top of that could be the deciding factor that tips the scales and makes a talented employee choose your firm. 
  • Increased productivity – If employees are working in suboptimal conditions with subpar equipment, you can’t expect them to excel in their role. Investing in their office setup and removing distractions puts them in a position to succeed.  

Payroll: Employee Allowances Made Simple 

Going forward, remote work is likely to remain a permanent fixture of the business landscape in some shape or form. In fact, researchers from Ladders project that 25% of all professional jobs in the U.S. will operate remotely in some capacity by the end of 2022, with remote opportunities increasing through 2023.  

Knowing this, businesses must act accordingly, especially if they operate in a place that has remote work stipend laws on its books. If you need help setting up your work from home allowance program or want to know how to operate in accordance with your company’s country-specific laws, you’re in the right place. 

At Playroll, you can enjoy ready-made employer of record services and work stipend management. Get started with our demo today to see our simplified payroll solutions services (including a payment management system) in action.

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