KPMG exclusive #3: Transformative changes in mobility

Andrea Godfrey, partner, head of Global Mobility Services of KPMG in Vietnam

Without doubt, mobility has seen major disruptions in Vietnam, with firms forced to switch to remote working and foreign experts unable to enter the country. What risks has this created for companies in Vietnam in terms of employee and corporate compliance?

Compliance for mobile workforce has always been a challenge, especially in this new normal situation where advanced technology and COVID-19 foster the growth of remote working. As remote working adds layers of complexity to mobile workforce management, employers must redefine normal and ensure that their compliance framework is fit for purpose.

As they are increasingly held responsible for many matters in the areas of immigration, personal income tax, and social security, employers need to pay more attention to managing the mobile workforce to mitigate the risk of non-compliance with regulatory requirements.

From a corporate compliance perspective, remote working creates complex consequences, such as how to make sure their duty of care obligations are fulfilled, how to maintain their culture and reputation, and related implications on transfer pricing and permanent establishment.

An employer’s duty of care is both an expectation of the employee and an obligation stipulated in regulation. Risks and issues employers have experienced during COVID-19 include ensuring the mental health of long-term remote workers, the challenge of leading dispersed and virtual teams, data security and privacy (personal and client data), employee health and safety in remote locations, and training and talent management.

Remote working also triggers greater tax compliance risks with more complex cross-border issues and increasing reporting obligations. With the Organisation for Economic Co-operation and Development’s (OECD) BEPS Actions giving more data for tax authorities, a more discerning and demanding workforce, and the threat from social media, employers must ensure their compliance and maintain their reputation and culture.

Remote working can create a tax presence of a company in another jurisdiction and pose transfer pricing and permanent establishment risks in that location. The employers should have good mobility policies and processes to adapt to these new aspects of mobility.

With changed dynamics in mobility, employees are also changing their perspectives on what the ideal workplace can offer them. What new considerations will companies in Vietnam have to incorporate in their talent management and employment of foreign workers?

With the global workforce experiencing unprecedented disruption and more flexibility, the most talented individuals have different expectations of their employers in terms of rewards, employee experience and, following their experience through COVID-19, increasing flexibility.

Paying them more money is not enough. Employers need to find out what they value the most, for example better work-life balance, more support in wellness and mental health, or a greater commitment to environmental, social, and governance (ESG) and other ethical standards which align with the beliefs and values of the employee. By forming an attractive rewards policy, employers need to consider internal processes to support the remote workforce and re-align performance conditions with incentives. They should also consider relevant tax and legal implications to the employees’ package and the employer’s compliance system.

Keeping key talents supported and fulfilled is crucial to ensuring that employers get the most out of the best people. With the global workforce facing disruption, isolation, anxiety, and uncertainty, employers need an approach to ensure the job expectations of their employees are being addressed, including career advancement, personal empowerment, and social impact.

Finally, immigration policy is also key to attracting top talent. Though Vietnam is an attractive destination for foreigners, the sudden closure of borders and rapid changes in immigration policies have had a massive impact on the mobilisation of foreign talent. Employers need to actively create new immigration-related mobility policies or amend the existing ones to address the impact of the pandemic on cross-border assignment and business traveller strategies, and consider remote working.

Probably the most pronounced trend of this year was the rapid switch to digital. How are firms in Vietnam using digital technology to keep track and enhance the performance of their employees?

The ability to track employees working remotely globally is being done mainly through self-assessment processes utilising tools like KPMG’s Trakker, Business travel risk and compliance initiatives, and work from anywhere assessment. KPMG have discussed in various forums the use of IP addresses to track individuals and associated privacy law concerns. All present on the calls leant towards implementing a process and technology solution to assess the risks.

For those working remotely in the country, companies are also adjusting their existing processes to both track and approve employees’ whereabouts to maintain control of their operations. There has been concern as to how you can effectively ensure employees are working when not visible. The key to this is effective communication within teams and a switch to an output-driven approach.

Collaboration tools like Zoom and Teams are being used effectively to carry out meetings and training virtually. Enterprise resource planning software is now being utilised more frequently and effectively. Implementing continuous reward programmes incorporating technology can also support remote working. Companies could consider the provision of WiFi, laptops, and broadband, and subsidies to the home office through ergonomics.

There exist a few companies who are still reluctant to deploy technology in their operation, or just use technology as a temporary reaction to COVID-19. Technology is key to manage and develop businesses, and companies that have been ahead in adoption are overcoming the crisis more easily with less volatility. Employees will expect flexibility in the future and that will be supported through the implementation of technology solutions.

Using technology in managing workforce has its own limitations and challenges such as a lack of direct interaction among employees, a potential decrease in work efficiency, and data privacy and security concerns. Notwithstanding this, applying technology to business operation and human resource management is a trend which employees will expect to continue. Companies should take advantage of technology not only to overcome the pandemic but to continue developing their business and employee experience.

A balance will no doubt need to be struck with face to face interaction remaining very important. The younger generation in particular has missed the social interaction at work. The workplace is likely to change to accommodate this through becoming a more collaborative environment.

The new Omicron variant of COVID-19 is once again threatening to disrupt global mobility. What impacts can companies in Vietnam expect on their operations?

Currently, the Ministry of Health in Vietnam is actively cooperating with the World Health Organisation and the US Centers for Disease Control and Prevention to respond to the new Omicron variant. The first and foremost response is a proposal to suspend travel from countries with high occurrence of the variant.

Although there is a push from the foreign business community for Vietnam to open borders and ease entry requirements, until the impact of the new variant is understood, this is likely to be delayed. The draft plan on gradually reopening the borders prepared by the Ministry of Transport has yet to be approved and seems likely to be delayed.

Therefore, prolonged border closures, which result in restriction of entrance for expatriates who are newly assigned to Vietnam or coming back to Vietnam after business trip/home leave, may remain in place. It means that maintaining and getting the right talent in the country remains difficult, as we have seen in the previous waves of COVID-19, and are likely to result in a longer term shortage of talent.

In addition, having employees working remotely also triggers compliance risks that need to be managed. Businesses will have to spend more effort and resources on maintaining workforce and ensure an effective compliance system.