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September 14 2020 - New York, NY

Remote work benefits: Michael Tannenbaum

Thomas:
After speaking about the future of offices and rethinking the office strategy, in this episode of Brex in the Black, we're going to talk about remote work benefits. So Michael, why don't you talk about how you're thinking about them holistically and what has changed as we've moved into a remote first world?
Michael:
Sure. So regardless of the long-term strategy for your business in terms of office space and working environment, the reality for most professionals today is that people are still working remotely. You're at risk in some ways of losing some of the culture and vibrancy and connection to employer that the office environment, if you used to previously operate that way, offered. So one way to compensate for that is to offer additional benefits to employees, so they feel that they're still in the mix with their company. Some of the things I've seen in that regard are utility stipends, meals stipends, at home office benefits for furniture, potentially offering shared office space in new cities. All of these cost money, but I think all of these are options you should be considering.
Thomas:
Do you have any particular recommendation around what you should be offering and setting any sorts of timelines for these benefits?
Michael:
I do. So, I mean, I would say even if you're planning on going back to the office and not changing anything about the way you operated due to this forced experiment in remote work, my recommendation is to still offer, for the current periods, some form of perk for the remote environment. I think employees are under a lot of stress. I think it's likely that expenses are down in the category of business travel and other meals and entertainment, expenses, offsites, those kinds of things, conferences. So take a portion of that budget and use it to build company loyalty, which is important in a world where everybody's working remote and the talent wars are still there. There is unemployment, but in many markets, there's still a lot of ... there's increased unemployment, but in many markets there's still a lot of competition for talent. So I think my recommendation in this regard is to offer something that's recurring that people actually feel. For example, at Brex we have a $200 a month virtual credit card that everybody is issued that people actually can go and use for things like DoorDash at home or Uber Eats or whatever they want. But rather than just adding this to payroll, we force people to interact with this card, so they're reminded that they have access to this additional work from home benefit. It's a constant reminder as they use it, rather than just disappearing into the paycheck. There are some of those pay stub freaks that check their pay stub every week and look at it, but a lot of people don't. So an additional $100, even for someone who doesn't make that much money, might just not get noticed in the same way as $100 that they're actually specifically accessing through some sort of benefit.
Thomas:
Now when you think about these stipends and benefits, is there any tax implication to the employee or the employer?
Michael:
So I think in terms of employee verse employer, the primary thing to focus on is taxes for the employee. For employer, the confusing part is much more around client meals and entertainment, that's where there's a lot of IRS guidance. But here, the IRS guidance for work from home benefits, that's much more on tax ability for the employee. So the IRS has really clear guidelines here, they're actually not that hard to read versus most IRS stuff, which is. There's a guide online called Employer's Tax Guide to Fringe Benefits that goes through all of the details here. But basically, the interpretation I got from reading that was anything you do occasionally like hand out donuts or do a onetime lunch on a Friday because someone's leaving or joining, all of that can be provided tax-free, same with working late. Any meals like that can be tax-free, but otherwise, most of what you'd be offering in the remote context would be taxable to the employee. So to be more specific, there's a clear guideline on taxes, whether or not if you can be tax exempt. One is if it's furnished on the premises, which is pretty hard remotely, and the other is it's furnished for your convenience. Here they mean there are no alternatives. So an example would be if you were working at a restaurant or in a really remote place, like a hotel that didn't have anything around it and there was no other place to get a meal, you could offer that for free. But the guidelines are pretty specific and explicit, that meals you furnish to promote goodwill, boost morale, or attract prospective employees are not convenience, and therefore it's taxable.
Thomas:
No, I was just going to continue on to that. I mean, I think you're touching some very clear topics. When you mentioned what Brex is doing with this virtual card, you said it could be spent on Uber Eats, Grubhub, DoorDash, all of these seem fairly standard and associated to meals. But is there anything else that people could be spending their money on and should be watching out for in some tax-free benefit or some implication that this may bring to the company or to the employee?
Michael:
Yeah, I mean, reading through the guidance, I was struck by the fact that utility payments could probably be considered a tax-free benefit. There's pretty clear guidance on employee provided cell phone, which states that there are non-compensatory reasons. Meaning it's not considered compensation, so it's not taxable to the employee for your company to pay for your cell phone. So I think increased bandwidth, which has been something that's come up at Brex, does get clear support. So if you think about that, if someone was paying for the internet before and they had to increase this because they're now working at home, increase the monthly stipend, I'd say it's pretty safe at a minimum for that increase to reimburse the employee for that and not treat that as taxable income. So that's one of the ones that I think is there. I think, look, on the meal piece, you definitely could try to make the argument there that it's furnished for convenience, meaning that there are no alternatives. But I think it's hard, it's not a risk I'd recommend taking. I think on utilities, pretty safe bet. Just remember, all of these are a burden on payroll, right? So especially with remote work, people are potentially moving to new places, which has new state income tax perspectives and implications and all the reimbursement and tracking of all of these things. Obviously important to have a good technology platform. We obviously use our own product, which is Brex to do this, but I do just want to acknowledge that just make sure your payroll department is staffed appropriately and knowledgeable on these topics.
Thomas:
Yeah, for sure. Do you think this can be rushed or not taken into account quickly enough? I think we saw this coming out very early in COVID when bigger tech companies were sending employees home and giving them the stipend very early on to start building their office, but then there's been plenty of other startups and companies that just haven't sorted this out. Do you think there's a fine line between that or is it just up to every company? The one area where I might be more cautious is work from home office stipends for furniture and those kind of things, because I think you want to think through the long-term strategy of are people coming back to the office or not? If you're not going to come back, you might want to send all the office furniture to different people's homes, if that's possible. Things like monitors, desks, if yours were moveable, things like mice, et cetera, hardware.
Michael:
The one area where I might be more cautious is work from home office stipends for furniture and those kind of things, because I think you want to think through the long-term strategy of are people coming back to the office or not? If you're not going to come back, you might want to send all the office furniture to different people's homes, if that's possible. Things like monitors, desks, if yours were moveable, things like mice, et cetera, hardware. So, I just think you want to think through that before you go buy a second set. Then even if you do allow employees to buy a second set, does that mean they also have the right to return to the office? If so, let's say they joined during COVID, are you then going to be buying them a second set of things when they return? So I think you just want to think through the long-term strategy, or you could end up spending a lot more money than you might anticipate.
Thomas:
Perfect. Thank you, Michael, for guiding us through remote work benefits.
Michael:
No problem.
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