Remote work: specifics and compensations

Referring to Olegs Kolesnikovs, lawyer SIA “INLAT PLUS international”, in March, 2020 the Ministry of Welfare addressed enterprisers, suggesting they should move their staff work to remote work regime as one of the options to cut the staff expenses and also to protect the staff from contracting COVID-19 virus. Data by Central Statistical Bureau of Latvia show that before the state of emergency was declared, 19,000 people worked remotely, afterwards - 148,000. Oļegs Koļesņikovs has no doubt after cancellation of the state of emergency many companies will still prefer remote work which allows them cutting the office expenses. However, in contrast to working in office, when doing their job from home, employees incur higher costs for their public utilities (power, water etc.) and communication services (phone, internet) which are to be paid on their expense. Oļegs Koļesņikovs explains specifics and compensations regarding remote work.

What is remote work

Remote work is a type of work characterized by an employee doing his/her job, while being away from the office and submitting the work results to his/her employee via internet. The concept of this type of work was made up by Jack Niles, who in 1972 argued that there is no need to keep staff at office, when nowadays there are sufficient communication means to allow contacting among staff members remotely. For this theory to be tested in practice, Jack Niles carried out experiments in University of South Carolina. As a result of these experiments, a conclusion was made, funding was provided by National Science Foundation and authorities showed interest in developing the idea of remote work, as it could solve the common issue of transportation in cities. The innovative type of work could solve these issues, by giving job to people from remote rural areas.

As of July 1st, 2020 amendments of Labour Protection Law come into effect, which define "remote work". As per the new edition of the law, remote work is a type of work where an employee is able to perform his/her job individually or on a regular basis outside the company, including work via information and communication technologies. The following criteria should be met:

• Job can be done at the employer's company or outside it (for instance, at home, shared workplace, in private of public premises);

• The employee works remotely on a continuous or regular basis;

Remote work does not refer to cases, when the employee carries out his/her job during the state of emergency. For example, if a company experiences internet disconnection and therefore the staff is asked to work from home, until the trouble is fixed;

• there is a written agreement made between the employee and the employer regarding remote work.

If job by its nature does not involve movement on a regular basis, such as transportation, visits to customers or business trip, it cannot be considered remote work, as the law stipulates.

Analysis of standard labour contract

Labour law (LL) stipulates that the employer and employee define their legal relationship through signing employment contract and by mutual agreement they are entitled to make some contractual amendments. It means, that, if necessary, they can agree on some changes in the employment contract in order to solve situations caused as a result of COVID-19 virus spread. Changes in employment contract, if made, should be voluntary.

Because there has been a rise in demand for consultations on employment rights, “INLAT PLUS international” law firm offers analysis of standard contract in order to clarify relationships between an employee and employer in case of remote work.

One should understand that in many cases the contract is an insufficient source of information on the contracting parties. Section 40 of Labour Law stipulates that an employment contract shall include only the basic information In addition to employment contract employment relationships can be regulated by working regulations and internal orders.

Surely, remote work is different from work in company premises. Nevertheless, an employee should be aware that every condition of employment contract remains unchanged and valid, while the solely difference is the place of performing the job. As usually, work should be started at the determined time, communication should be maintained with the employer and terms of privacy should be followed, so that no third party intervenes in the work process. The employer is entitled to define on his/her own, how remote work would be organized for his/her employees. It is recommendable to fix such terms in a document. It should be considered that informing the staff timely on the new terms helps ensuring the necessary work order.

Section 76 states that the employer should cover the expenses for doing the job. When working remotely, nothing changes and the employee has rights to have his/her work expenses recompensed. This refers to the expenses caused in future, as well. One should remember that an approval by the employer should be given accordingly. Expenses for expensive office furniture are not to be repaid, yet the employer must recompense bills (internet, power), because the employee uses his/her resources, when working at household environment.

Unfortunately, there are common situations where there are no internal terms and directions in place and the employment contract does not contain anything in specific, and instead of listing rights and obligations, there is a reference made to laws and regulations. In such cases a legal consultation should help. The same goes for workplace disputes that could lead to court proceedings. In assistance of a lawyer you will be able to protect your rights and interests properly.

Laws and regulations lack specific answers to questions on processing employment relationships and compensations. It is accepted that expenses of an employee can be recompensed, if he/she works outside the office. Expenses can be recompensed, if they are proportionate, the estimated sum of compensation is accurate and the link to the economic activity of the company is identified clearly. Explanations of reasons for these expenses on the basis of economic reality are defined and laid down legally within the company internally.

Subparagraph 18.2 2 of terms No. 899 by Cabinet "Procedures of applying norms of Personal Income Law” stipulates that incomes that are exempted from payroll tax include benefits and payments by the employer related to expenses the employee has incurred due to doing his/her job duties, as well as payments by the employer to recompense the employee's expenses, which are considered employer's costs according to Corporate Income Tax Law and Personal Income Tax Law.

In cases, when the employee performs his/her job outside the office due to its characteristics, while the employer recompenses the expenses incurred to the employee that are considered the employer's costs, they are exempted from personal income tax (PIT) and the compulsory social security contributions (CSSC).

In this situation the employee's recompensed expenses are exempted from taxes, as they are considered costs of company's economic activity and there is no requirement to submit any report to SRS on sums paid to a natural person, nor it is required to declare them to SRS in any other way.

We would like to remind you that the company should give clear grounds for such expenses, their amount and their link to economic activity.

The recompensed sum of expenses can be justified by the following points:

• Workplace parameters are identified in agreements on non-recompense use (a property part is identified (proportion) from the total property);
• Expenses are recompensed on proportionality basis, considering the property part and regularity, for example, if 10% of total property is given for non-recompense use, the compensation sum must not exceed 10% from the total public utility payments.

It should be noted that most of the staff will be willing to resume office work in future, as humans are social beings. For many people, going to work and meeting work colleges mean no less than the salary. Work gives them opportunity to interact with interesting people and for many being at work evokes strong and positive emotions. Isolation brings joy only in deeply introverted people, while for majority of people being at office comprises an important social act.

“INLAT PLUS international” offers professional legal services also remotely via “Viber”, “Skype” and “Whatsapp” applications, and also provides consultations free of charge.