No one has ever told you the most important fact about digital nomads

Legal residence is everything. Physical location is nothing. Here’s what you need to know about employees who don’t live at home.

Where do your employees live?

In the post-pandemic world of flex-work, hybrid-work, and remote-work, where your employees live is suddenly a very important question.

Conversations around post-pandemic employee categories overemphasize the differences between office workers on one hand and hybrid and remote workers on the other—and also underemphasize the much greater differences between specific kinds of remote workers. These differences have big implications for both the companies and the employees themselves.

In other words, we tend to intuit a Great Divide between full-time office workers and hybrid and remote workers. But that’s not where the line is.

A full-time office worker and a hybrid worker (a person who works in the office part-time and at home part-time) have the most in common. They both usually reside in the same state and are therefore governed by the same employment laws. They both usually live within commuting distance of the workplace and can be called into the office on short notice. They’re usually in the same time zone. They both usually pay taxes in the same state. And the tax implications for the employer are usually the same.

Full-time and hybrid employees are on the same side of our Great Divide. On the other side are some, but not all, remote employees. A remote employee may live (both legally and physically) in a different state, a different country, a different time zone, and they may not be called into the office on short notice. The employment law and tax status may be far more complex for both the employee and the employer.

So which side of the Great Divide do digital nomad workers fall?

The surprising answer is: It depends.

A digital nomad, by definition, lives in a different place than their legal address. Digital nomads don’t live at home.

Let me explain.

A digital nomad moves from place to place. (That’s what makes them a nomad.) But the world isn’t really set up for nomads; it demands a physical “home address,” even from people who don’t have one. Federal and state governments, various companies, and other organizations simply won’t accept blank “home address” fields in their forms and documents. And so, each nomad needs a physical address that is not a PO Box where they can receive mail.

So, what digital nomads do is either keep a “home base”—a place they rent or own that they live in part-time between trips—or they use the address of a relative or friend.

That “home address” is what determines which state’s employment laws apply. It’s also what governs tax laws and obligations for both the employer and the employee.

But back to our Great Divide question: A digital nomad whose legal home address is in the same state as the company is mostly on one side of the Great Divide (in terms of employment and tax laws for both the employee and the company). A digital nomad with a legal home address in another state is on the other side of the Great Divide. And it doesn’t matter where the person actually lives at any given moment.

Take me, for example. I’ve lived and worked as a digital nomad since 2006. My legal home address during that time has always been in California. But during most of that time, my actual residence has been in any number of countries in Europe, Latin America, the Middle East, or North Africa.

Even though I’m currently living in Morocco, everything about my employment—from employment laws to taxes—is governed by the state of California and the United States of America.

When I enter a foreign country, Customs always asks if I’m visiting for business or tourism. The answer is always tourism.

Unless I take up legal residency in a foreign country (something I’ve never done), if I visit a country to attend a trade show (something I’ve done only about a dozen times), then I’m only there for tourism and not business—even though I’ll be working the entire time. (Yes, I’m working, but that’s not the sole reason as to why I’m there in the first place.)

From a lifestyle perspective, the legal home address of a digital nomad is nothing and nowhere. It doesn’t matter and it doesn’t apply. The only thing that does matter is the physical location. But from an employment perspective, only the legal home address is required for employment and tax law purposes. The physical location of a digital nomad employee, however, is completely inconsequential.

And so, a digital nomad employee with a legal home address in the same state as the company—but who lives all over the world—is less complicated for employers than a work-from-home employee who lives on the other side of a state line.

That’s the most important fact about digital nomad employees. Now you know.

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Copyright © 2022 IDG Communications, Inc.

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