Workers commuting regularly between Hong Kong and Shenzhen have found their routines and careers upended by the stringent travel restrictions to fight the pandemic. Experts say remote working could also trigger other problems like tax and social insurance liabilities. Edith Lu reports from Hong Kong.
People line up at the Shenzhen Bay checkpoint on Nov 24 to enter the Chinese mainland. (PHOTO PROVIDED TO CHINA DAILY)
As tens of thousands of Hong Kong residents scrambled in the past two weeks to return to the Chinese mainland for the upcoming Lunar New Year family reunions, their agony and suspense in having been separated from their families for so long have become very clear.
For many in the long queues snaking into Shenzhen Bay Port — one of only three land, sea and air entry points between Hong Kong and the mainland that have remained open since Feb 4 — they’ve not seen their families or loved ones for a year due to the tough travel controls still in place to fight the pandemic.
To them, the joy of being reunited with their families, perhaps, far eclipses the arduous journey back to the mainland, where they now have to endure three weeks of mandatory quarantine, as well as rigorous coronavirus tests before being allowed to move around freely.
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Due to the pandemic, a round trip would now cost them five weeks at most in quarantine for most Hong Kong and mainland residents
Hong Kong and the Shenzhen Special Economic Zone in Guangdong province may be separated, geographically, by just the 200-meter-wide Shenzhen River but, for much of 2020, they were worlds apart. For most Hong Kong and mainland residents, a round trip would now cost them five weeks at most in quarantine.
The travel curbs have not only reduced commuting between the SAR and the mainland to a trickle, they have triggered a host of issues for people living and working on both sides, including labor and tax problems.
For regular cross-boundary commuters, the quarantine rules came as a bolt from the blue and have hit them hard. Jason Li, a private equity analyst who used to work in Hong Kong and live in Shenzhen, said the curbs have completely upended his working and social life.
Li started commuting daily between Hong Kong and Shenzhen four years ago when he was still working at Hong Kong Science Park in Sha Tin — a 20-minute drive from Futian Port. It was a good deal for him, sacrificing a little commuting time for a much lower apartment rent and a more convenient, relaxed life in Shenzhen.
When he switched to a new job in Hong Kong’s Central, which required a longer commuting time of five hours daily between the two cities, he believed it was still tolerable and worthwhile. But it did not last. Everything has completely changed since the coronavirus outbreak.
Li was allowed to work from his Shenzhen home for several months after Lo Wu, Futian and Huanggang ports — the three busiest cross-boundary checkpoints between Hong Kong and the mainland — shut down in early February. Li considered it wasn’t a long-term solution.
He heard from colleagues that his boss had made some unflattering remarks about the arrangement, casting doubts on whether Li was really working at home.
“My boss’ attitude was the main factor in my decision to return to Hong Kong although I wasn’t told I had to show up at the office,” said Li. “I made up my mind to move back to Hong Kong when I realized it was highly unlikely the checkpoints would reopen in May.”
He was also worried that having to work from home indefinitely would have a negative effect on his chances of getting bonuses or promoted. Li returned to Hong Kong in mid-March and stayed temporarily with a friend after completing his quarantine before renting a flat in Kowloon for a monthly rent of HK$7,000 (US$903).
Li said he had to pay for his own accommodation bills in Hong Kong after the company declined his request for subsidies.
According to the Society for Community Organization — a local non-profit-making group — there are currently about 42,000 regular cross-boundary commuters like Li, including 17,000 living in Hong Kong and 25,000 in Shenzhen.
Commuter workers rising
Crossing borders to work and live isn’t uncommon worldwide. It’s prevalent between the United States and Mexico, and the US and Canada, as well as countries within the European Union, where people living in Poland and working in Germany, mainly in the construction industry, made up the bulk of cross-border commuters within the EU in 2019.
The pool of Hong Kong-Shenzhen commuter workers has swelled in recent years as cross-boundary marriages shot up in view of the deepening social and economies ties between the two places. According to the latest figures from law firm Deacons, among the approximately 50,000 marriages registered in Hong Kong each year, about one-third involve Hong Kong-mainland couples.
The “one-hour living circle” concept promoted within the Guangdong-Hong Kong-Macao Greater Bay Area has further lifted the number of cross-boundary commuters — mainland graduates staying and working in Hong Kong, as well as Hong Kong residents having close business ties with mainland companies.
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“Prior to the pandemic, commuting between Hong Kong and Shenzhen had been much simpler. But with the strict travel control measures now in place, a line has been drawn between the two cities,” said Shen Jianfa, a professor with the department of geography and resource management at the Chinese University of Hong Kong.
He called the pandemic a “sudden crisis” and a “particular episode”. But everything should be back on track in the post-pandemic world and the “one-hour living circle” is likely to accelerate the flow of people in the Bay Area.
With the “one-hour living circle”, he expects the number of commuter workers to continue rising after COVID-19 is gone. “Normally, there’re more commuter workers living in Shenzhen and working in Hong Kong as the living cost in Shenzhen is much lower than Hong Kong’s. Looking ahead, the number of commuter workers will still depend on the dynamic relationship between living costs and income levels in both places,” said Shen.
He believes companies will not see cross-boundary commuters in an unfavorable light in staff recruitment as they’ll not take cross-boundary commuting as a key factor in job applications. However, some workers did lose their jobs due to travel problems amid the pandemic as they couldn’t make it to the office on time.
George Huang settled down in Hong Kong with his family through the Quality Migrant Admission Scheme in 2014. He was hired by a company in Shenzhen in 2019, and had to commute regularly between the two places.
Since the pandemic broke, Huang had been working from his home in Hong Kong for a while. But when he returned to his Shenzhen office in March last year, he was told he had been sacked on the grounds that he had failed to show up while all of the company’s employees were required to start working in the office from late February.
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Huang was upset his company had never discussed the matter with him. He has appealed to the Shenzhen labor and human resources disputes arbitration committee, seeking compensation.
The COVID-19 shock has created a whirl of problems for employees and employers alike, especially when cross-boundary matters are involved. If home-office or flexible working were to be the norm post-pandemic, more issues could arise concerning visas, taxes, payrolls and insurance for workers who need to commute.
Accounting firm Ernst & Young called the situation a “perfect storm”, referring to the combination of remote working and cross-boundary employment problems.
In Huang’s case, he lived in Hong Kong and worked in Shenzhen before the pandemic. Under mainland laws, he only has to pay taxes in Shenzhen as long as he does not spend time working in Hong Kong. If he does, he and his employer would risk being hit with a bill from the tax and social insurance authorities. But would his time spent working at home due to the pandemic be considered as days worked in Hong Kong and be taxed in the SAR?
Rules tightening up
According to China’s State Taxation Administration guideline issued in August last year, the temporary relocation of an individual shall not trigger a change in his or her permanent home or center of vital interests, or tax resident status under a tax treaty.
The ruling is in line with an Organization for Economic Cooperation and Development analysis in April that COVID-19 is unlikely to affect the tax treaty determination of an individual’s residence status.
But the STA has not mentioned explicitly whether the temporary change caused by the pandemic would affect counting the number of days of residence in the country. Accounting firm PwC urged employees to consult professionals about relevant issues.
To avoid potential risks, many companies have drafted strict regulations on cross-boundary remote working.
HSBC — one of Hong Kong’s three currency-issuing banks — has begun embracing more flexible working options for its staff, allowing some of its Hong Kong employees to work up to four days a week from home.
The lender has also implemented strict restrictions on cross-border working. According to an internal human resources guideline viewed by China Daily, it only allows employees to work outside their country of employment for up to 10 working days a year in exceptional circumstances.
These circumstances include the death or serious illness of an employee’s immediate family member, elderly parents needing support or when the employee needs to be quarantined while in another country.
In addition, employees must provide confirmation they have the right to work in another country with regulatory compliance approval.
HSBC warned that cross-border working could create risks relating to regulatory, immigration and tax rules. Certain roles in a bank are tightly controlled in terms of how and where they’re performed. Cross-border working can also trigger corporate tax liability, as well as additional foreign tax and social security liabilities.
The banking giant said it has received a growing number of requests from employees to work from countries other than their countries of employment, with travel controls easing and the success of remote working amid COVID-19. It’s believed it’s now time to issue such guidelines to ensure that employees understand the potential risks.
Accountants have also advised companies to design flexible programs for remote and cross-border working to avoid being entangled in law issues that could be extremely complex.
