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Four years ago, Heath and Alyssa Padgett were newlyweds undertaking a bold experiment: spend a year on the road, living in an RV, documenting how others are making a living. Funny thing happened somewhere across those 49 states and 12 months: they not only produced a documentary film, but also crafted a sustainable nomadic lifestyle that leverages their creative work talents with their desire for location independence. Today, the couple has a thriving digital business of blogs, sponsorships, videos, workshops books and a Facebook group of 10,000 followers – all produced from their home and office on wheels.
The Padgetts are among a burgeoning mass of workers who are rejecting the traditional office assignment, for a work lifestyle that is not defined by a location. Rather, they travel the world while working remotely – needing only the internet and a digital device to produce a living.
A British journalist and Japanese semiconductor scientist first coined the term in their 1997 book, “Digital Nomad.” According to a recent New York Times article, the authors predicted that technological advancement would “make us geographically independent of our homes and offices,” leading to “cerebral nomadism” — we will travel the world hunting down information and relationships, much as our ancestors stalked the plains for prey.”
These so-called digital nomads can thank the strides made in the late 1990s to bring telecommuting to the mainstream. By the late 2000s, the nomadic lifestyle was becoming a “thing” as millennials in particular saw it as an alternative to high rents and high costs of living. It’s estimated that by the year 2035, there will be 1 billion digital nomads. For employers seeking to fill remote global work positions, the nomadic population will be an increasingly important one to tap. Some things to consider when working with digital nomads:
Not all nomads live in an RV like the Padgetts. The fact is housing options vary widely, but forget the long-term apartment rental or leased homes in a community of expats. Nomads seek flexible, short-term, low-cost housing in a location that is walkable or easily accessible to coffee shops and community gathering spaces. The one common denominator regardless of type of housing is access to reliable high-speed internet.
International housing networks like Roam are a popular housing alternative, with more than 2,000 members currently in its network. It provides furnished, single-occupancy housing for around $500 per week, in major international markets. Its facilities offer communal kitchens and co-working spaces to encourage community. Other nomads may choose to share space with a friend while on a temporary assignment, or use employer-provided apartments. The key for employers is to couple low-cost, clean and quiet housing with areas for community and co-work space.
The very nature of location-independence means work created by digital nomads can be at greater risk for data breaches. “Digital nomads typically work remotely—from home, co-working spaces, coffee shops, hotel rooms, etc., on tasks and goals that traditionally take place in an office. All they need is a laptop and a good internet connection,” according to the blog Fulltime Nomad.
Sadly, those open networks can be a danger zone for hacks and breaches. Employers should take extra precautions to ensure location-independent hires are working on encrypted and secure platforms. The General Data Protection Regulation issued in 2018 applies to all European Union residents, not just citizens. Employers must ensure that both they and their digital nomads strictly adhere to rules for protecting personal data or PII.
Related: GDPR Now Underway Across the Globe
One of the biggest challenges for the location-independent worker is how to handle financial transactions. The default payment option typically is PayPal, for its convenience and protection. It is offered in more than 200 countries, and supports 25 currencies. But PayPal has its downsides, most notably high transaction fees. PayPal Business can be a less costly option for frequent users.
As the nomadic workstyle has grown, so have the options for transacting payments. Stripe, Skrill, TransferWise and Bitcoin are among numerous alternatives to PayPal. Some provide payments directly to the user’s email address, or to an ATM-like card. Wire transfers are another option.
Digital nomads may be able to avoid the monotony of an office, and the drudgery of a long commute, but one thing that can’t avoid is paying taxes. According to Stewart Patton, a U.S. tax attorney currently living in Belize, “all US citizens are subject to US tax on their worldwide income, no matter where they live. Also, US citizens are required to file a US tax return if their gross income is over the applicable threshold (generally $10,000 for single people and $400 for people with self-employment income).”
However, he says, “US citizens who live outside the US can take advantage of the foreign earned income exclusion to reduce their US tax. “The FEIE allows a digital nomad to make up to about $100,000 from providing personal services without paying any US income tax. To qualify, you generally need to be in a foreign country for 330 days in a 12-month period (and that 12-month period can start on any day). If you work as a self-employed person (an independent contractor, freelancer, solopreneur, professional, etc.), then you still have to pay self-employment tax, which is 15.3% of the first $118,000 and 2.9% above that. Also, when you own a business (not a profession) directly in your own name, there are some rules that reduce the effectiveness of the FEIE.” For more assistance, Worldwide ERC®’s global tax specialists offer an array of resources on global taxes online.