Business Insights | Government Incentives: How Hybrid Work Creates Compliance Risks

The rapid adoption of hybrid work has introduced new compliance risks for companies receiving state and local economic development incentives. Historically, incentive agreements operated under the assumption of a five-day, in-person workweek. Following the pandemic, a patchwork of rules has emerged.

Today, companies face a fragmented landscape where temporary pandemic allowances have expired, state rules conflict with local mandates and compliance definitions often compromise current benefit collections.

To mitigate risk, corporate decision-makers must re-evaluate prior agreements and embed hybrid workforce definitions directly into site selection processes and development agreements.

Hybrid-Work Incentives Vary Widely by Jurisdiction

Prior to 2020, compliance requirements for economic development incentives were straightforward. Companies committed to facility investments and maintaining a minimum number of full-time, on-site employees. And agreements often required a decade or more of reporting, leaving many contracts signed in 2018 and 2019 bound by pre-pandemic operational assumptions.

As state and local authorities attempted to accommodate hybrid work models, they enacted widely varying compliance requirements. As a result, on-site physical attendance requirements now range from 0% to nearly 69% of a standard workweek.

Three Common Hybrid-Work Incentive Compliance Risks

1. Silent Expirations of Temporary Allowances: Pandemic-era relief has largely expired without formal notice. For example, Georgia’s Job Tax Credit temporary telecommuter allowance was limited to tax years 2020 and 2021. Companies that relied on these allowances after they expired may be deemed retroactively noncompliant.
2. Misapplication to Retained Employees: Compliance rules often apply equally to new hires and retained positions, such as Illinois’ 14-hour weekly on-site threshold. Existing remote employees cannot be grandfathered in to meet attendance requirements.
3. Credit Reductions and Contract Default: A decline in on-site employees reduces the credits a company can claim and may trigger clawbacks or other penalties tied to multi-year retention commitments.

Regulatory Mechanisms That Determine Hybrid-Work Eligibility

To evaluate potential exposure, corporate managers should examine programs across six regulatory mechanisms:

Local Incentives Pose the Greatest Compliance Risk

Hybrid workforce compliance spans both state and local levels. A state credit or grant typically sits alongside a county property tax abatement, a local grant or a municipal income tax credit. These programs were developed by different authorities and updated independently over time. In some states, the result is a patchwork of incompatible rules or interpretations.

Local agreements carry the greatest compliance risk. They’re typically stricter and less likely to have been updated since the pandemic. Moreover, compliance with state-level provisions doesn’t guarantee compliance at the local level. Companies should read the local agreement first and treat it as a separate obligation.

Three Questions Companies Should Ask

To comply with post-pandemic incentive requirements, companies should conduct a structured, top-down review focused on three essential audit questions:

1. How is a “qualifying job” defined? Determine whether eligibility hinges on payroll/withholding or requires physical presence at a business site and for how many hours per week.
2. What are the requirements of the local agreement? Separately analyze city, county and school district agreements. Local requirements are commonly stricter and less likely to have post-pandemic amendments.
3. Have formal amendments or alternative reporting arrangements been executed? Many jurisdictions require formal contract amendments before remote workers can be counted toward program requirements. Any flexibility in reporting or compliance should be documented in writing rather than assumed.

Address Hybrid-Work Requirements Early in Site Selection

Companies engaging in site selection need to consider their workforce mix at the start of the project. A program that appears generous may define a qualifying job in a way a hybrid workforce can’t satisfy, resulting in a complex compliance challenge after execution. To avoid this, companies should understand which jurisdiction controls each incentive and the attendance requirements that govern it.

CBRE’s Site Selection & Incentives team has mapped hybrid and remote work eligibility requirements across state and local programs nationwide. For companies with active agreements, the team conducts definition-level reviews against current workforce patterns. For companies engaged in site selection, the team incorporates workforce model assumptions directly into incentive analyses.

In practice, this requires three steps: screening programs against projected workforce models before selecting a location, auditing executed agreements to catch noncompliance exposure early and renegotiating terms with economic development agencies when gaps arise. While most companies assume signed incentive agreements are set in stone, agencies typically prefer renegotiation over clawbacks when a business shows continued investment and good-faith effort. CBRE’s team has navigated these conversations across jurisdictions and knows where flexibility exists.

For companies still evaluating locations, embedding realistic workforce assumptions early prevents chasing unclaimable incentive values, leading to grounded decisions and commitments the business can fulfill.