Over the course of the last year, with stay at home orders and kids out of school, remote work is now a way of life. Additionally, a lot of businesses have discovered that hiring remote employees has expanded their talent pool to find even more ideal candidates for their open positions. Hiring remotely is brand new territory, and with employees and hiring when we say “brand new territory” you should know what that means... Compliance issues!
As soon as you bring on a remote employee that is working in a different state you are opening yourself up to a new tax jurisdiction in that new location. Let’s say you are in Memphis, TN and you hire someone who is going to be working remotely in Kentucky and this person is the very first person you have hired in that state. You are now liable for all things Kentucky when it comes to payroll and payroll taxes. That means state withholding tax, state unemployment tax as well as some of Kentucky’s wonderful local taxes of which you may not be aware of and now need to consider. Also, with changes galore around minimum wage, each state has their own minimum wage requirement. So it's a good idea to ensure you know the state wage requirements before making a hire in that state.
Ultimately, hiring remote workers will not always be a higher cost than local staff, but the cumbersome nature of needing to deal with each state should be something you're prepared to do if you want to make a remote hire. That is why outsourcing payroll and payroll taxes to a trusted payroll partner who has the expertise to handle these complexities for you is critically important. Instead of being an expert on state wage requirements, you can ask us to keep your provider to keep you informed on the policies you need to comply with based on your specific employee needs.
Another issue you need to consider when hiring remote employees will be your company policies around paid and sick leave, overtime, and more. If you decide to hire someone who is working in Denver, Colorado, you must provide the mandatory local paid sick leave that is applicable to Denver. Even if ninety-nine of your one-hundred-person staff work in your home office, you are required by law to abide by the regulations mandated by your remote employee's city and/or state (even ifit is different than your local policy). Each local jurisdiction can have its own unique set of rules. It just couldn’t be that easy, could it?
These types of jurisdictions and compliance regulations will require you review and possibly make some proactive changes to your employee handbook to ensure your policies are compliant with federal, state, and local laws in each specific area you have employees.
These are normal rules you need to be aware of when hiring remote workers, but if you dare hire someone in California, New York, or another highly regulated area, you need to be prepared for even more due diligence. These highly regulated states often have weird overtime rules, FLSA work hours, mandatory sexual harassment training, and all kinds of fun stuff. It’s not just as simple as interviewing a candidate and saying "Yep! You’re hired!"
So far we've mentioned payroll-related items you need to be aware of, but this doesn’t explore local licensing, security concerns, and even income tax nexus. These are all concerns to be thinking about, especially if you are starting to hire people all over the country. Next thing you’ll know you’ll have twenty people working on your team, in fifteen different states and you are wondering why your payroll and HR fees are so high. If you decide to hire someone in a remote state, be sure to do your research or get with your payroll provider before sending out that offer letter.
There are many pros and cons to hiring remote teams, and it's important to be aware of both the risks and rewards of hiring talent outside of your primary office.If you and your team are hiring remotely, or are considering hiring remote teams in the near future, the team at Whirks is here to help you keep up to date with all the necessary rule changes and areas of compliance that you may not be aware of.
Check out our HR page to see what other people problems we can help you with, or explore more remote hiring resources here. Our team helps businesses all over the country, providing them with the solutions and guidance they need to be successful and have peace of mind over payroll & HR-related issues. How can we help you?
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