Best Practices for the New Normal: Hiring Out of State Remote Workers

If you ask workers why working remotely appeals to them, you’ll get a variety of answers. However, one of the most common will be, “I can work from anywhere!” Likewise, as an employer, you may be attracted to the ability to recruit workers who live in other states.

That’s true, but doing this may be more complicated than you realize. It’s important to follow best practices to avoid any negative repercussions for hiring remote workers from out of state.

Take Taxes into Consideration

The tax implications of hiring people in other states can be quite complex, and failing to follow all of the rules can lead to significant penalties. 

You need to understand the tax laws of the states where your employees live and ensure that all necessary deductions and tax payments are made. Payroll taxes represent a significant source of revenue for most states, and they are very vigilant in enforcing these laws. 

If you have an in-house accounting team, make sure they have the competencies to handle this. If they don’t, you’ll need to hire and onboard people with those skills. It may also be worth investing in hiring an outside firm that handles these sorts of employment taxation issues.

Make Sure You Pay Employees Correctly

It’s important to ensure that you are paying your employees correctly according to the laws that apply to them. Whether you handle payroll processing yourself or go through a payroll provider, you are ultimately responsible for this. Go over the following points with your payroll administrator or your payroll service:

  • What is the minimum wage in the employee’s state?
  • Have you included all mandatory information on the employee’s pay stub (e.g., vacation accruals)?
  • Are there new regulations for payroll deductions?
  • How are payroll taxes calculated in each state?
  • Is there a city or county minimum wage that supersedes the state wage?
  • Do your pay periods align with payday frequency laws?
  • Are there special rules in the state for calculating overtime pay?
  • What are the overtime exemptions in each state?

It’s very important to make sure that your out-of-state employees are paid correctly and on time from the start. If your payroll provider isn’t familiar with regulations in other states, you might consider contracting with one that is. 

Now is also the perfect time to do some salary and compensation research. Even if you are within the legal guidelines, you won’t recruit top talent if your wage schedule isn’t competitive.

Plan to Keep Up with Regulatory Changes

In order to hire workers in multiple states, you must understand all of the unique laws and regulations that apply. This understanding is complicated enough, but that’s not all. All of these rules are subject to change, and they change frequently.

You need to identify who is going to take on the task of learning these regulations and how they apply to your company. Then, you must determine how you will keep up with regulatory changes as they come up.

Ideally, your HR team is competent enough to handle this task. However, in some cases, it may be advisable to consult an employment attorney along with a tax professional if you have questions or concerns.

Follow State-Level Labor Laws and Regulations

Payroll and taxes are very important, but there are other laws and regulations to consider. Each state has its own Department of Labor that creates and enforces regulations that are specific to that state. They may even conduct audits to ensure that you are in compliance.

Here are a few examples of regulations that may vary from one state to the next:

  • How employee rights and other signage must be displayed or provided to workers
  • Hiring practices as they relate to prospective employees’ criminal records
  • How sick time is accrued and paid
  • Workers’ compensation insurance requirements
  • Mandatory breaks and meals
  • Harassment and discrimination policies
  • Unpaid leaves of absence
  • State-specific employment forms and documents
  • Days of rest requirements
  • Mandatory drug testing policies
  • Employment at will and right to work
  • Mandatory employment benefits and COBRA coverage

In some cases, you may need to drill down to the county or city level to ensure there aren’t labor boards or regulations that apply there as well. You can contact these agencies directly for information on employment laws and regulations.

Establish Clear Standards and Practices

In addition to following laws and regulations, you will want to create company policies that ensure that remote workers are engaged, productive, and treated equitably. It’s important to predict as many eventualities as possible and to set expectations for new hires.

One issue that comes up frequently is timekeeping. Will you require workers to clock in and out or log their time in some other way? Remember that there could be regulations that apply here regarding exempt and nonexempt employees. 

If you truly reach out to candidates in many states, you’ll also have to take time zones into consideration. While it’s definitely possible to work around this, it can impact availability for online meetings and other “live” events.

Finally, be careful about being too heavy-handed. The last thing you want to do is establish so many rules and regulations that the benefits of working remotely are no longer apparent. 

You’ll lose talented, out-of-state workers to your competitors if you can’t offer a great work culture. Remember the factors that make remote work appealing, such as flexibility and autonomy.

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