Life can throw unexpected surprises our way—including a global pandemic, which spurred more workers to search for remote employment. Whether you are hiring remote workers now, or your existing employees are working from home in another state, complying with multiple states’ employment and tax laws can be a headache.
While the worst of the pandemic may be behind us, remote work is likely here to stay. On one hand, it’s great for employers: you can find the best talent for your company’s specific needs. On the other, researching state and federal employment laws is a time-consuming and often expensive proposition.
When your employees tell you, “I want to move back home to another state, but keep working for you,” don’t panic. SixFifty has created solutions for this exact scenario. With our cost-effective legal technology, you can hire—and retain—employees in all 50 states.
How remote workers affect employers
There are dozens of benefits to remote work, for both employer and employee alike. Employers get to find and retain top talent across the country. Employees enjoy a short bedroom-to-home-office commute, and often more flexible schedules, which allows them to meet both family and work needs.
There are downsides, too. Most employers find that researching, creating and implementing state-specific policies for multiple states is an expensive and time-consuming undertaking. Smaller companies may not be able to afford legal assistance, while larger ones may not want to spend money on billable hours, or burden their legal department with these tasks.
While there are federal employment laws that apply across the board, every state has their own set of rules. Some states, counties and cities offer stricter worker protections, while others are more laissez-faire—and it’s your job to comply with them all.
Remote work has certain tax implications. Depending on the circumstances of employment, employers may be required to pay taxes to the employee’s state of residence, or to their own state. For example, in Illinois, employees can work 30 days without triggering state tax liability—but in New York, it’s only 14 days.
Finally, remote workers may be eligible for workers’ compensation and unemployment insurance in their own state. Usually, employers must pay unemployment and workers’ compensation insurance premiums to the state in which the employee works.
If you don’t already have a streamlined, efficient process to onboard remote workers, this might look like more hassle than it’s worth. Fortunately, there are solutions to accomplish just that.
Which state law applies to out-of-state remote workers?
The first challenge you’ll need to tackle is determining which state law will apply to your out-of-state remote workers. Generally, it will be the laws of the city and state in which they work. Because certain states have local city or county laws—San Francisco, Cook County (Chicago), Seattle and New York City are good examples—some locations may have stricter standards than you have in your own state.
However, “Depending on state law and conflict of law principles, there may be exceptions for employees who are temporarily located in a state or not considered ‘based’ within a state.”
Before you can determine which state law applies to your employees, you’ll need to find out what constitutes being “based” within a state. Then you must research the state and local employment laws that apply to your newly remote worker.
State and local employment laws can affect everything from leave to payroll taxes, employment benefits, workers’ compensation and employment insurance and more. Failing to comply could leave you legally liable to the worker or the state.
How to manage out-of-state employees
Here are some quick tips to manage your out-of-state remote employees:
- Get familiar with the local laws: SixFifty’s proprietary legal technology makes it easy to comply with all state and local laws—just answer a few questions and let us automatically generate the compliant employment documents you require. All you need to do is have your lawyer review and approve.
- Register your employee with the state: You’re required to register your employees’ location and other information with the state and federal government—this helps the government track down people for child support payments, among other things.
- Withhold income taxes as needed: You will also need to withhold income taxes and make payments to the appropriate state agencies. Keep in mind that the forms and filing dates will differ for each state.
We know it’s a lot of extra work on your part, which is why SixFifty designed employment tools specifically for employees working in different states. We make it fast, cost-effective and easy to comply with employment laws in all 50 states. When your valued employees express the desire to move elsewhere while remaining on your payroll, you can confidently tell them, “Yes.”
Questions? Want to see how it works? Schedule a demo today!