Having employees working in a remote location can bring up issues for your company. How will equipment be maintained? How will employees collaborate? What about time tracking when a “normal” 9 to 5 is replaced by an at-home job? We’re gradually working through these issues as an increasing number of employees end up telecommuting. But there are also issues upfront during the hiring process that employers now have to worry about. What are the compliance and regulatory challenges businesses now face with hiring remote workers? We have answers.
Are There Compliance Challenges to Hiring Remote Workers?
Compliance and Your Remote Workers
The benefit of remote workers is you broaden your labor pool—you can literally hire anywhere. However, the regulatory environment for payroll and other issues is governed at the federal and state level. Some of the issues you may encounter when hiring remote workers include:
- Payroll rules such as unemployment taxes or state-specific tax withholding if you’re doing something other than a 1099. The complexity increases if the employer is located near a state border or if they have workers that cross state lines to do their job. But remote workers also fall into this category. For example, if you have a W2 hourly contractor, are you taking out taxes for the city in which they live or for the company where they work? As a general rule, you should tax for the state where the work is performed, however, the problem is, there are exceptions. Too, you expand the business into new states, are you ready to handle the tax implications in each state which vary but also change regularly? There are also complexities around the hybrid employee who works from home partially and also goes into the office.
- Foreign qualification isn’t exactly what you may assume it is. Legally, some states call other states “foreign” and they require that you “qualify” your business in their state before hiring workers there. Basically, you’re registering to do business in that state. There are additional compliance rules that stem from registering, also.
- Home occupation permits are all the rage now. At the municipal level, some counties and cities require home-based contractors to seek out a home occupation permit. It’s a flag for regulators if you are paying payroll taxes in that region but you don’t have any home occupation permits on file.
- Tax Nexus is a term for companies that do business in a state that is outside where the company is located. This can include if you have remote workers in other states. The trick here is that you may fall under the tax laws where the remote worker is, in addition to paying taxes in your home state. Or, you may not.
- Remote worker classification is another very tricky area of compliance law. While you may assume the remote worker is an independent contractor, that isn’t always the case. Just because the employee isn’t on site these days doesn’t mean you file them as an independent. Courts are increasingly looking at these issues to determine if the worker isn’t independent at all. To complicate the issue, different states look at these classifications differently. Why does this matter? Because misclassifying a worker can lead to costly fines and reputational damage.
Are You Facing Compliance Challenges with Remote Workers?
In today’s increasingly complex work environments, you have an expert in your corner to manage the employer/worker relationship. FoxHire is an employer of record (EOR) that uses smart technology to keep employers legal while managing the hiring process. Talk with our team today about how we can help you manage complying with today’s challenging regulatory environments.