In today’s tight labor market, it may be important for you to know labor laws from multiple states. Many companies are embracing the lessons learned from the pandemic by actively recruiting from outside of their geographic area. The goal is to find top talent, regardless of where they may reside. By recruiting outside of the company’s geographic footprint, a wider net can be cast.
In addition, many people moved during the pandemic when forced to quarantine and they may want to continue working as a remote employee. This flexibility can improve retention and is an enticing incentive in recruitment.
However, it is important that each company assess what works best for them. A workforce in multiple states adds layers of complexity and additional liabilities. Do not hire blindly. Before hiring in an additional state, do your homework and proceed cautiously.
Areas to review when hiring in a new state:
Before a new employee begins work, make sure that you have the proper registrations and licensing required by the state. Apply for the State Tax ID and Unemployment number.
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Generally, taxes are withheld for the state where the employee performs the work. For example, if an employee lives in North Carolina, but crosses the state line each day and works in South Carolina, then you must withhold taxes for South Carolina. Yet, some states have reciprocity agreements which allows its residents to pay tax based on where they live, instead of where they work. For example, Kentucky and Indiana have a reciprocity agreement. An employee who lives in Kentucky, but works in Indiana, only pays state and local taxes for Kentucky, their home state. And some states do not even have a state withholding tax. If you have remote workers, it is crucial that you know where the employee is working and tax correctly.
Each state has different rates and requirements for Workers' Comp coverage. In addition, five states and Puerto Rico have state mandated short-term disability programs. Funding is through employee wage deductions and/or employer contributions, depending on the state. Before hiring in a different state, secure the necessary coverages.
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If you currently offer employee health plans, confirm that coverage can extend into additional states. Using a Certified PEO with a Master Health Plan adds ease and security to the complex benefits process.
Ask the remote employee to submit of photo of their workspace and provide necessary tools if necessary. An ergonomic chair is a minor expense compared to a workplace injury.
From required posters to e-verify to handbook stipulations, every state has its own unique governance. Plus, new regulations are constantly added. Failure to adhere to each state’s conditions can result in significant penalties. Work with legal counsel, your HR department, or consider partnering with a PEO to make sure that your business is compliant.
Hiring from a larger talent pool can be a game changer for your business. The positives can far outweigh the negatives as you are able to hire the best from anywhere. However, use caution and common sense. By partner with experts to successfully employ in additional states, your company will be able to hire the best talent available to Propel your business forward.
She spoke with PEO Insider magazine to share where she thinks the industry is headed and how NAPEO can continue to grow. Download a pdf version of the full interview: A Passion To Serve
About Propel HR. Propel HR is an IRS-certified PEO that has been a leading provider of human resources and payroll solutions for 25 years. Propel partners with small to midsized businesses to manage payroll, employee benefits, compliance and risks, and other HR functions in a way that maximizes efficiency and reduces costs.