Many employees have the option to work anywhere, at any time. While there are many advantages, remote workers present new challenges for your payroll team. Here’s what you need to know.
By now, employers understand the value of remote work and how it benefits employees as well as their businesses. According to a McKinsey study, nearly 60% of employees can work remotely at least part of the time. That means employers are managing remote workers in different states and even other countries on their payrolls.
The advent of remote work also presents advantages for employers. One of these is the ability to tap into a wider pool of available talent, resulting in more productive, engaged, and satisfied employees. Allowing employees to work from home leads to significant cost-savings, such as eliminating rent expenses for office space and the option to explore more affordable alternatives like coworking spaces.
While it can be a win-win for employers and workers alike, remote workers also expose employers to a new set of issues.
A few examples of state-specific mandates include:
Paid Leave. Earlier this year, the Department of Labor (DOL) issued new guidance regarding the Family and Medical Leave Act (FMLA) and eligibility requirements for remote workers. While remote workers are eligible for FMLA on the same basis as in-office workers, employers must use the remote worksite location - where the employee reports or assignments are made - as their primary address.
Minimum Wage and Overtime. Although a basic minimum wage is established by federal law and the Fair Labor Standards Act (FLSA), wage and hour laws vary depending on the state. Some cities even have different minimum wage standards. When hiring remote employees, it can be more challenging to keep track of locations, wage requirements, and overtime hours.
Pay Statement Requirements and Pay Rules. State and local laws also vary regarding pay, such as the information that must appear on paystubs, requirements for pay frequency, and vacation and final wages paid upon termination.
Calculating Remote Compensation. Pay can also be an issue. Determining fair compensation for remote employees can be challenging due to disparities in the cost of living and regional pay scales.
As the remote work landscape continues to evolve, businesses must adopt a forward-thinking approach to payroll. Future-proofing payroll processes involves staying ahead of regulatory changes, leveraging technologies, and maintaining open lines of communication with remote employees. Employers can prepare by implementing the following:
Stay Up to Date with Multi-state Payroll Laws. Understand the laws in the states where your remote employees are working. Your business may be required to establish an official entity in that state, have compliance obligations, and be required to file a business tax return. Also, review guidance provided by the Department of Labor Localization of Work Provisions - Principles for Determining Where Wages Should Be Reported When Work is Performed Entirely in One State or in a Number of Different States.
Keep Accurate Records. Maintain accurate records, including home and worksite addresses for remote workers, to ensure compliance with local minimum wage requirements.
Allowing employees to work from anywhere may create new legal and tax obligations and payroll issues for employers. To navigate multi-state tax and compliance issues, it's important to invest in a payroll system that can adapt to different regulatory frameworks and engage experts, such as an IRS-certified PEO like Propel HR, who have a thorough understanding of the intricacies of payroll, HR, compliance and benefits.
➡️➡️Read more about topics related to small business payroll:
01_Small Business Payroll: In-house vs Outsourcing
02_Most Common Payroll Mistakes (and How to Avoid Them)
03_Important Year-end Payroll Tasks to Take Care of Now
04_The Importance of Accurate Record Keeping for Small Business Payroll
PLEASE NOTE: This information is for general reference purposes only. Because laws and regulations are constantly changing, please check with the appropriate organizations or government agencies for the latest information and consult your employment attorney and/or benefits advisor regarding your responsibilities. In addition, your company may be exempt from certain requirements and/or be subject to different requirements under the laws of your state.
About Propel HR. Propel HR is an IRS-certified PEO that has been a leading provider of human resources and payroll solutions for more than 25 years. Propel partners with small to mid-sized businesses to manage payroll, employee benefits, compliance and risks, and other HR functions in a way that maximizes efficiency and reduces costs. For more information, visit www.propelhr.com.