Since remote work has become routine for businesses, managers may be leading dispersed employees who live across the country. What do employers need to do if an employee decides to move out of state? What should employers consider when hiring remote, out-of-state employees? Here are some proactive considerations:
Look before you leap
Generally, having an employee in a state is enough to be considered a “transacting business” in that state. This requires the business to register as a foreign entity and set itself up as an employer in that state. This process looks a little different in each state. Make sure to determine the required information and filings for the state the employee is moving into. Additionally, be sure to obtain any required workers’ compensation, disability, and/or unemployment insurance.
Talk to your CPA and Payroll Provider about out-of-state employees
Doing business in a new state also means complying with that state’s laws around taxes, including payroll taxes. It’s important to make the proper withholdings and deductions from employee paychecks. Out-of-state employees could also have impacts on business taxes. Some of these include the collection of state sales tax, general excise taxes, or B&O taxes.
State and Local Employment Laws
Employment law is an area that varies greatly from state to state and can even be unique to each location. For example, where Washington has its own paid sick leave law, the city of Seattle has even more protective paid sick and safety leave requirements. This is true in other states too, so be careful to ensure that you understand and account for these requirements. Requirements that will apply when hiring out-of-state employees include new hire reporting and employee rights notices and signage. Often, employers with out-of-state employees will restructure their handbooks to include state-specific items to address unique requirements. Consider which laws apply with respect to:
- Paid sick time
- Paid family and medical leave
- Meal and rest breaks
- Other leave requirements, such as paid jury duty leave
Update your employee handbook and policies to reflect any adjustments.
Consider Employee Pay
Finally, out-of-state employees may also warrant a review of their pay. The going rate may differ based on where the employee’s location. States may differ on minimum wage, exempt status salary thresholds, or simply geographical market differences in compensation.
While it’s no small effort to set up, manage, and maintain out-of-state employees properly, it certainly presents opportunities. One benefit is that you can broaden your hiring pool to a state full of potential new hires. But don’t forget that labor laws are always changing. The Equinox team can help you remain compliant and stay current on any changes that might affect your business. Learn more about our General Counsel services and take compliance worries off your plate.
Enlist help to assist with out-of-state employee compliance
You are not alone – Speak with an attorney to discuss risks involved with out-of-state employees, business health and risk assessments, reviewing employee handbooks, creating policies and procedures, and more. Contact us at 425-250-0205 or firstname.lastname@example.org.
Legal Disclaimer: This article contains general information. Do not view this article as legal advice. Talk with counsel familiar with your unique business needs before taking or refraining from any action.