Did you know that more than 4 million people work remotely in the United States? After the pandemic, remote work became more desirable for employers because they realized the many benefits, including access to a wider pool of talent since the location no longer is a factor. An important thing to keep in mind is business compliance to ensure that your business stays out of any legal trouble when it comes to having remote employees.
Read on to learn more about small business compliance in relation to remote workers.
One of the trickiest things can be payroll because your employees are going to be spread all around the country. As a rule of thumb, employees have to pay taxes to the state in which they perform their work. This is called the physical presence rule, which requires the employer to withhold state and unemployment taxes in the employee’s state of residence even if your business is not located there.
Keep in mind that certain states have laws where the employee might end up being double taxed. If the employee works a few days out of state and comes in for a day or two to work in the office, it is best to get the help from tax resolution services because this makes payroll more complex.
Employers sometimes make the mistake of classifying their remote workers as independent contractors in order to reduce payroll taxes and other labor costs. The employee’s daily activities will determine if they are an employee or an independent contractor.
Different states use different tests to evaluate and determine if a worker is an independent contractor or an employee. Talking to an employment law expert in your local area will ensure that you don’t put your business in legal jeopardy.
3. Worker’s Compensation
The majority of the states in the U.S. requires companies to provide workers compensation coverage for their employees in the event that someone is injured on the job. Remote workers are a bit tricky because they are not in the office.
Remote employees are allowed to claim benefits if they are hurt, but the law will differ based on the state that they are working from. One way to stay in compliance and avoid confusion is to set clear guidelines around what their job duties are and also what their work hours are.
This will make it easier to separate work-related claims from personal claims.
4. Unemployment Insurance
When an employee is not in your home state, then you will more than likely have to register your business with the state unemployment office of where your remote worker is conducting their work from. If your business doesn’t register with that state, it can lead to penalties for not being in compliance.
Once you are registered with the other state, then you will start paying premiums for that state’s unemployment insurance.
This doesn’t apply to every location, but there are some areas that require home-based workers to obtain a home occupation permit. If a permit is required and you are paying payroll taxes in that state without the local home occupation permits, you are going to run into legal issues.
Government agencies have been auditing businesses with remote employees and sending out notices of delinquency and audit letters for remote workers that don’t obtain the proper permits to work from home. Take the time to double-check if a permit is required in the remote employee’s local county.
6. Privacy and Data Security
Adding remote employees has many benefits, but your potential avenues for cyberattacks increases because your network endpoints expand. Your business private information is exposed to unwanted activity and vulnerabilities the more remote employees you bring on your team if they are not careful about where they are accessing business data from.
For example, if they choose to work at a local café for the day, and they use the open WiFi they are exposing your information. Make sure that you put security policies in place along with clear guidelines to help prevent data loss. Also, educate yourself about cross-border data transfer laws and the legalities associated with sharing information about global customers with home workers.
7. Hybrid Employees
If you plan on having employees that work in both their home and the office, then these are considered hybrid employees. Or some employees might work from home and in another single remote location during the work week.
While many remote workers will be stationary and only work from home, if your employee will often be moving then they have to be tracked continually because of tax purposes. Make sure that you ask your new hires where they will be working from and let them know that if they change states while working for you, they must disclose this information.
You will need to create employment contracts where remote employees disclose what state they are working in. Some countries have passed new telework laws because of the pandemic, which requires specific documentation for remote employees.
Feeling Like a Business Compliance Pro?
Hopefully now you are feeling like a pro about business compliance and are feeling more confident about staying out of any legal troubles. Compliance in business doesn’t have to be overwhelming now that you have a better understanding of how to stay within regulation. Maintaining good standing when doing business in multiple states will require constant attention to changing laws.
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