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Hiring a Remote Worker in a Different State? Here's What YOU Need to Know

June 23rd, 2023 | 2 min. read

By Mike Shaeffer

First off, congratulations on hiring a new employee! This is an exciting time for any business owner as each new addition brings a fresh perspective, additional skills, and an eager excitement to the team. However, if your new hire works in or lives in a state where you are not currently operating, he or she also brings additional compliance concerns that need to be addressed. In this article, we will explore some key aspects you should consider to ensure legal and regulatory compliance while maintaining a positive and productive relationship with your new hire. 

Wondering which states you should avoid hiring in? Check out this article about The 5 Worst States to Hire From 

Understanding State Laws for Remote Workers

When hiring an employee who lives and works in a different state, it is crucial to familiarize yourself with that state’s labor laws. A couple of common items to be aware of are the state’s minimum wage rules, overtime pay requirements, and paid leave policies. You need to ensure you understand these rules and how they may differ from the states you currently operate in. For example, the state minimum wage in Tennessee (where we are headquartered) is different from the minimum wage in our neighboring state, Arkansas. I can’t hire a minimum wage employee remotely working in Arkansas and pay them the Tennessee rate. Moreover, many states are passing mandatory paid leave policies that require employers to comply with certain thresholds for providing employees additional paid leave. 

Tax Implications for remote workers 

You may need to register your business with the state’s taxing authorities, withhold income tax from the employee’s wages, and file additional tax returns. Ultimately, familiarizing yourself with the state’s tax laws and requirements is going to be needed, and it may make sense to consult with a tax professional to make sure everything has been appropriately thought through. 

Employment Eligibility Verification for Remote Workers

Verifying the employment eligibility of your new remote hire is just as important as it is with any on-site personnel. The U.S. Citizenship and Immigration Services (USCIS) requires employers to complete Form I-9 for all employees, regardless of location. Many states also require that you put the new hire through the e-Verify system to ensure employee eligibility. Failing to abide by the appropriate federal and state laws can result in significant fines and penalties.  

Remote Work Policies 

What does your current handbook say about remote workers? Clearly defining a remote work policy and expectations will pay dividends down the road. You need to be clear on topics like working hours, communication channels, data security, and equipment usage. You also need to communicate the employee’s rights and responsibilities to ensure they are aligned with your company's overall policies. 

Payroll and Compensation 

Apart from state requirements on wage and hour laws, it may also be appropriate to consider the salary requirements of a remote worker that is living in an area with a significantly different cost of living situation than where the company is headquartered. While best done before a new hire is brought on board, considering these topics will inform and direct future compensation conversations. For example, should an employee living in Manhattan receive the same pay as a worker living in rural Arkansas with all other things being equal? Many people have differing philosophies on this topic and nailing down how your organization thinks about how location impacts compensation will be time well spent. 

While there are many compliance issues to address with remote work, hiring an employee should be a fun, exciting time for any organization! Regardless if the person is on-site or working remotely, do not forget to celebrate their onboarding with their team, and make a big deal about the impact he or she will make on your organization! 

Want to learn more about best practices for remote workers? Check out this blog on how to set up payroll taxes for remote employees.  Want to talk to a real live human being about all this? So would we!