Hiring remote employees opens up your talent pool, but it also opens the door to compliance challenges, onboarding headaches, and culture concerns most small businesses aren’t prepared for.
At Whirks, we help companies handle remote hiring the right way, across dozens of states, tax jurisdictions, and employee types.
In this article, you’ll learn the biggest mistakes businesses make when hiring remote workers. And we'll show you what you should do instead to stay compliant, build strong teams, and scale with confidence.
Why Remote Hiring Is a Competitive Advantage for Small Businesses
Remote work isn't a pandemic response anymore. These days, it's just how business works. What started as a forced experiment has evolved into a competitive advantage for businesses willing to hire beyond their local market.
The benefits include expanded talent pools, potential cost savings, and better employee retention. Many workers now view remote flexibility as non-negotiable. But (and this is a big but), these advantages come with strings attached.
Remote hiring expands your access to talent and gives you a competitive edge, but it also introduces new responsibilities.
What Compliance Looks Like When Hiring Across State Lines
When you hire someone in a different state, you're establishing a business presence there, which triggers legal and tax obligations.
The moment you hire someone working remotely in Kentucky, you're liable for "all things Kentucky" when it comes to payroll and payroll taxes. This includes state income tax withholding, state unemployment insurance, workers' compensation, and local taxes. Each state has different registration processes, forms, and deadlines. Some states make it relatively painless. Others... well, let's just say you'll become intimately familiar with their Department of Revenue.
Hiring a remote employee in another state makes your business responsible for that state’s payroll and tax laws.
For a detailed breakdown of the compliance steps you need to take, check out “How to Stay Compliant When Hiring Remote Workers in Another State.”
Each state has its own minimum wage requirements, and you need to comply with the state where your employee works, not where your business is headquartered. If you're based in Tennessee (minimum wage $7.25) but hire someone in Colorado (minimum wage $14.81 in 2025), you need to pay them according to Colorado law.
And it's not just minimum wage. Some states have unique overtime rules, mandatory paid sick leave, and other requirements. Let's say you hire someone in Denver, Colorado. Even if 99 of your 100-person staff work in your home office in Tennessee, you're required by law to comply with Denver's mandatory paid sick leave policy for that one remote employee.
This means your employee handbook needs to address state-specific policies, which can get complicated fast. For guidance on keeping your handbook compliant, see “What Makes a Great Employee Handbook.”
Why Remote Onboarding Requires a Different Approach
If you've only ever hired local employees, remote onboarding presents challenges you probably haven't considered. Remote onboarding requires both legal compliance and intentional culture-building to make new hires feel connected.
Legal/Compliance Onboarding
You still need to complete Form I-9 for every new hire, which requires you to physically examine their original documents proving identity and work authorization. For remote workers, this means having them physically visit your office, using an authorized representative in their home location, or utilizing approved remote verification platforms. None of these options are as simple as having someone walk into your office on day one.
Cultural/Human Onboarding
Another challenge with a newly hired remote employee is creating connection and belonging when they aren’t physically present. They won't absorb your company culture through daily interactions. You need to be intentional about welcome videos, virtual introductions, clear communication about company values, and regular check-ins during the first 30-60 days.
For strategies to make remote onboarding smoother, explore “7 Best Practices for Electronic Employee Onboarding.”
How Culture Fit Factors In for Remote Employees
Remote work amplifies cultural mismatches. When someone works in your office, you can course-correct issues through casual conversations. Remote workers don't have that same ambient awareness about how things work at your company.
Remote work exposes cultural misalignments, so clear communication and documentation are critical for success.
Before hiring remotely, ask yourself: Does your company culture lean toward synchronous (meetings, calls) or asynchronous (email, Slack) communication? Are you prepared to provide clear documentation for remote workers who can't just walk over to someone's desk with questions?
Small business owners consistently emphasize this point: "Don't just look at cost savings, look at culture fit. Successful remote work hinges on everyone being aligned and informed."
How to Set Clear Expectations for Remote Productivity
Many business owners worry about productivity when employees work remotely. Contrary to what some believe, remote work doesn't inherently make people less productive. But it does require different management approaches.
You must clearly define what success looks like, how it’s measured, and how remote employees should communicate. Vague expectations that work fine in an office may cause confusion with remote teams.
Costs Most Owners Overlook when Hiring Remote Employees
Yes, remote work can save money. But it also comes with costs that aren't always obvious upfront.
Remote hiring comes with hidden costs like multi-state compliance, legal fees, and system upgrades that add up fast.
Managing payroll across multiple states requires more tracking, reporting, and attention to detail. You'll need to stay current on changing regulations in every state, file tax returns in multiple jurisdictions, track different paid leave accruals, and manage workers' compensation across state lines. Some businesses underestimate this burden and end up spending more on compliance than they saved by hiring remotely.
Your current payroll system might not handle multi-state payroll efficiently. You may need to upgrade or pay for specialized services. You'll also likely need tax professionals, employment attorneys, or HR specialists. These professional fees can add up quickly.
Beyond payroll compliance, you might also need to consider business licensing requirements in new states, income tax nexus (yes, having an employee in a state can trigger corporate income tax obligations), data security laws that vary by state, and industry-specific regulations.
If you're starting to hire people all over the country, you might wake up one day with 20 people in 15 different states, wondering why your payroll and HR fees have tripled.
What Makes Remote Hiring Successful for Small Businesses
Despite all these challenges, thousands of small businesses successfully hire remote employees every day. The key is going in with your eyes wide open.
Here's what actually helps:
- Partner with experts who know multi-state compliance. Unless you want to become an expert on 50 different state tax systems, outsourcing payroll and HR compliance to a provider with multi-state experience is critically important.
- Invest in good onboarding systems. Electronic onboarding platforms that integrate with your payroll system can eliminate hours of manual work. Check out, “How Electronic Onboarding Saves Time and Headaches for Small Businesses” for more on this.
- Be proactive about culture. Don't assume remote workers will naturally absorb your company values. Use welcome videos, clear documentation, and regular communication. “How Small Businesses Can Improve Engagement With Remote Workers” offers insights into building inclusive remote cultures.
- Do your homework before sending that offer letter. Research the specific state's requirements, understand the true costs, and make sure your systems can handle the complexity before committing.
Partnering with experts and building the right systems upfront sets you up for remote hiring success.
What to Keep in Mind Before You Hire Remote Employees
Remote work is more common than ever, and today's top candidates expect flexibility. Businesses that offer remote options position themselves to attract better talent and gain a competitive edge.
But this flexibility does come with complexity. From compliance requirements to onboarding hurdles, culture fit issues, and hidden administrative costs, remote hiring demands preparation and strategy.
Now that you know what to watch out for, you don’t have to figure it all out alone. Working with experienced professionals can help you stay compliant, onboard effectively, and build remote teams that thrive.
At Whirks, we help small businesses across the country manage multi-state payroll, HR compliance, and remote onboarding, allowing you to focus on growing your business.
Remote work offers huge advantages, but only when you’re prepared to handle the compliance, cultural, and onboarding complexities.
Ready to make remote hiring work for you? Explore our HR services, and let’s talk about how we can help.
