Managing multistate HR and payroll compliance for today’s remote workforce

A little more than three years ago, everything changed about the way we live and work.

One day, we were talking face-to-face with our friends and family. The next day, we were six feet apart. Masks quickly became a staple of our everyday lives. And the idea of going to restaurants, schools and stores suddenly became more of a fantasy than a reality.

Additionally, there was a massive shift in the way we work. The COVID-19 pandemic rattled everything we knew about our jobs – not only the location from which most of us worked, but also the way we communicated with coworkers, the use of technology to do our jobs, and many other aspects, including the way we attract, hire and retain employees.

These changes were presented as short-term realities at the time, although we now realize that many of these adjustments are here to stay – or, at the very least, they are going to stick around for longer than we originally expected.

While the idea of working remotely existed prior to the arrival of COVID-19, the pandemic certainly brought the concept front and center for many employers as it emerged as a national issue. It quickly became obvious that the way we work was changing and that companies were going to have to swiftly adapt to keep up.

The HR and payroll perspective

One of the most significant shakeups to the way we work has taken place within the human resources and payroll departments of companies, both large and small, throughout the U.S.

In the spring of 2020, organizations had to quickly figure out how to interview applicants without meeting them in person. As a result, HR was screening a pool of applicants from different states, including locations that in many cases had never been on their hiring radar previously.

Of course, multistate employment has always existed – particularly at larger companies with many locations – but starting three years ago, an even larger number of organizations found themselves discussing the possibility and practicality of remote work in other states. Companies began recruiting outside of their immediate geographic regions for positions that could be performed from an alternate location. Existing employees who could or were required to work from home, began setting up their offices and in some cases, changing their addresses. Needless to say, internal changes needed to be made to support this multi-location workforce.

The idea that an organization in Florida can simply hire a remote worker from California isn’t so simple. It’s easy to say, “You’ve got the job.” But it’s not so basic, from an HR benefits and payroll perspective, to quickly add an employee from across the country.

There is a lengthy list of complications within those key areas, and until recently, there was no centralized resource for finding information about HR and payroll compliance for all 50 states.

What HR and payroll professionals need to know

At the start of the pandemic, companies were reactive to the challenges that emerged on almost a daily basis. The shift in how we worked arrived seemingly overnight, and HR and payroll leaders had to figure out multistate compliance issues in a hurry. This overnight shift was more than three years ago and organizations must now take proactive steps to ensure they are prepared to hire employees from multiple states.

That means HR and payroll professionals need to have easy access to the employment rules and regulations that apply in every state from coast to coast. They need to be prepared for a potential hire in California, Florida, New York and everywhere in between. Of course, that doesn’t mean that organizations should not hire people from other states; rather, they just need to be prepared for the possibility and the potential impact upon their compliance requirements, because if they don’t the cost for noncompliance can be staggering.

Key HR multistate compliance considerations include:

• General employment requirements
• Benefits
• Equal employment opportunity
• HR administration
• Leave of absence/time off
• Wage and hour
• Unemployment compensation

Additionally, from a payroll perspective, there is a need to understand state and local regulations concerning:

• Tax and withholding
• Registrations
• Required tax forms
• Unemployment insurance
• Workers’ compensation

Digging deeper into a couple of specific examples, HR leaders need to understand each state’s specific regulations around leave (parental leave, personal leave, paid family leave, etc.). And they need to know whether pre-employment testing is permissible for new hires in their organizations. 

Payroll departments must understand what is required of employers in terms of filings, payments and rules for employees who work out-of-state. Who needs to be reported and who is exempt? When and how do they need to file? What local or other taxes need to be considered in addition to federal and state taxes? There are typically no uniform rules for all 50 states. Regulations can vary significantly, and there is generally no flexibility when payroll rules are violated or misinterpreted.

Introducing Baker Tilly’s Employer State Compliance Roadmap

Given the major changes to the way we work, and the hiring landscape in particular, Baker Tilly is proud to introduce our Employer State Compliance Roadmap. The Roadmap provides access to HR and payroll compliance information through an easily accessible and searchable state-by-state database, bringing everything together in one convenient location. Through quarterly updates, organizations will be kept informed of HR and payroll regulatory changes across all 50 states.

We want organizations to feel confident hiring and onboarding qualified candidates in any state – without struggling to understand confusing regulations or worrying about notices, penalties, interest and audits because of inadvertent mistakes.

The Roadmap will save you time, energy and money. It will help your organization adapt to the new way of working and be strategic in your decisions on where to recruit and hire new employees. It will keep you compliant and avoid fines and penalties.

For more information about the Roadmap, click here. And to discuss how it can change the way you work, contact us.