Many organizations transitioned their employees to home offices during the pandemic. In turn, some employees redefined where their “home” office is located. There is a growing trend of employees relocating out of state to care for a family member, or to a region where the cost of living means they can buy a house, or to have an inspiring view of the ocean while writing code. The flexibility to offer remote work from home expands the potential candidate pool for employers. All of this virtual work world begs the question: Should an employer be concerned about where their employees are physically located? The answer is Yes.
Each state has its own laws and regulations impacting employment practices. This includes hiring processes (mandatory notices at time of hire), time off programs (i.e. mandatory sick time), and termination practices (final pay requirement). Depending on the workforce size, the number of new hires and employee relocations, you might find yourself easily overwhelmed trying to keep up. Or worse, find the organization is out of compliance with legal requirements. Here are key considerations to aid your organization in successfully embracing a dispersed workforce in multiple states.
Business Registration, Payroll & Benefits
Start by reviewing the state agency websites (i.e. Secretary of State) and look for business registration requirements. Typically, a company needs a state Employment Identification Number (EIN). Your payroll provider can also be a great resource to determine where a company must register, since this information is needed to file payroll taxes on the company’s behalf. Generally, an organization pays taxes in the state where the employee works. During the pandemic, some states have COVID-specific guidance or reciprocity agreements that may allow for exceptions to this rule. If there is reciprocity between the work state and the home state, the employee may be able to complete a non-residency certification exempting them from paying taxes in both states. Currently, this practice is limited to about 16 states. Don’t forget to look for state specific tax withholding forms, so taxes are withheld appropriately.
Be sure to verify the wage and hour requirements for the state, local minimum wage ordinances, overtime rules, and pay frequency requirements. Consider the benefit package offered by your organization. Are the benefits limited by a particular service area? Will employees be covered for medical services if they move from Illinois to Arizona? If the move is short-term will the carrier offer limited services? Is a new plan required? Check with the company’s benefits broker to confirm what is available under current benefit plans.
Relocation Policy, Compensation & Local Laws
Employees may not be aware that their relocation impacts the organization. Developing a relocation policy is a great way to set expectations and obligations for both the organization and the employee. Use your policy to clarify:
- the likelihood of remote work continuing, or if employees will be called back to office when COVID-19 restrictions are lifted;
- the process for employees to notify or request approval;
- the positions eligible for relocation;
- how long a temporary relocation is allowed; and
- how travel expenses will work if an employee if needed at their home office.
Examine your compensation practices. The competitive landscape of hiring an employee is an expensive job market such as Silicon Valley is very different from hiring in Bend, Oregon. This may be a consideration in setting salaries. If you plan to vary salary regionally, be strategic as adjusting an employee’s pay may cause issues of performance, team dynamics, or retention issues. Research what other employers in your industry are doing so you stay competitive.
Review state and local employment laws, and compare them to your existing policies.
- Paid parental leave. Many states now require that employers participate in paid leave insurance either through a payroll contribution or private plan.
- Employment application and hiring practices that prohibit inquiring about criminal history.
- Employment notices and posting requirements. Many poster companies now offer electronic subscriptions and will push out required notices to employees.
- E-verify is required to be used in some states (AZ and MS).
- Workers compensation. Some states are monopolistic and require organization to use the state mandated workers compensation plan (WA, ND, OH, and WY).
Engagement of employees is an important consideration for a workforce operating in multiple states. If recruiting efforts lead to hiring in a new state, consider shifting onboarding to a virtual process. There may not be a physical tour and bagels on their first day. However, arrange for a “welcome to the team” delivery on their first day, complete with snacks and swag. Assign a buddy who can assist in navigating processes and understanding norms. Remember to schedule frequent check ins and encourage participation in group meetings.
Look for ways to replace the social gatherings once held at the office. For instance, replace Friday lunches in the conference room with a Zoom lunch hour and a 0 allowance for the meal. Offer flexible schedules, encourage days off even for staycations, and get creative with virtual coffee breaks so employees stay connected to each other.
Whether remote work is temporary or part of a new norm, make sure you have a plan for your employees who work in different states. Researching the rules and engaging employees will help you navigate a multistate workforce like a pro.
About the author
Amy Valentine is an HR Consultant for the Newfront HR Services practice.
The information provided is of a general nature and an educational resource. It is not intended to provide advice or address the situation of any particular individual or entity. Any recipient shall be responsible for the use to which it puts this document. Newfront shall have no liability for the information provided. While care has been taken to produce this document, Newfront does not warrant, represent or guarantee the completeness, accuracy, adequacy, or fitness with respect to the information contained in this document. The information provided does not reflect new circumstances, or additional regulatory and legal changes. The issues addressed may have legal, financial, and health implications, and we recommend you speak to your legal, financial, and health advisors before acting on any of the information provided.
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