Expanding your team across state lines by hiring remote employees is a smart business strategy for many companies.
For example, hiring home-based customer service reps in other states and time zones could help you provide longer support hours to your clients. Adding remote sales staff in new states could help significantly increase your revenue.
Or, maybe, you’re looking to hire employees with specialized skills. Accepting applicants from other states who would work remotely makes your pool of potential candidates much bigger.
Whatever the case, staying compliant with labor laws when hiring remote employees in a new state can be challenging.
It’s essential to know what you’re getting into before you start recruiting candidates in states outside of your current operations. Here are the top three HR factors to consider.
1. Know the right way to pay your employees
In the event of a Department of Labor (DOL) audit, you have to make sure you’re paying your employees properly from the get-go. This is the number one thing to consider before hiring remote employees in a new state.
What does this entail? You and your payroll provider should know:
- What is the minimum wage in the new state?
- What is the minimum wage in the city and/or county in which the employees will work?
- What information must appear on the employees’ paystubs, i.e., paid sick leave accruals?
- What are the payday (frequency) requirements?
- What are the rules concerning paycheck delivery?
- Are there any payroll deduction regulations?
- Are the rules for calculating overtime in this state different from the federal regulations (including the new white-collar overtime exemption requirements)?
- How do we calculate payroll taxes in this state?
Make sure your payroll provider is set up from day one to pay your out-of-state employees according to the rules, or consider outsourcing payroll to a provider accustomed to working in the new state(s). Verify the provider’s experience by asking how many other clients they have in your states of interest, and get some references out of that pool of clients to speak with, if possible.
2. Know the state-specific labor laws and regulations
Beyond pay, there are many other regulations governing employment in each state. Employees (and the state’s DOL) require you to abide by the local laws, even if your main office is based elsewhere.
These state-specific regulations may govern:
- Rest, meal and/or lactation breaks and days of rest
- Signage and notices to employees
- Anti-harassment and anti-discrimination practices
- Hiring with regard to a candidate’s criminal record
- Unpaid leave of absences
- Paid sick time
- Employment paperwork
- Workers’ compensation insurance
- Drug testing
- Employment benefits, including but not limited to, provision of health care
- COBRA continuation
Many cities and counties have employment regulations among these categories, as well, so it’s important to research laws all the way down to the hyper-local level.
3. Know how you will stay on top of regulatory changes
Before you take on the complexity of employing workers in multiple states, you should have a plan for how you’ll stay compliant with each state’s unique set of laws.
Are you going to take on the responsibility of researching all of the regulations yourself? This would involve hours of reading websites and newsletters focused on employment law in the states you’re hiring in and would require you to come up with your own solutions to any regulatory changes. This also means you’ll need a system for monitoring those changes after the initial set-up.
Another option is to hire employment law attorneys who know the rules for the states where you’re considering hiring employees. They would help you understand all the rules initially and you could request that they keep you informed of any new legislation that might affect the way you do business.
A third option is to outsource certain administrative tasks related to your human capital by joining a professional employer organization (PEO) that would assist in government compliance for you at the federal, state and local level, among other HR tasks.
Looking for an easier way to stay in compliance with ever-changing federal and state regulations? Download our complimentary e-book: HR outsourcing: A step-by-step guide to professional employer organizations (PEOs).