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Opening an Office in Another State? Ask Yourself These 7 Questions

If the market seems right and the resources seem available, most growth-minded business owners like you would explore expanding operations into a new state, given the chance.

But at the same time, you’re not new to the challenges of being an entrepreneur. You know that strategic decisions involve a lot more than market readiness and your access to capital. You’ve learned to pay attention to every little detail, because small oversights can easily turn into big problems that threaten the stability of your business down the road.

If you believe that your employees are one of your greatest assets, you know you must consider several HR aspects before opening an office in another state. Use these seven questions to help you consider the people strategy you would need to make your growth plans a reality.

1. How would expanding change my total employee count?

If you’re opening an office in a new state, you’re going to hire new employees. Right? When you do, you have to think about how that expansion will impact the size of your business as a whole. As your business grows, usually, so does your number of employees.

A change in size can mean a change in your requirements under many federal laws.

For example, once you have 50 or more employees within a 75-mile radius, you must let eligible employees take job-protected leave under the Family and Medical Leave Act (FMLA).

Another example is the employer mandate under the Affordable Care Act (ACA), which goes into effect once companies have 50 or more full-time equivalent employees (FTE).

And once your company employs more than 100 employees, you’re legally obligated to send workforce data to the Equal Employment Opportunity Commission (EEOC) in an EEO-1 report (although there are a few cases, too, where companies with less than 100 employees must file).

If your numbers are growing as a business (in-state or out-of-state), chances are high that your legal obligations are, too. Don’t fail to plan accordingly.

2. What are the new state and local laws?

Of course, you’ll have to expand your awareness to all the additional state and local employment laws to which you’d be subject in your new location.

Because municipalities are more nimble and can enact laws faster, you’ll find that cities often have their own set of laws for employers. This can add a lot of complexity to your ability to comply with employment laws across locations.

Some states (like Massachusetts, New Jersey, Washington, Oregon and California) have more employment laws to follow than others.

But no matter what, it can be tough to stay on top of them all without an HR staff person dedicated to employment law compliance or a reliable outsource provider.

Here’s a long (but far from complete) list of the laws and requirements that can vary from state-to-state:

  • Minimum wage
  • Overtime calculation
  • Recordkeeping
  • Anti-harassment training
  • Unpaid leave of absences (for things like voting and donating blood)
  • Rest, meal, and/or lactation breaks
  • Paid sick leave
  • Drug testing
  • Payroll tax
  • Paycheck delivery
  • Filing fees
  • Employment benefits
  • COBRA continuation

3. What is the operational impact?

Because of new state and local laws, everything you do operationally could be different in your new location. Are you prepared to re-establish each and every policy and process you have as a business in order to operate in a new state?

The ways you comply with new laws should all go into your employee handbook. Some companies create different versions of their handbook for each state they’re in. Others create an all-inclusive employee handbook that covers the differences. Whichever way you go, know that you can’t just hand new employees your old handbook. You must document your policies according to the new legal environment.

4. How will we establish good communication between locations?

While your employee handbook is one essential way to convey your expectations with employees in a new state, your communication plan shouldn’t stop there.

How will you make everyone feel connected across all states? Will you face the challenge of working in different time zones? What tools (e.g., video conferencing platforms, etc.) could you use to collaborate?

Employees in new locations often end up feeling isolated from the home office. But your investment in a new office would be too great to let this happen. To get maximum discretionary effort from your new employees, they must feel totally integrated. Have a game plan for establishing regular communication between your old locations and new.

5. How much do comparable employee health benefits cost?

If you offer health benefits to your employees, you’ll want to shop for the same or a similar plan in your new state early in the process. You don’t want your health benefits to appear better in one place than another. For example, would you have to choose a plan with a higher deductible or a narrower network of providers to keep premiums the same?  Depending upon the benefit plan you offer, you may not be able to provide the same plan from one state to another. Perhaps the best you can do is find a similar plan. You should find out what it would cost to offer a plan with comparable features. This information will help inform your hiring decisions at the new location.

6. How will we hire and onboard the new employees?

Knowing how employment laws affect you based on your size and location gives you good information on which to build your hiring strategy. Next, ask yourself: How many people do I need to hire? What role will they play? How will they service my customers or clients? Should I outsource payroll and benefits or is my current payroll person equipped to handle the payroll for the new location? Should I conduct interviews at the main office or in the new office or at both places? Will any current employees need to transfer to the new location – temporarily or permanently?

7. How can we keep company culture consistent?

Adding locations (and thus diversity) comes with the challenge of keeping your company culture consistent. Not only do your policies, processes and benefits have to be compliant with the new setting, they have to make sense and resonate with your new employees.

Consistent doesn’t always mean exactly the same. If you offer a fun perk to employees in one state, do offer a similar perk elsewhere, but make sure it’s something that a group of employees will actually be excited about. For example, major league baseball tickets may work as a reward at the home office, but not in your other locations because there’s not an MLB team. Make sure you find an adequate replacement that keeps the spirit of the reward the same.

Are you on your way to building the business you’ve always dreamed about? Learn how to dodge HR mishaps that can get in the way of your company’s success. Download our free e-book, 7 Most Frequent HR Mistakes and How to Avoid Them.

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