Work from home had become the latest trend and was being practiced many of the companies in the United States. There were approx. 3.9 million Americans who were already working remotely. COVID 19 lockdown has forced almost every company around the world to start work from home for their employees. It is now also being looked upon as a social experiment by some business professionals as work from home has many benefits for businesses such as access to a wider range of employee talent regardless of location, reduced employee turnover, and cost savings.
But work from home may look innocuous as but brings with it a massive dose of compliance requirements. These can impact everything from business taxes to compensation of workers. Unfortunately, such considerations sometimes come as a surprise to employers who don’t have an HR department or lack an understanding of the execution of having remote employees.
Here we have listed some points you need to know about maintaining compliance with the laws and regulations that govern remote employees.
Requirements of Payroll
If your employees work remotely, in some other state, where do they withhold taxes? According to the physical presence rule, employees pay taxes to the state in which work is performed. For example, if the headquarter of your company is in state A but the remote employee is working from home in state B, as per the rule, you have to withhold unemployment and state taxes in state B, even if you don’t have physical office there.
But some states have different law. This means that employees are subject to income in both the states, the state in which they reside and also the state in which the employer operates. In case an employee works for few days from home and comes to office on the rest of the days in a week, in such complex cases you should take advice of a tax expert because of the complexity of this issue.
When working remotely, the frequency of interaction of employees with colleagues and supervisors tend to decline, which can also lead to the situation where work of an employee becomes less visible. To address these challenges, schedule regular meetings between remote employees, encourage video conferencing, highlight and acknowledge their work.
Other State Qualification
If you have a limited liability firm or a corporation, and you have employees working in a state other than the state the company was established, then depending on the type of business and the work that is performed by your employee and how many remote employees are in that particular state, you may need to qualify your limited liability company or corporation in that state.
Other state qualification also known as foreign qualification is the process of applying for authority to do business in the state other than the one in which the corporation or limited liability company was formed. You might require to qualify weather you have a physical presence in the foreign state or if you routinely accept orders or execute contracts there. In addition, after getting qualified the limited liability company or corporation will have other compliance obligations such as having to specify and maintain a registered agent and file an annual report. A registered agent is an individual or a corporation with a physical address in the state who can receive legal documents on behalf of your organization.
Remote Employee Permits
Most of the municipalities require home occupation permit for the home-based employees. Despite the fact that they are not technically operating a business out of the home, as more the work is done off-site, more the independence remote employees get, the lined become blurred. Check with the local city or county zoning employee laws to see if permit is needed.
The term “Tax Nexus” is often used to depict a situation when a business has a tax presence or is doing business in a state other than its primary physical location. Relying on what your out-of-state employees are doing, your business might become subject to the sales, income, or other tax laws of that state. It is best to discuss with your tax advisors to be sure.
Data Security and Privacy
As you include remote workers to your workforce, your network endpoints and potential chances for cyber-attacks increase. Mobile devices, wireless networks, and even inadvertent disclosure of data in public spaces all expose your firm to unwanted susceptibility. Make sure that you have security policies and guidelines in proper place to prevent loss of data. Educate yourself on cross-border data transfer laws and the implications of sharing information about worldwide customers with work from home employees.
Majority of the states need businesses to provide worker’s compensation coverage for their employees. But what if a remote employee is injured on-the-job? In most of the cases, they can claim benefits but laws on what constitutes a work-related injury differ in every state. To avoid any type of confusion, set clear guidelines around the duties of the job and working hours of your remote employees so that you can easily separate work-related claims.
The present COVID-19 public health crisis has left many organizations and employees scrambling to figure out the best method to work remotely and solve the challenges related to setting up remote working. But with open communication, trust, and clearly set expectations, working from home can actually be incredibly rewarding and productive. It will also provide a clear picture of the future possibilities on remote work culture.