hiring process

Consider This When Creating an Out-of-State Hiring Process

In a recent study, 48% of those surveyed said they will “definitely seek a remote position for their next job.” Two and a half years after the Pandemic shut down, the message is clear – remote work is here to stay. That means business owners may need to create or tighten up the hiring process for out-of-state employees.

At first glance, the remote work boom is a simple win-win: employers have more workers to choose from, and workers can live where they choose. Despite the benefits, there are tax and legal consequences of employing people who don’t live in the state where your company is located.

Payroll implications for workers out of state

When hiring employees in different states, the salary you offer is just one factor to consider. Each state has its own requirements for a number of payroll processes. Some states may require weekly pay periods for certain types of workers, while other states may allow the employer to set the pay period with some minimal standards.

In addition, state law varies on when you are obligated to pay the final check to a terminated employee – and the wage and hour regulations may differ depending on who initiated the separation. For example, if an employee in Massachusetts quits, they receive their final check on the next scheduled payday. However, if the employer fires the worker, the employer is obligated to ensure the worker is paid the same day as termination.

Minimum wage and overtime rules are two additional ways in which the various states may differ on employee wages. As an employer hiring in multiple states, you need to be aware of the different rules you may face. Speaking with an expert like a business attorney will help employers understand the specific state requirements.

Benefits required across state lines

There are some federal laws that apply regardless of where the employee is located. Federal requirements, however, may vary depending on the size of the company; for example the Family and Medical Leave Act (FMLA) applies to employers with 50 or more workers. For those employers with less than 50 employees one needs to look to the state where the employee is located to determine if the state offers similar benefits. A similar issue applies to the obligation to provide health insurance under the Affordable Care Act.

Employee benefits may also vary from state to state. At the time of this article, at least eleven states offer some form of paid family medical leave while sixteen states offer some form of paid sick leave. Even though these states offer paid family medical leave or sick time the requirements among the states can vary greatly. In the case of health insurance, you need to understand the specific health insurance requirements where your out-of-state workers reside and how you’ll provide and manage that insurance. Just because your insurance carrier can provide coverage in Massachusetts it does not mean employees can use that same carrier in another state.

And while Workers’ Compensation and Unemployment are federally mandated benefits, how you provide those benefits will vary, as each state has its own requirements to meet. Similarly, each state determines how much an Unemployment payment is and how long the payments last.

Beyond the federal mandates, employers need to know the additional benefits required in each state where they plan to hire workers. Disability insurance is not a federally-mandated benefit, but certain states require that employees offer it.

Other considerations for your cross-state hiring process

While wage laws and benefits obligations are two areas that employers need to be aware of, there are a multitude of other regulations that employers must comply with when hiring employees in other states.

Here are a few other things a company needs to consider: Do you need to register your business in that state? Do you need to pay additional taxes (income and sales tax) in that state? Do you need additional liability insurance and workman’s compensation insurance? Does the state you are entering have data security laws you need to address? Does the political landscape in that state align with company values? Hiring employees in a new state requires is much more involved than looking at just that state’s employment law.

There’s help to decode state and local employment laws

There are a lot of legal complexities to hiring workers in different states. Preparing for the challenges ahead of such hires can help you avoid tripping over legal consequences. An HR department cannot be an employment law expert in every state. Sassoon Cymrot Law can help you comply with hiring requirements and understand the potential effects of expanding your company’s reach. Contact us today.

Scott Wittlin is a business and tax attorney with significant experience in advising businesses and the business owner. Scott works with business owners in addressing the complicated tax decisions they face in both their succession and estate planning. He works with his clients to maximize their tax benefits in all facets of their business and personal lives. He also assists families with probate and estate administration.

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Sassoon Cymrot Law and Grossman & Associates have joined together into one firm under the Sassoon Cymrot Law name effective May 1, 2021.