Employers are continuing to evolve with the pandemic and trying to find new ways to attract and retain employees. During this difficult time, employers are faced with a tight labor market, so the question arises: do we allow our workers to work out of state?
While the initial thought might be “Yes! That is a great idea! We keep our best employees!” Many employers think, it’s not a big deal because the work being done is for a Colorado based company; yet there is more to consider than just setting up the employee with equipment and business as usual.
In most cases, the state where the employee resides, is the state that the employer’s liability will fall. Most states have a new employer page which helps guide employers through some of these considerations, but they may not include everything.
Before telling a great employee that they can move or hiring an out of state employee, employers should consider the following:
Register as a Business Entity in the State the Employee Resides
Identify if you need to register with the Secretary of State first to do business within the state in order to pay an employee in that state.
Workers Compensation Insurance
State of Colorado does not have reciprocity with other states. The employer may have to register with the state to set up a policy within that state. Or depending on workers compensation carrier you may be able to add that coverage with your current provider
The employer will need to register for an unemployment account to ensure that the premiums are paid to the correct state for that employee. Also, identify who is responsible for paying those expenses on time to not avoid late penalties.
Set up an account to report and pay state income tax. Identify who is going to perform the payments/filings in that state. Also check to see if any township or city has special income tax or other local taxes that may apply.
Identify the state’s mandatory postings, wage and hour laws, paid leave, vacation, termination rules. All of these will have to be considered when an employee is in another state
Contact your health insurance provider to ensure your coverage is national so your employees can access benefits. Also, identify if there are any regulations within the state for employers to provide health insurance or participate in a state retirement plan
Remote Work Policy
Do you have your remote work policy ready to roll out? It should include verbiage around hours of operation and the expectations for what time zone the employee will work under since the business may be different from their own.
While this is a good starting point for businesses, this list is not all inclusive. There may be other considerations with different payroll laws or regulations that we need to consider as well. This is a big decision for employers and a lot of administrative work to add to a small business. If you are considering this, please contact StaffScapes for assistance as soon as possible.