As you grow your business, you may find that with growth comes the need to expand geographically. Maybe you've decided it's finally time to open up that office in California, or maybe you've discovered that it's easier to recruit talent if you're willing to hire remote workers.
Although these are exciting times, it’s crucial to remember the compliance aspects of growth. When you begin to expand your business, particularly concerning hiring remote workers and doing business in multiple states, there are plenty of compliance pitfalls you’ll want to avoid. While the United States is one country, each state is its own legal domain, and state employment laws vary.
We've built a helpful guide on hiring remote workers — and staying compliant while doing so. Download the Quick Guide to Hiring Remote Employees here.
The legal requirements for conducting business vary on a state-by-state basis, but generally speaking, if you have an employee who performs work for you in a state, you'll need to make sure you're in compliance with state laws.
If you do plan to open a new office or hire a remote worker in a new state, there are some basic steps you’ll need to follow. This post is not an exhaustive list, but simply an overview to get you started. Laws vary from state to state and different requirements may apply based on your particular business. Consulting with an attorney is always the best way to know you’re doing things right.
Learn how to hire and manage employees in a new state.
Registration & Licensing Requirements
Before you grow your business in a new state, check business registration and licensing requirements, if applicable.
Determine whether you need a state or local tax ID by researching applicable state and local laws regarding income taxes and employment taxes. You may also want to familiarize yourself with the applicable reporting forms.
You’ll also want to obtain any required insurance. Again, these requirements vary from state to state, but here are some examples of policies you may need:
- Workers’ compensation — Not required in certain states such as Texas
- State statutory disability insurance — Required in California, Hawaii, New Jersey, New York, Rhode Island, and Puerto Rico
- Unemployment insurance — Varies by state, and you may need to register with your state workforce agency
Important Info for Hiring a Remote Employee
There are a few specific compliance regulations tied directly to hiring an employee in a new state. Let’s break it down.
Consider finding a company that can help you manage processing payroll. For example, Justworks is authorized to operate as a Professional Employer Organization (PEO) in all 50 states and D.C., and can help companies with respect to payroll.
Paying State Taxes
Different states, and some local governments, have different requirements, like disability insurance or commuter benefits. If you use a PEO, they'll be able to secure all the different policies for you and make sure you have everything you need.
New Hire Reporting
Last but not least, you need to report your new hires to the state. State and federal laws require employers to report basic information on new and rehired employees within 20 days of hire, though some states require it sooner. Find the applicable new state hire reporting website to get the most up-to-date requirements.
A Quick Note on State Employment Laws
When you expand your business to a different state, you have to operate under that state’s rules. If, for example, they mandate that vacation be paid out when an employee leaves, you have to pay it out, even if that requirement differs from the laws in your own state. Some states have different paid and unpaid leave laws, too, such as the New York Paid Family Benefits Leave Law (PFLBL).
Justworks Can Help
When you find talent that you want to hire, you should hire them. However, it will definitely pose some additional challenges.
Because each state has its own employment laws, it is helpful to consult with legal counsel to help you comply with all applicable employment laws. If you're a Justworks customer, our HR support team can help you adapt your policies.
While you can handle many of these compliance regulations on your own, it can be helpful to work with a provider familiar with payroll and compliance in multiple states. Justworks operates in all 50 states and D.C., and specializes in taking care of many of these crucial items for you — such as withholding, reporting, and remitting payroll taxes, and obtaining workers’ comp and state unemployment insurance.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.