Remote Employees and the Regulatory Implications for Your Business
Now more than ever, businesses are employing workforces comprised of remote employees. Whether by choice or by necessity, the decreasing reliance on in-person office workers is allowing businesses to become more nimble than ever before; talent pools are no longer subject to geographic restrictions, expenditures for the lease of brick-and-mortar offices can be reduced or avoided altogether, and the headaches associated with a commuting workforce – traffic, automobile problems, travel subsidies – are no longer an issue. Helping to speed this remote worker culture along are advancements in virtual meeting platforms which allow teams to meet, share files, and communicate efficiently and on-demand, no matter their physical location. With the growing potential for a team of employees to be spread across multiple states and even countries, it is important to be aware of the regulatory liabilities that a business of remote workers may incur.
Different countries have different laws governing payroll, benefits, and insurance requirements with which businesses hiring citizens of those countries must comply. Most countries require foreign businesses to maintain some sort of registration with their government in order to employ their citizens. A business may choose to register as a foreign corporation within a country, utilize a PEO (Professional Employer Organization) to act as an outsourcer of payroll requirements, or employ foreign citizens as remote independent contractors, though the latter may still require some legal maneuvering on the part of the business and the employee.
At the State Level
The presence of a remote W-2 employee within a state may, depending on the activity carried out by that employee, require a business to ‘foreign qualify’ with the secretary of state even if the business has no actual operations hub there. Typically, the liability for state level registrations and licenses for businesses with remote employees comes down to determining if the activities of the business fall into the state’s definition of “doing business” within its borders. At any rate, state payroll taxes will most likely become a registration requirement for businesses upon the hire of a remote employee there.
Counties, cities, towns, and even school districts may uphold their own regulations related to employees working from home within their jurisdictions. Again, depending often on actual employee activity, businesses may be subject to local business ordinances including home occupation permits, business licenses, earned income taxes and local payroll taxes. A few notable examples of localities requiring business licenses for businesses with certain types of remote W-2 employees are Seattle, San Diego, and Pittsburgh.
To avoid legal issues, fines, and penalties associated with delinquent filings, it is important to understand the regulations imposed by the governing body of every jurisdiction in which your business has a footprint, even one as seemingly negligible as having a remote employee working there. LicenseLogix can assess your license portfolio to make sure your business is complying with the laws of every jurisdiction where you operate, as well as save you time by handling any missing filings on your behalf. Contact us for a consultation today.