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Remote Team Payroll: Common Challenges, Surefire Solutions

Processing payroll for remote teams can be tricky, especially when your employees live out of state. And as employers embrace flexible work, these arrangements are becoming more common. As a result, an increasing number of businesses find themselves struggling to master the complexities of remote team payroll.

The key is to get out in front of these common payroll challenges—by implementing our surefire solutions.

Challenge 1: Juggling Multi-state Payroll Taxes for Remote Employees

As you know, employers are legally required to withhold federal and state income taxes from employees’ paychecks, along with FICA contributions and state unemployment taxes.

That’s pretty straightforward when everyone works onsite and in-state. But when employees live and work out-of-state, employers are obligated to collect and pay taxes in each worker’s home state—and state income tax varies widely.

Some states don’t have an income tax. Others use a flat rate. And still others use a graduated rate. In addition, some have reciprocal agreements with neighboring states that govern where taxes are paid.

To top it all off, employers must register with each state’s tax agency and possibly their unemployment agency, too. Even with just a few out-of-state employees, it’s a lot to manage.

Challenge 2: Maintaining Multi-state Compliance for Remote Team Payroll

Managing payroll tax for remote jobs isn’t the only challenge. Payroll compliance regs regarding minimum wage and overtime rules obviously vary from state to state. Think you’re off the hook because you don’t employ nonexempt workers? Think again!

Each state has its own paid and unpaid leave statutes—plus, provisions on vested vacation pay. No employer wants to face wage and hour litigation because one outlier payroll rule fell off its radar.

Challenge 3: Observing Statutory Pay Frequency Regs

Employing a consistent pay frequency streamlines payroll operations. However, some states’ payday laws may require that employers process payroll for remote employees on a different schedule than its home-based team.

For example, an employer may process payroll semi-monthly—the minimum its home state requires. However, payroll for remote employees out-of-state may need to be paid bi-weekly instead. In some states, like California and Michigan, pay frequency varies by occupation—and some employees must be paid weekly. There goes your simple payroll schedule!

Solutions for Managing Remote Team Payroll Smoothly

When it comes to processing payroll for remote employees, there are multiple moving parts. But there are also proven strategies for staying on top of them all—and knowing what they are is half the battle:  

Make Sure Remote Employees Stay Connected

Make it your remote employees’ responsibility to keep you apprised of a change of address. Add a remote work section to your employee handbook; cover it during onboarding.

No employee wants tax problems. Once you explain the implications of payroll taxes for remote employees, workers will want to keep you in the loop.

Set Boundaries on Where Your Workforce Can Live

If your business doesn’t want to register with tax agencies in various states, it can set boundaries. According to the Society of Human Resource Management (SHRM), it’s appropriate for employers to define a geographic scope for their workforce—and to specify this in job offers and other communications.

Leverage Advanced Payroll Technology

One of the hallmarks of robust payroll technology is its ability to simplify and automate complex calculations. If you’re processing remote team payroll in multiple states, insist on payroll software that will automatically apply state-specific regulations, saving countless hours and keeping you compliant.

Designate a Payroll Compliance Champion

For most employers, processing payroll is one of their weightiest responsibilities—before adding payroll tax for remote employees to the mix. Whether you designate an in-house champion or use a professional service, you need reliable expertise—i.e., someone who will stay abreast of regulatory changes, monitor your operations, and ensure your payroll taxes are handled correctly.

 At Namely, we offer employers state-of-the-art payroll software and expert payroll tax services. Learn more about our payroll solutions—and if you already manage remote employees, discover fresh ways to keep them connected.

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