Post-pandemic, remote work arrangements are here to stay. The 5th Annual State of Remote Work 2021 from Owl Labs found that nearly 50% of workers in the U.S. would be willing to take a 5% pay cut to continue working at least part-time from home. And employers are embracing this arrangement too. There are several good reasons for doing this, but unfortunately there are some pitfalls to consider.
Having a remote work staff is often a win-win for the company and employees. From the company perspective:
- The arrangement enables an employer to hire the best talent, regardless of their location. And, because many employees prefer this arrangement, it allowed companies to attract and retain good employees.
- Research has shown that productivity of remote workers is at least equal or better than those on premises.
- The company may able to reduce their space and save on rent, utilities, and other related costs for facilities.
- There are no OSHA concerns because this federal agency has said it would not inspect employees’ home offices. Of course, with the proliferation of remote work arrangements, OSHA may establish regulations for home offices in the future.
From the employee perspective, remote work:
- Eliminates commuting time and cost and helps with work-life balance.
- Saves them money that would otherwise be spent on office clothing, lunches out, and for many, daycare costs. (Many parents working from home may still require paid daycare to enable them to focus on work.)
And there’s a climate change benefit. To the extent employees don’t have to commute, it’s a positive for the environment too.
Employers with a remote workforce face additional administrative and managerial challenges. These including:
- Registering as an out-of-state business. Check with the secretary of state where remote workers reside to determine if this is required.
- Keeping remote workers meaningfully engaged. ConnectTeam offers 8 ideas on how to do this effectively, including using the right tools and creating effective internal communication (e.g., weekly check-ins).
- Minimizing cyber security risks. Employees may be lax in their online practices. Companies should consider policies to strengthen security, such as providing employees with laptops to be used exclusively for company business (no web surfing or social media visits other than what’s required for work) and educating about cyber security, such as using strong passwords and not opening unfamiliar email.
So far so good. Lots of good reasons to have a remote workforce and only modest challenges on an administrative and managerial level. But now comes the ugly and things can get very complicated—and costly—for employers with workers in other states.
- Maintaining workers’ compensation where workers are located (“extraterritorial coverage” if workers are in states other than where the company is located).
- Handling income tax withholding for remote employees in other states. Our blog last year covered the matter of state income tax withholding.
- Paying state income taxes if these remote employees create a “nexus” to another state(s). Simply put (and it’s much more complicated than this), having this connection may require an allocation of income and paying state income, gross receipts, or franchise tax on it to the other state or states.
- Complying with employment law rules in remote states. If, for example, a worker lives in a state or city requiring paid sick leave, you must provide it even if your company’s location does not.
In this post-pandemic, tight-labor-market world, you may have no choice but to offer remote work arrangements. While there are many benefits to you and your staff for doing so, there are a number of serious considerations you need to address. Be sure to work out all the kinks so you don’t encounter problems in the future.