It seems like whenever we’re about to reach a point where we can start making definitive plans about returning to the office, COVID-19 comes right back again and with more cases, increased transmissibility, and even more questions. For that reason, many companies are starting to make the decision of whether a permanent flexible office schedule is the best way to retain top talent, keep their people safe, and keep their business moving. In fact, 70 percent of employers who currently have a flexible work model plan to solidify this as their permanent policy and an additional 10 percent plan to stay exclusively remote.
Allowing your people to work where they like may seem as simple as sending a company announcement, but there's a lot to consider and ensure you have in place compliance-wise before making that decision. Let's look at three legal line items you need to make sure to check off your list before moving forward.
1. Onboarding documentation requirements
Prior to COVID-19, onboarding forms such as Form I-9 required a physical inspection of the document and its supplemental forms of identity to ensure accuracy. As of April 28, 2022, the Department of Homeland Security has announced that they are continuing the practice of allowing the forms to skip the in-person inspection and be turned in electronically through October 2022. This does not, however, apply to employees who physically report to a company location. Once this temporary lift is either canceled or your new employee begins reporting to a physical office space, these forms will need to be physically inspected and refiled.
Keep in mind that this extends only to those hired on or after April 1, 2021 and does not extend to March 2020. Those hired from March 2020 to March 31, 2021 will be evaluated on a case-by-case basis, as there may be a variety of circumstances that would make this impossible, such as them no longer being an employee. Additionally, during COVID-19 lockdowns in 2020, employers were permitted to accept expired forms of identification that appear in list B on the Form I-9, but beginning May 1, 2022 employers will no longer be able to accept these and will also need to go back and update forms for all those hired between May 1, 2020 and April 30, 2022 with valid forms of identification. Since this is something that you'll have to consider if you choose to have a hybrid model, utilizing HR technology to keep track of this documentation accurately and securely will be key to ensuring a smooth transition.
2. State income tax compliance
Something that we heard a lot over the course of 2020 was how we would find out coworkers moved without telling anyone. While things were a little more fluid then, it’s important to note that state and federal tax regulations have caught up and it’s important to know exactly where your employees are residing to ensure their pay is being calculated accordingly. Not tracking this information can lead to incorrect paychecks and the risk of costly errors.
While federal taxes are consistent and only depend on where employees are located, state taxes can be more complicated. Due to the freedom associated with remote work, it's important to keep a close eye on where your employees are working and what the laws are in the states where they reside. Below are a few scenarios to help you get an idea of what may apply at your organization based on where your people are working.
If your employees are working in the same state as the business, then your tax withholding will not change. Once they move across state lines, however, you will then need to begin withholding state employment taxes based on the state where they reside as well as register with that state’s tax board and familiarize yourself with the tax filing schedule for tax returns to ensure complete compliance with each paycheck.
In states that acknowledge “convenience of the employer” rules, employees are required to pay taxes based on where the company is, not where they reside. This means they will also need to file a nonresident income tax return and a resident tax return for their state. In addition to utilizing a payroll solution to help automate the calculations needed, providing your people with information and guidance during the onboarding process and periodically throughout the year to ensure they are aware of the latest tax laws can help keep your company compliant.
3. Workday requirements by state
Depending on the state where your people live, you will need to reevaluate your policies around overtime, meal and rest breaks, and sick time. According to the UKG State Compliance Guide, Alaska, California, and Colorado have daily overtime regulations in place, and Oregon, New York, and Massachusetts have industry-specific overtime regulations. All other states recognize the federal rules set by the Fair Labor Standards Act.
By not being aware of these rules and regulations by state, you run the risk of fines, fees, and penalties for noncompliance. Your team will need to evaluate whether overtime will be allowed and how that time will be compensated based on the requirements by state. Sick time can also be a complex policy to implement depending on which states your people reside in. Time worked, accruals, and how much is permitted to be used at a time are all things that vary state by state and even city by city.
Making sure your HR technology can keep track of all time and documentation, allow you to set up attestations through the timekeeping system to remind employees of breaks, and allow clear, transparent communication about the policies can help mitigate the risks we just talked about. Keeping your people informed about what rules they're required to follow and updated as rules and regulations change will be important to ensure compliance across your entire organization.
Conclusion: Stay sharp on compliance when it comes to remote and hybrid work models
These are only a few of the legal items you need to make sure to be aware of, but if you want to get the complete list of potential remote-related compliance challenges and how to overcome them, as well as a host of other tips on staying sharp on compliance, register to join us for our HR & Payroll eSymposium. In our Remote Employees: A Compliance Watchlist session, you'll get and in-depth background on the history of remote work, how it’s evolved, and what compliance laws you need to be aware of to ensure you’re setting your organization and people up for success. You'll also get credits toward your SHRM, APA, HRCI, HRPA, CPHR-SK, and National Payroll Institute certifications for most of the sessions. We hope you’ll join our free event!