With many agencies allowing employees to work partially or entirely from home these days, there is no shortage of new challenges and issues to consider.
Many of you have been focused — rightly so — on day-to-day operations.
- How do you communicate effectively with a remote team?
- What do you do to manage productivity when you can’t see your team in person?
- Can you generate new business when you don’t have in-person networking?
- Is it possible to build company culture without water coolers and happy hours?
- Which tools can help you be more productive as a distributed workforce?
These are certainly big concerns and things that you ought to be focused on.
But there are administrative considerations to a newly remote team that you need to consider also.
Payroll Taxes
One of the most important — but easiest — issues to address are payroll taxes. Most agencies use a third-party provider like Paychex or ADP to manage the administrivia of paying their teams.
If you have an employee who moves because of the new work-from-home environment, it is often a simple matter to update their record online. Then your provider handles all of the calculations, payments, and paperwork.
When you have an employee who moves to a different state or jurisdiction, you may need to fill out some additional information for the payroll provider to set up your presence in that locality, but it is usually a pretty straightforward process.
In some locations, employers are getting stuck in the middle of some thorny issues related to payroll taxes, however.
For example, Massachusetts has taken the position that it can continue to collect income tax from New Hampshire residents who had worked in Bay State offices before the pandemic hit, but now work from home in the Granite State. This issue is now being litigated in federal court.
Employers are then in the position of having to figure out if they continue to withhold Massachusetts payroll taxes even if their employees take the position that they are exempt. (Hint: talk to your lawyer and accountant if you find yourself in this position.)
Business Taxes
More complicated — and potentially more expensive — than payroll taxes can be new business taxes that you could be on the hook for when you have remote employees move to new locations.
When you have distributed team members, some countries, states, and localities may feel entitled to a cut of your business profits to tax.
This has always been an issue, but it is taking on more importance now as governments everywhere find themselves with more expenses and less revenue. They’re on the lookout for any way to increase the flow of funds into their coffers.
You need to talk to your accountant to determine if any of your remote workers create a “nexus” that allows those government entities to make a claim on some tax revenue.
These issues can be thorny — and the calculations can be even more difficult. I have been down this road with home-based workers in my businesses several times over the past few decades, and it can end up being a real headache if you don’t plan ahead.
While you can follow a “cross your fingers and hope they don’t notice strategy,” you need to be aware that governments are becoming more aggressive in seeking out tax revenue, and payroll filings will tip them off to the presence of these workers (and many, though not all, states share this information between the groups that handle payroll and business taxes).
Employee Benefits
When you had all of your employees locally-based in the same office, it was much easier to figure out what benefits worked best.
Chances are that you used the same health insurance provider as your team, and you knew the local availability of in-network doctors and facilities.
When you have a distributed team, you need to think about how all of the plans and providers serve all of your locations, not just the one where you live.
If you haven’t been involved in dealing with these issues in the past, you may be in a for a rude awakening. Even big name insurers that have a large national presence may offer plans that are strong in one region and weak in another.
Before you settle on a provider during your annual insurance review, you should survey employees to discover any issues with the existing plan so that you can avoid problems with employee morale and even retention.
Also, be sure to ask your broker about how any potential plan changes may impact the geographies where you have remote employees. Often they can tell you things like “This is a great plan in New Hampshire, but they don’t have much available in-network outside of New England.”
While health insurance is the biggest benefit to consider, you should also look at the full suite of benefits you offer and see if there are other adjustments that need to be made for a newly remote workforce.
Business Insurance
Chances are you didn’t even think about your business insurance policies when you moved to work-from-home status.
If you’re like most agencies, you simply listed your office on the policy and called it a day.
With remote workers, you may need to add their individual residences to the policy to ensure that you are covered. This can also impact rates.
Remember that insurance providers will find any excuse not to pay a claim — after all, if you aren’t paying for the risk, why should they fund the liability?
That means you shouldn’t waste your money paying for a policy that won’t be honored because you didn’t disclose your remote workers and change your paperwork appropriately.
Talk to your provider to determine what they require. It’s better to be safe than sorry here.
Employee Expenses
Many agencies have been asked by employees to help pay for new expenses that they’re incurring in the work-from-home world.
Some of us have had to upgrade our internet connections, upgrade computers, or purchase new furniture to support full-time home-based work.
It’s natural for employees to look to their employers for help in meeting these new expenses since they are items that aren’t generally required for in-office employment.
From a management perspective, you need to figure out what you are going to do to help your employees.
But there is an administrative issue to consider here, too. You need to work with your accountant to determine if any of the items that you want to help your employees out with constitute taxable benefits instead of reimbursable expenses.
You also need a clear policy about what happens to any equipment that you help purchase if an employee leaves your agency. Don’t wait until they leave to figure it out, lock in your rules now.
Contractors vs. Employees
It can be very tempting to have remote workers operate as contractor workers instead of payroll employees.
That’s increasingly a mistake.
While it is appealing to have contractors because they are easier to flex up and down as needed to meet the changing economic reality of the agency’s business, many locations have begun to take a tougher stance on how individual workers get classified.
If you have workers operating remotely in some areas — like California or New York — it can be very challenging to meet their requirements for having someone work legally as a 1099 independent contractor.
You especially should avoid transitioning a payroll employee to an independent contractor when they move — unless they are legitimately setting up their own new business that will have other clients.
An employee who becomes a contractor doesn’t pass the sniff test with regulators and will cause an even closer look at the legal requirements.
That doesn’t mean you shouldn’t use contractors in the new remote-work world where many individuals want greater freedom and flexibility, but you need to avoid playing fast-and-loose with the rules.
Contract labor isn’t a great way to get around the administrative requirements described in this article, but it can be a great way to compound your problems if you get caught trying to skirt the rules.
Local Rules and Regulations
If your head isn’t already spinning, it is sure to be after this last item.
The heading is vague because it’s a catch-all for a bunch of different items that you may need to consider that aren’t already listed here.
Whether you have employees in other countries, other states, or even other cities, if they are working from home you may be subject to laws and regulations that you haven’t even ever heard about.
You’re going to miss some, but you should be as educated as possible about what’s out there.
In general, you are better off abiding by the most stringent rules in the areas where you have team members rather than trying to have different rules based on locality.
For example, 17 states now prohibit asking prospective new hires about their salary history. The simplest solution is to stop doing it even if you mostly operate in the other 33 states.
Most states have their own rules about pay frequency, minimum wage, final paychecks, and all sorts of other employee-related issues. Talk to your lawyer and accountant to get their advice, but in general if you take the toughest rules and live by them globally, that’s likely easiest.
Conclusion
While you have a lot of administrative issues to consider if your team is working from home full- or part-time, there are still lots of great reasons to include remote work as at least part of your agency’s mix going forward — even after it is no longer a virtual necessity.
Don’t let any of the items here deter you, but instead use them as jumping off points to find the right solutions for your agency business and your employees.
None of these are insurmountable, and most will actually make your business stronger since it forces you to take a bigger picture view of your current operations and future success.
