Is it all going to stay different on the other side? For HR and Finance, there are some new norms and some old rules to follow post-pandemic. We’ve gathered six of the most common questions we hear from small businesses and remote employees. Most of us want to know what is the best way to structure a virtual workforce while keeping it simple and without adding too many tax liabilities.
1. My employee works virtually in another state. What do I need to know?
You’ll need to test whether there is a nexus between the employer and that employee in order to determine if that state will consider business income taxes due. Each state sees this differently, so you’ll need to examine which state you have remote employees doing work in and where they might be creating nexus. Luckily, some states have issued a relief program during Covid regarding the nexus rules. But we don’t expect these to stay in force through 2022.
2. Do I still need to provide workers compensation insurance to them?
Yes, unless you are in Texas (which does not require this – but many employers still choose to carry coverage because it is comprehensive). Workers comp insurance covers work-related injury and illness for any employee regardless of the location of the work performed.
3. Do I also need to provide unemployment insurance?
You may need to withhold SUTA – state unemployment taxes. These vary state by state, and they can vary even within each state based on the type of employee and the work they perform. Your best bet is to speak with a CPA, employment lawyer or an HR professional about this.
4. How should I withhold for remote employees’ income taxes?
You will need to be sure to adjust the remote worker’s state income tax withholdings to their state of work, i.e. remote site. Otherwise there may be penalties imposed on the business for improper withholding. Again, you will need professional advice on this.
5. My employee is working internationally. What do I need to know?
You need to confer with an international tax advisor, preferably one located in the country of residence of the employee. Each country will have different requirements for setting up an entity, withholding taxes, etc. Not all EU member countries look kindly on tax evasion through an independent contractor agreement, and neither does the IRS. So be sure you know how to structure your employment agreements with remote workers in other countries. Companies like Deel and Papaya Global can help you manage this process. If you’re hiring someone in Canada, read this blog post about it.
6. How do I manage remote employees?
When it comes to productivity, remote work separates the sheep from the goats. Productivity will be the main performance measurement in managing remote employees. Therefore it is important to build in interactive touchpoints to make an employee’s experience more humane and manageable. Performance reviews focused solely on one’s individual productivity can be unnerving and create the wrong internal culture. Other metrics, like participation in virtual team projects, brainstorming sessions, and constructive feedback to teammates and management, can help balance this out. Here are some further ideas about improving performance for remote employees.
If you have further questions about how your business will function post pandemic, shoot us a note at Suitless. We want to help you grow gracefully.