Running a business in 2022 looks very different from 2019. While the pandemic brought many challenges, it also provided a unique opportunity to hire the best talent on the market.
Before the COVID-19 pandemic, remote work was slowly building momentum. In 2019, 51 million Americans reported working remotely using the internet. By 2020, the percentage of employed persons working at home on days they worked nearly doubled, rising to 42 percent, according to the U.S. Bureau of Labor Statistics.
Why should I hire remotely?
Since many jobs can be done just using a computer and the internet, more than 20 percent of the workforce could work remotely three to five days a week just as effectively as they could if working from an office.
There are also cost savings with a remote workforce – for employers and employees. Many people are leaving high cost of living areas since they’re no longer tied to a physical office. Global Workplace Analytics estimates that employers can save over 11,000 dollars per year per employee due to the lower cost of office space, reduced absenteeism, less turnover, and even increased productivity.
Agile companies, including startups, are especially keen on going remote, with 71% of venture-backed companies saying they'll be allowing workers to stay remote even after the pandemic fades as many remote workers have relocated to cheaper, less crowded communities.
HR experts are warning businesses that if they don’t offer the kind of flexible-work options employees expect, they’ll lose out on up to 70% of job-seekers who want to join remote and hybrid workplaces.
The best talent is now working remotely. Switching to a distributed workforce allows your business to hire the best talent, no matter where they live.
How do I foster a positive distributed workplace culture?
Face to face communication builds trust. But without a physical office, employers will need to give employees the benefit of the doubt. Employers must create a culture of transparency where employees are trusted to get their work done and all policies and decisions are communicated early and clearly.
Schedule face to face time
Even though you’ve hired remotely, kick off your relationship with employees through in-office new hire training (when it’s safe to do so). This helps build a sense of solidarity with new employees and the tenured workers who are assisting in training. It also helps establish expectations of digital and in-office workplace behavior and accountability.
A drawback of remote work is that it’s hard for most employees to receive the visibility needed to be promoted. Plan ahead and host team offsites so everyone has a chance to display their skills and accomplishments. This is a great opportunity to show your appreciation and help employees build their brand.
Foster an inclusive workforce
As an employer, think beyond the diversity and inclusion policies that only focus on protected classes. Inclusion also applies to team members with childcare responsibilities, medical conditions, or are a caregiver to a family member. Flexible scheduling can help all of your employees do their jobs to their best ability.
Plan virtual team events or offsites that offer activities for everyone. Not everyone drinks or can play physical games. Consider cooking classes (that accommodate those with dietary requirements), virtual board games, unique icebreakers, or set up breakout rooms in Zoom for team competitions.
Communicate across time zones
Managing a team that is based in different time zones can be a juggling act. But instead of trying to get everyone on the same schedule, create a culture of asynchronous work. Do your employees need to all be online and available to respond to messages immediately? Probably not. Asynchronous work requires everyone to be more thoughtful and purposeful in their requests during off hours.
Consider using helpful tools to bridge the physical divide, like:
- Loom - video messages are a more friendly way to communicate. Tools like Loom make communication clearer and also include features like screen sharing.
- Slack - Slack statuses help set expectations about when people are available to respond and when they’re off the clock.
Collaborate from anywhere
There are a number of tools available to encourage collaboration, even if you can’t huddle in a room at the office. In fact, working remotely can increase productivity by up to 77% with fewer distractions from colleagues. Examples include:
- Notion - this collaborative workspace consolidates messages, tasks, documents, and reduces the need for meetings.
- Google Workspace - editing and suggesting modes help create real-time living documents in which everyone can collaborate in one central location.
- ClickUp - this project management application helps set action items, goals, create mind maps, track time, and can take the place of email.
- Trello - this tool organizes your projects into boards with sticky notes. It also integrates with your technology stack to create one collaboration hub.
Who and how do I hire remotely?
When hiring, your first decision will be whether to hire an independent contractor or a full/part time employee. There are benefits and drawbacks for both.
I’ve decided to hire an employee out of state, now what?
If you decide to hire an employee instead of a contractor, there will be specific paperwork that must be completed for the state they reside in. There are three ways to manage the paperwork: use a PEO, enlist an EOR, or you can hire directly.
Use a Professional Employer Organization (PEO)
A PEO is a third party payroll and HR outsourcing firm. This organization acts as a co-employer that’s responsible for managing the administrative side of hiring and tax compliance. One of the benefits of using a PEO is the shared liability model which lowers your employment related legal and financial risk.
But there are drawbacks with PEOs. They can charge a high percentage of your gross payroll and business negotiations aren’t always in your favor. They’re also in charge of providing healthcare to your employees and can act as an external influence on company culture.
Lastly, it can be too complex using a PEO just for out of state hiring and not for in-state hiring. The only way around this is to use the PEO across all states.
Enlist an Employer of Record (EOR) to handle HR administration in another country
EORs are organizations that take care of managing and paying full time employees on behalf of your business. Enlisting an EOR allows you to hire people outside of your country without having to register your business in that country.
Directly hire an employee in a new state
Using PEOs and EORs work well for some companies but there’s a real risk of losing control of your people and processes as well as having an outside influence on your culture – not to mention the cost. So if you don’t already have a PEO or EOR setup, hiring directly is likely the right option because it gives you control over the entire employee experience.
BUT even hiring directly can be complicated.
What are the risks of hiring out of state employees directly?
Every state has their own rules for hiring and payroll taxes. Some have higher minimum wage requirements than others and require reimbursement to employees for home office expenses. Other states require employers to withhold unemployment and state income taxes for the state in which the employee is located.
If you’re doing business in California, new overtime laws now apply to any out-of-state employees while they are working in California. In Colorado, employers must publish wage ranges in job postings. These are just a few examples of how complicated hiring has become.
File as foreign entity
To comply with legal requirements in the states where remote workers reside, employers must first file as a foreign entity with each state’s Secretary of State (SOS) office. Filing the foreign qualification requires valid proof of good standing in your company’s home state.
While 37 states only require you to register for payroll taxes, 14 states/jurisdictions require you to register with their SOS first:
- Alabama
- District of Columbia
- Idaho
- Indiana
- Kentucky
- Louisiana
- Michigan
- Missouri
- New Jersey
- New Mexico
- Oklahoma
- Vermont
- Washington
- West Virginia
To make things even more complicated, 41 states require your business to pay an Annual Report Fee, which costs $105 on average. Another 12 states require you to pay a Franchise Tax, which averages out to $245.
The result is a confusing mix of requirements and fees. For example:
- Indiana - needs SOS account setup and an Annual Report due every 2 years.
- Texas - doesn’t require SOS account setup and doesn’t have an Annual Report fee.
- Virginia - doesn’t require SOS account setup but asks for an Annual Report every year.
- California - doesn’t require SOS account setup but requires a Franchise Tax.
Legal complications
These specific and varied requirements introduce a lot of risk – because you're not an expert in all 50 state laws and policies. There’s a chance you’ll find out too late that you haven’t met the requirements and will have to delay your hiring plan, or worse, be fined.
Since remote workers have the flexibility to move states whenever they need, you’ll have to manage and track your compliance in each new state after every move. Tracking compliance includes registering as a foreign entity, addressing minimum wage differences, following overtime rules, following legal and benefit obligations per state, and auditing by state and federal employment and tax agencies.
If you don’t register with a state and are audited, not only will you be barred from representing yourself in court, but remedying this situation will take longer and may even result in your business losing good standing.
These administrative processes are time consuming and difficult. They also hold back founders and senior executives who want to focus on growing their business and working with customers.
There are tools and partners out there that can take this burden off your shoulders.
Middesk offers an all-in-one solution for hiring out of state employees
Here at Middesk, Agent enables customers to successfully complete the process of hiring out-of-state employees. In fact, we use Agent ourselves to register and monitor our registration in the 5 states where we have talent. Middesk Agent provides:
- A single dashboard to manage all of your compliance needs.
- Receiving, scanning, and displaying your mail from each state agency that you are registered with and flagging when action is required.
- Managing SOS account set up so you can focus on hiring.
- Ensuring you’re always in compliance with submitted updates to the government on your behalf.
Learn how Middesk Agent helps companies focus on growing their business by giving them compliance peace of mind.
