With the access we have to technology today, working remotely has never been more feasible or more desirable. Remote working has been on the rise since 2012, and by 2020, it’s estimated that nearly three-quarters of the U.S. workforce will do some of their work remotely.

Hiring remote workers can help companies hire top talent, retain their employees, and spur innovation and creative thinking among employees. But, having a large remote workforce is not without its pitfalls. One of the biggest problems remote workers cause for employers is complicating the company payroll system.

Payroll Complications for Remote Workers

  • Independent Contractor or Employee?—When an employee doesn’t come to the office every day, it can be tempting to classify them as an independent contractor, but oftentimes, that isn’t the case. Your company may have a number of independent consultants who work remotely, but some of these workers will likely qualify as employees. Hiring remote workers can muddy the waters of employee classification, so it’s important to have access to payroll experts who can clear up any confusion.
  • Differing State Laws: Managing federal and state taxes is hard enough for any payroll department, but it becomes even more complicated with remote workers in different states. In general, businesses need to withhold income taxes for the state where the employee does the work. This is known as the “physical presence rule” and can mean that remote employees are subject to different taxes than other employees. This gets even more complicated if an employee resides in a different state than where they do most of their work, or if they split time between different states.

It’s not just taxes that differ from state to state, other labor laws will also apply to remote workers. Different states may have different requirements for the way employers manage retirement plans, healthcare, overtime, and benefits. Companies with a large number of remote workers may need to manage that information for multiple states.

Outsourcing Payroll for Remote Workers

Remote workers make managing payroll significantly more complex. It’s easy to make payroll mistakes, and many in-house HR departments won’t have the expertise to manage remote workers. The easiest way to eliminate the headache of managing a complicated payroll is to outsource the work to a payroll management company.

Payroll management companies sync with a company’s existing HR department to take over all tasks related to payroll and payroll taxes. These companies have built effective systems and processes for handling payroll in different states and with differing numbers of employees. These services can also be scaled up as your business grows to support more remote workers.

As one of the top payroll service providers in Tennessee, LBMC Employment Partners is equipped to handle all your payroll needs, including managing remote workers. Contact us today to learn more about how LBMC EP can help your company.