Toolbox: How To Pay Remote Workers

Filed Under: HR, More News

Nine out of 10 remote workers want to maintain some telecommuting post-pandemic. That means employers need to continue to accommodate these workers – or risk losing talent if their flexibility is taken away. A central factor in managing a remote workforce and ensuring their satisfaction is compensation. With everything from different wages based on where employees are located to payroll taxes, there’s a lot to consider when understanding how to pay remote workers appropriately.

Location

The most common approach to setting compensation is what’s known as geography-based pay. With this approach, businesses base salaries on the location of the company office employees work from, which can cause salaries across the U.S. to fluctuate up to 23 percent based on where the job is located. So what about remote workers who don’t work out of a corporate office?

Under the same model, these employees would, in theory, be paid based on where they work from. In some cases, that could mean earning more than they would at an office, for example, if your company is based in a rural area but the employee works in a city where the cost of living is higher. Other times, if an employee works from a location where salaries for their position are less competitive, that could mean a pay decrease.

Some companies have opted to avoid changing the pay of remote workers by moving away from geography as the basis and instead having a national rate. Zillow is one example of a company who pays all workers the same based on their job rather than location.

Equipment And technology

When an employee works from home, they may need several pieces of equipment and technology to be able to operate effectively. 

Most businesses provide employees with the hardware and software employees use from home and many cover a portion of internet expenses, although typically not in full since most workers also use it for personal reasons. 

When it comes to furniture, If your employee needs an ergonomic chair or stand-up desk, you may need to provide it under the OSHA General Duty Clause that mandates you keep workstations free from all hazards, including ergonomic ones. 

Policies vary for cell phones but if your worker needs one to carry out their duties, then you’ll likely want to provide a company device or stipend for them to “bring your own device (BYOD).”

If you decide to reimburse employees for work-related expenses, be sure to set guidelines about things like which expenses are eligible, record keeping and submitting receipts. Or consider offering a stipend. Companies like Twitter and Facebook offered a $1,000 remote work stipend to enhance the ability of workers to work from home.

Federal, State Guidelines

Under the FLSA, there’s no requirement that employers reimburse employees for expenses incurred when working remotely; however, you’ll need to be aware that you can’t ask employees to pay for these costs if it would cause their pay to fall below the minimum wage for hourly employees or salary threshold for exempt employees. 

Several states that have laws requiring employers to reimburse employees for certain remote work expenses. 

Pay Requirements 

If you have remote workers in a different state than where your office is located, you’ll need to make sure you’re paying them according to applicable state laws that govern several payroll topics, including paystubs, pay frequency and pay methods such as remote deposit.

Laws Governing Payroll Taxes

While all employers need to withhold federal income tax and the employee portion of payroll taxes (Social Security and Medicare), you’ll also need to worry about state tax withholding for remote employees. Typically, you’ll need to withhold unemployment (SUI) and state taxes and deposit them based on where employees perform work. 

In that case, you’ll also need to register with your employee’s state tax agency since you’ll be withholding income taxes there. Depending on the laws, you may also need to register with a local tax agency.

Moreover, the employee’s home state may also require that you withhold additional money for things like state disability insurance if your employee works in one of the five states that have this type of withholding. In addition, you’ll need to determine if you have to contribute to a state paid family medical leave program. 

Karyn H. Rhodes is vice president HR Solutions at Complete Payroll Solutions. She specializes in all areas of human resources, including strategic planning, employee and labor relations, recruiting, compliance, training and development, compensation and benefits, policies and procedures, organizational development, executive coaching, workforce planning, and affirmative action plans. More info at completepayrollsolutions.com

 


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