December 10, 2021 | By Brandon Hartsaw
When your business is in the hiring mode, it is difficult enough for your HR staff to comply with the federal laws and regulations from the state where you do business. You add another level of complexity to HR duties when you hire employees from outside of your business’s home state.
You can characterize these additional issues as those that arise during the “pre-hiring,” “hiring,” and “post-hiring” phases.
Whether you decide to launch an out-of-state location or hire workers from out of your business’s home state, there are specific steps you must take.
Each state has its own rules regarding the employee hiring process and continuous employment procedures. Here are a few government agencies that require you to register your company’s activities:
There are several steps to follow during the hiring phase, as shown below:
Once you hire an employee, a whole set of rules applies concerning compensation. For instance, the state’s minimum wage rules apply. The federal minimum wage rule is $7.25 per hour for hourly employees. Each state can adopt minimum wage laws that are lower than, match, or exceed the federal minimum. In a state with no minimum wage rules, the federal rule applies.
Each state can also decide how often you may pay your employees. Most jurisdictions require employees receive compensation either weekly, bi-weekly, semi-monthly, or monthly. State rules are free to adopt more specific payment rules. In 2021, only three states have no frequency rule: Alabama, Florida, and South Carolina.
Pay stubs are a state issue where no federal rule applies. Some states do not require pay stubs. Other states allow companies to choose whether they will give paper or electronic pay stubs. Others require that employees have easy access to pay stubs that are printable. The type of information that must appear on pay stubs also varies state by state.
Both federal and state laws apply to the following payment issues:
At the federal level, each employer must withhold federal income tax, the employer and employee share of Social Security and Medicare taxes, and the Federal Unemployment Tax (FUTA).
State payroll withholding responsibilities may include:
In addition, HR staff may need to determine the amount of compensation that applies to each state when an employee splits their time in different states. In these cases, you will need to register with each state taxing authority, calculate the appropriate tax withholding, and make sure the deposits are made promptly. In addition, HR staff may need to determine employees’ proper classification, that is, employees versus independent contractors. Income tax withholding is not required for independent contractors.
These complex duties may burden the load for in-house HR staff.
We have good news; you can eliminate the complexities of hiring out-of-state workers. The answer is to hire a Professional Employer Organization (PEO) to handle the issues for you.
A PEO has the trained staff to ensure compliance with pre-hiring, hiring, or post-hiring regulations. The PEO keeps on top of laws specific to each state. The PEO staff does payroll calculations and deductions for you, so you don’t have to keep track of multi-state withholding.
Acting as the Chief Operations Officer, Brandon actively promotes an environment of creativity, collaboration, and individual ownership to empower Questco team members to deliver exceptional client experiences.