Sense with Cents

The word “remote” is from the employer’s side of the desk. From the employee’s side, they are not remote. They are at home in Boise, or a spare bedroom in Reno, or wherever the laptop sits. They are somewhere specific, and that somewhere is a state, often a county, sometimes a city, all with their own rules.

The way I usually hear it described is something like “they work remote, they just log into our server.” The remote part is the access. The connection is remote. The employee is not. The employee is in a chair, in a room, in a building, in a state.

These days the trail may not even involve your server. A smartphone with email, a customer app, and a calendar can carry a workday without ever touching company infrastructure. The work happens. The records of where it happened may not exist on your side at all.

When you let an employee work from their home in a new state, you have effectively opened an office in that state. A small one. One worker. No sign on the door. But for tax and labor purposes, you are running a business location there. The state treats it the same as if you had signed a commercial lease. You are expected to register, withhold, pay unemployment, and follow that state’s labor rules. The state does not care that you never picked the address or never even visited.

The office does not always stay in one place either. Home Monday, coffee shop Tuesday, a relative’s house Wednesday — the location moves with the laptop, and so does whatever is on the screen. Payroll records, customer information, and personnel files sitting on whatever WiFi happens to be there, in view of whoever is at the next table. A separate problem from the tax one, and not one a payroll program can fix.

There is also a population of employees who would prefer the employer never know exactly where they are. Online forums openly discuss how to obscure location data. You will not always be looking at honest information.

The same gap shows up beyond employees. Plenty of small operations run out of homes without a city license, without home business insurance, and without much attention to where employees actually work. These arrangements work until they do not — a notice, an injury, an audit triggered by something else — and then the bill comes due all at once.

Customers cross this line without realizing it more often than people would guess. One hires a relative’s kid who has recently moved to Oregon. Another lets a long-time bookkeeper keep her job after she retires to Arizona. Six months later, a notice shows up, and the call usually starts with “I had no idea.”

Do the work before someone creates a new nexus for you.

This is preventive work. Once an employee has been working in a new state for a while without setup, you are catching up under audit, not setting up at leisure.

A note on who actually does the work. Some of you are owner-employees doing payroll for your own business. Some run a payroll service. Some are payroll clerks working under an owner. The list below applies to all three, but the responsibility shifts. The owner carries it. The service flags it. The clerk raises it. Same facts, different role.

Track where each employee actually works. Not where they were hired. Not where the office is. Where the laptop, or the phone, sits.

Capture location on every time card. In modern payroll, every employee — hourly, exempt from overtime, owner — should report time worked, breaks taken, and where the work happened. The time card is not just for calculating pay. It is the record that makes everything else defensible.

This applies even to employees not paid by the hour. Washington requires employers to report actual hours worked for every employee on quarterly unemployment insurance reports — hourly or exempt from overtime. The fallback if you have no records is forty hours per week, which can hurt you in a benefit determination or audit. California is strict in a different way: for hourly employees, missing meal break records create a presumption the break was not provided, and the employer pays a penalty per day per affected employee.

The location field on the time card has a second purpose. An employee who has quietly moved is rarely in a hurry to volunteer that fact. A time card asking where the work happened brings that information up where you can act on it.

Treat employee moves as payroll events, not just life updates. A new address often means new withholding, new unemployment registration, sometimes new disability or paid leave deductions. If the new address is in a new state, assume you have just opened a branch there. The default is the rules where the work happens. There are exceptions and reciprocity agreements, but the default is the default.

One more thing about registration. Once you register payroll in a new state, that state’s revenue department knows your business is operating there. The payroll side and the corporate income tax side of the agency talk to each other. If your payroll registration shows up but no corporate income tax return follows, expect a letter asking why. The amount of corporate income tax exposure depends on state-specific rules and on what the employee actually does there. It is its own conversation, separate from payroll.

A heads-up here for the people running payroll. Strictly speaking, the company income tax side is not your job. But you are the one who sees the new state first, on the day the registration goes through. A quick word to the owner — “registering here will probably trigger a company income tax question down the road, worth a call to the CPA” — is the kind of thing employers remember. It costs nothing and prevents a surprise.

Put a written work agreement in place. Spell out the approved location, who is allowed in the work area during work hours, and that working from anywhere else without prior written approval is grounds for dismissal. All useful — but keep in mind: a clause does not undo the registration, withholding, and exposure that may have piled up while an employee was working somewhere you did not know about. The agreement gives you a basis to act once you find out. It does not retroactively close a state nexus.

Call your liability insurer and give them the address. The conversation usually leads to an endorsement, not a new policy. My situation runs about twenty dollars per extra location. Yours may be different.

Insurance is the key piece here. You can write all the agreements you want, but you cannot stop a kid or pet running through the room, an employee taking a work call while driving, or a charger snaking across a coffee shop floor. The agreement tells the employee what is expected. The insurance is what catches the situations that happen anyway. Ask your insurance carrier what they recommend and what they will cover at the new location. That is what you are paying them for.

Check the local rules at the new location. Many cities allow remote work from a residence as long as the residence does not look like a business — no signs, no use of the address as a business address, no customers coming and going, no extra traffic. Some cities require a home occupation permit on top of that. Others do not. The rules are very local, and the only way to know is to look at the city code where the employee actually sits.

If the employee rents, the lease is the document to look at. Some prohibit business activity from the unit. That kind of restriction is a flag in two directions: it limits what they can legally do from home, and it tends to push them toward a coffee shop or shared workspace — both of which bring back the screen exposure and shifting-location problems from earlier in this post.

For my own setup, I pay the city business licenses, route mail through a PO box, and carry home business insurance. I do the same exercise for the employees who work from their homes. It is tedious. It is also far cheaper than a notice arriving from a jurisdiction I did not know I owed.

Post the labor law notices. Federal and state notices are required for every employee, including remote ones. The Department of Labor accepts electronic posting for fully remote workers, but state rules vary. California, for example, requires physical posting at the workplace even for full-time remote employees, with electronic distribution as a supplement only. The simplest fix in any state is a small commercially-prepared poster set sent to the employee’s work location — inexpensive, and it removes the question entirely.

If this stack of obligations is more than you want to carry, two paths are worth considering. Retain a multi-state employment expert who handles registration, withholding, posters, and the state-specific paid leave and disability programs. Or use an employer of record service — what older customers may know as a leased-employee or lease-back arrangement — where the service becomes the legal employer in the new state and you contract for the worker’s time. Each has trade-offs.

In our software, we built support for any state’s withholding because we figured customers would eventually need it. What we did not build is a way to tell a customer that the friendly arrangement they made with a long-time employee is now a multi-state payroll situation. That conversation still has to happen the old way, on the phone, after the notice shows up — or, better, before it does. This kind of advisory is not part of payroll software support. We have been sharing our experience and knowledge freely since 1984.

See also: Help Me Help You, Do You Really Have a Backup?, and Being Replaceable Is Part of the Job.