Remote Employees & State Tax – A Primer for Your Business

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Due to modern market changes, both businesses and workers are facing new challenges. The rules and environments in the workplace have changed. Thanks to the latest technologies, business owners can optimize and enhance the workflow. At the same time, they make it much more productive than ever before.

Workers and businesses now face another unique opportunity. As the Internet evolved, the tendency of people to start working online has increased. any specialists choose to work remotely from the comfort of their homes. They can also choose any other location across the globe. What’s more, many companies are willing to hire such specialists.

Are you up for these changes? Or haven’t you yet adjusted to the fast-developing world? There are still many questions and challenges arising when companies decide to hire remote employers. In this article, we are going to dig deeper and find accurate answers to some of the most common questions:

  • What jobs can be remote?
  • How can hiring remote workers be beneficial for a business?
  • What are the main challenges of having remote employees in your team?
  • How to handle taxes with remote employees?

Let’s dive in!

What Types of Jobs Are Remote?

Pretty much any role performed by people at the office can be handled remotely. Most often, the following specialists receive plenty of offers to work online:

  • Content writers;
  • Translators;
  • Academic writers from “write my essay” services like this one;
  • Graphic and Web designers;
  • App, game, or Web developers.

However, this is not even close to being a full list of roles that can be performed without a specialist’s physical presence in the office. The popularity of this form of employment keeps growing. Many companies decide to hire marketers, HR managers, accountants, customer service managers, and many other specialists to work from other locations.

Pros of Hiring Remote Specialists

Let’s start with the obvious. By hiring remote, one expands the hiring pool to the whole world. As such, one gets access to a more significant number of talent that could benefit the enterprise. As a rule, companies who look for talent worldwide have higher chances of recruiting the best specialists. 

Thus, businesses that do this can boast of a significant competitive advantage over other companies that only recruit locally.

Apart from giving you access to a broader talent pool, this form of employment also has several positive effects: 

Higher productivity.

One of the studies published at Harvard Business Review claims that letting more employees work from home actually increases productivity.

Better time-effectiveness.

Have you ever thought about how much time your team wastes on non-work related activities? According to the study, one employee can waste over 8 hours a week, doing something not related to his job. This can be extremely ineffective. However, when your team works from their homes, it boosts productivity. Thus, the waste of time is minimized.

A drop in office costs.

Let’s face the truth – salaries and taxes are not the only costs employers have to deal with. There are plenty of additional office costs that have to be covered. Often, these costs reach tens of thousands of dollars per person each year. Hiring remote pros will help you to cut down on these expenses.

Better retention.

What does it take to recruit and train a new member of your team? As a rule, this process requires lots of resources and time. Thus, it is fair to say that the cost of replacing someone from your team can be colossal. 

Luckily, another study confirms that remote workers are 13% more likely to stay in their current jobs in the next five years than those who work in the office. Allowing your team to work remotely, you increase retention. Be sure that they will stick around.

These are just a few critical pros of allowing your team to work from home. In general, it has been reported that remote employees are 29% more happy with their jobs compared to in-site specialists. This once more proves that this form of employment is highly beneficial both for companies and workers.

The Biggest Issue of Hiring Remotely: Handling State Tax Withholding

Despite a wide range of quite obvious benefits, many businesses still come up with plenty of reasons against remote teams.

Indeed, creating a virtual work environment is often associated with a number of major issues. Some of the biggest challenges are ensuring that you find the right specialists. It is critical to find effective ways of cooperation across different time zones.

However, the biggest concern that really stands out is how to deal with payments and taxes. After all, they differ across states and country borders. This is one of the most critical questions that holds back many teams from going online. 

If this is something you are concerned about as well, our detailed guide will help you handle all tax and payment-related issues. 

First of all, let’s outline the three categories that the online workforce may fall with.

Contractor

This is the most preferred category for companies. The most significant benefit is that contractors are the ones who take responsibility for handling taxes. This means that the company doesn’t have to bother about these issues at all.

However, there is one thing to keep in mind. Although this form of employment is the most beneficial for businesses, most legislations have pretty clear designations of what differs a contractor from a full-time worker. It is vital to classify your specialists appropriately. Otherwise, you risk ending up with a hefty tax bill!

Full-Time 

This category doesn’t differ much from regular on-site employees. It requires you to hire a chosen specialist officially, as you’d normally do if someone was invited to join your team in the office. The biggest problem here is that hiring workers from this category requires a company to open a branch in the specialist’s location.

In this case, all taxes should comply with the laws and regulations of a particular area.

Company / Sole Proprietorship

This is one of the easiest ways to recruit specialists outside your area. It assumes that a specialist will set up one’s own company. One will use it for invoicing payments for the services he provides to your company. 

In this case, a specialist is not exactly your employee. One is rather a partner who provides services.

Like hiring contractors, this method is also preferred by companies because of simplicity. However, there are a few downfalls to this solution. 

First of all, setting up a company is not always easy for people. Specialists from some countries may not have the possibility to do it. Others may find that registering and operating a business is too costly in their locations.

Defining the right kind of relationship is vital to ensure that you won’t violate yours or your employee’s local laws. 

Now, let’s get to the main question – how to handle taxes?

In general, the way you will be handling taxes only gets down to where your specialist is located. There are certain common features in different legislations. Yet, when it comes to taxes, each region and country may have specific rules that you will have to follow.

Handling Taxes: Employees from Another Country

Recruiting specialists outside your country can create a whole set of challenges.

Keep in mind that the legislation of most countries will require you to open an official branch for your company. Thus, you will be able to hire citizens without violating the law. 

You will have to conduct in-depth research to find out all local laws regarding employment. Establishing your branch will also take time and effort.

Often, this appears to be too challenging for most businesses. That is why they prefer to collaborate with contractors. In this case, specialists register as freelancers or self-employed workers. Benefit – they have to deal with all work-related taxes on their own.

Handling Taxes: Employees from the USA

Compared to many other countries, the US can give businesses more headaches when it comes to hiring people from outside. This is mostly because laws and regulations, as well as tax rates, differ a lot from one state to another.

In general, if you are recruiting within the US, you will have to worry about to main types of taxes. Those are payroll and income ones. The main difference is that rules and rates of each of these taxes will vary depending on the state.

Let’s say your company is based in California, and you are willing to hire a designer from Arizona. In this case, you will most likely have to register with the local tax authorities in Arizona and deposit taxes.

Wrapping Up 

How to make things a bit easier? Two main solutions may come in handy. The first one was already mentioned earlier – if you hire contractors, you get rid of the need to handle taxes. 

However, this solution may not be available for you in some cases. As previously mentioned, you may require your employees to function in a way that goes beyond the scope of what is allowed within the contractor framework.  In this case, you best bet is to partner with a professional payroll company that will gladly handle all the issues for you.

The good news: you are already in the right place. DistantJob handles payroll for all employees hired through us. So move along to our contact page and get in touch!

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