14 Important Financial Steps When Bringing On Remote Staff From Different Locations

Feb 23, 2022.

With more and more companies implementing permanent remote work policies, businesses are widening their talent pool to find the best people for the job, regardless of location. As businesses expand their remote teams by adding new members from across the nation and the globe, they must stay on top of multiple sets of labor laws and tax regulations.

It’s important for business leaders to review their financial policies to operate effectively, legally and profitably with a widespread remote team. From deciding on a fair pay scale to understanding state-specific laws, below 14 Forbes Finance Council members share important financial steps for businesses that want to bring on remote team members from outside their headquarters location.

Members of Forbes Finance Council share financial considerations for companies bringing on remote workers from across the nation and globe. PHOTOS COURTESY OF THE INDIVIDUAL MEMBERS.

1. Create A Competitive Compensation Package

Employers must have a strategy to attract and retain global employees to mitigate talent shortages. Create a competitive compensation package that includes benefits and perks for your remote team. This may look different in each country. Consult with an HR, legal or tax professional to understand the financial implications of creating benefits packages that are fair for employees worldwide. - David Whyte, Irwin

2. Understand The Complexities Of Multinational Compliance

We switched our company from in-person to virtual at the start of the pandemic and have made the change permanent. We currently have people from Europe, the Asia-Pacific region and all over the United States, so being fully remote makes sense. Though diverse backgrounds are a huge benefit, it's important to remember that remaining compliant in different countries results in a significant increase in HR and payroll complexity. - Julie Fergerson , MRC / Merchant Risk Council

Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?

3. Consider Hiring A Contractor

Rather than taking on payroll taxes and benefits for a W2 employee, consider adding a W9/1099 contractor role, which can save money. Have a good contractor agreement that includes data protection. Make sure the agreement aligns with state and federal regulations, including workers’ compensation funds to protect your company. Your attorney or state official can help with the agreement. Ignorance is never bliss when it comes to your money! - Kale Goodman, Easier Accounting

4. Look Toward Long-Term Value Creation

The pandemic has shown that effective implementation of hybrid and remote work can enhance talent acquisition, employee satisfaction and productivity. Long-term value creation will be dependent on how well a company manages data security, health and safety, culture, and regulatory compliance in this new operating environment. - Martin Jarzebowski, Federated Hermes

5. Remember The Analysis Of Appointment

Hiring employees in multiple states (and internationally) can trigger income tax nexus and create complicated multi-state tax liabilities. Each state has its own rules regarding nexus, and during Covid, many states provided certain exceptions to their standard rules. This makes the analysis of apportionment even more complicated. Penalties can be significant for companies that miss this analysis. - Jennifer Eubanks , CPA Department

6. Be Conscious Of Currency Exchange Rates

When it comes to the economics of hiring, businesses must consider the currency exchange rates and their fluctuations if teams reside in foreign countries. As payroll is a major expense, a strong domestic currency will prove beneficial while negotiating pay. - Anil Grandhi , AG FinTax

7. Base Your Pay Structure On The National Average Pay Scale

Think about how you can make your pay structure equitable and fair for you and your employees. Our pay structure is based on the national average pay scale. This structure helps keep us profitable and maintains consistency in tracking regardless of the city or state each employee lives in or potentially moves to. It’s also fair to our employees and gives them flexibility in where they live and work.- Jody Grunden, Summit CPA Group

8. Review Your Benefits Package

Don’t overlook the financial impact of the employee benefits you offer and how that can play into the equation. When you bring on team members from other states or countries, you’ll likely need to adjust your benefit offerings so they work for those employees. And while potential cost-saving opportunities exist, such as switching to an HDHP/HSA offering, your overall benefits package needs careful review. - Tom Torre, Bend Financial

9. Explore A PEO Or Employer Of Record Model

As you look to expand your business into new regions, adding headcount can be complex and complicated with different jurisdictional employee requirements, from payroll taxes to on- and off-boarding employees and general HR compliance. I recommend exploring a professional employer organization or global Employer of Record model to assist in the early stages until you have the scale to support a geographically dispersed team.- John Tytko, Caremerge, Inc.

10. Be Aware Of State-By-State Laws

State laws (and even more so, international laws) can be a minefield. An entrepreneurial friend learned an expensive lesson when he thought he had contractors and the state believed he had employees. At the end of the contract, everyone filed for unemployment. That particular state had a very narrow definition of who was not eligible for unemployment. Unraveling the situation came with high costs and lots of headaches. - Katherine Jackson, Bayer Properties, LLC

11. Understand The Multiple Possible Financial Impacts

When assuming nexus in another state, businesses may face impacts in various areas, including insurance, sales tax and corporate tax, and the requirement to now report by state annually. There are many rules surrounding nexus, and putting boots on the ground creates a physical nexus that could impact much more than payroll. Know the costs before making the decision. - Cynthia Hemingway, Fourlane, Inc.

12. Consider The 'Local' Factors Of Each State Employees Reside In

The “new normal” includes hiring talent from across the country, which means businesses face the additional burden of filing tax returns in each state in which employees reside. Firms must also consider factors such as whether they will adjust base salaries to align with the local cost of living, when or if to open a new office, and how to coordinate travel to headquarters. - Sonya Thadhani Mughal, Bailard, Inc.

13. Outsource Your Payroll

How do you plan on managing payments to your remote workforce? If you are handling your payroll internally, having employees across multiple states and/or countries can be very difficult—you’ll have to manage taxes and compliance in every state and especially in foreign countries. Look into options for outsourcing your payroll. There are several great options for managing remote workforces in the U.S. and abroad, so take advantage. - Joseph Orseno , Tiltify

14. Focus First On The ROI

Global and state wage arbitrage can be a great benefit for companies, even after you take into account the tax and legal implications. Focus first on the ROI to the business and the quality of work your remote workers will provide. Let your HR and accounting teams handle the paperwork to ensure your company remains compliant, or use a third-party intermediary to hire remote employees. - Vlad Rusz , Centaur Digital Corp