Hiring Virtually (in other states)

5 Key Considerations for Online Business Owners Hiring Out-of-State Employees

So many of my clients have cast a wide net in their hiring because we can as online business, doing everything online. However, something that often gets overlooked is the compliance & complexity when it comes to hiring someone in a different state than where you are based/registered.

So I figured it was time to add this to the blog. Here are some things you want to consider and figure out before deciding to send that job offer once you’ve narrowed down your candidates.

1. Understand Employment Laws: Each state has its own employment laws, including minimum wage, overtime, and employee classification rules. Familiarize yourself with these to avoid legal pitfalls. Check out the blog post we did here about employee classification. Some states are more strict than others.

2. Register Your Business: You may need to register your business in the state where your new employee or contractor resides. This often involves obtaining a foreign qualification or registering for a Certificate of Authority. We love using CorpNet for this. If you’re already on Gusto, you can use their service from inside of your Gusto portal. It’s a breeze!

3. Payroll Taxes: Out-of-state hires require you to withhold and remit state income taxes according to the employee’s state regulations. Ensure your payroll system is set up to handle multi-state taxation. We love Gusto for this!

4. Workers’ Compensation Insurance: Verify if you need workers’ compensation insurance in the new state. Each state has different requirements and obtaining the right coverage is crucial. Again, you can achieve this inside of your Gusto portal, using NEXT Insurance.

5. Benefits Compliance: Be aware of state-specific requirements for employee benefits, such as sick leave and family leave policies. There are some states like California, where certain laws kick in with as few as 5 TOTAL employees (across all states, not just in California). So be aware of what these are. If you’re unsure, you can upgrade your Gusto plan to include HR and get answers to this.

Ready to hire? Here’s a step-by-step:

How to register in another state

1. Research state-specific employment laws. Once your candidate has accepted your job offer,
2. Register your business in the new state. We recommend using a service called CorpNet. If you have Gusto, you can initiate this inside of your gusto portal and have everything more integrated.
3. Set up payroll to handle state-specific tax withholdings. You can easily accomplish this in Gusto (including sending the offer letter!)
4. Obtain necessary workers’ compensation insurance. This is another service Gusto will coordinate within their system.
5. Ensure compliance with state-specific employee benefits requirements.
6. Update your employment contracts to reflect state laws. Hire a lawyer or check out Coaches & Company Contract Templates.
7. Consult with a legal or HR professional to review your compliance. Gusto offers HR in their premium plan. Well worth it once you have a few employees, or even just one in another state!

By following this checklist, you can seamlessly integrate out-of-state employees into your online business, ensuring both compliance and operational efficiency.

Need help setting up Gusto? Need to chat about whether you can afford to hire? Let’s chat! You can book a consult call here>

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