June 25, 2022

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Boulder County firms see challenges for HR, accounting while allowing remote work

The coronarvirus pandemic forced many companies and organizations to shift employees to remote work, but now that the country is easing up on pandemic restrictions, it has become very clear that many employees like the flexibility of working from home. Many do not want to come back to the office, having proved to themselves and their employers that they can do their jobs from anywhere. But what are the human resources, legal and tax implications of maintaining a remote workforce?

“Remote work has many advantages for both employees and employers,” said Kathy Gardner, vice president of communications at FlexJobs in Boulder. “In fact, our latest survey found 57% of people said they’ll leave their job if they can’t have remote work options moving forward.”

That’s why it is important that employers thoughtfully execute their remote-work policies. Otherwise, they will “face some common HR hurdles and challenges, including conflicts with scheduling, establishing trust within teams, practicing proactive and effective communication, and cultivating and maintaining strong company culture from a distance,” she said.

Kathleen Alt, an attorney at Boulder law firm Berg Hill Greenleaf and Ruscitti, advises business clients on the legal, accounting and HR challenges posed by allowing employees to work remotely. (Cliff Grassmick/Staff Photographer)

Attorney Kathleen Alt, a partner and co-chair of Berg Hill Greenleaf Ruscitti’s employment practice, said that when organizations decide to allow employees to work from home, they must first determine who in the organization qualifies for the privilege and how often it is allowed. That determination “should be based on a legitimate, objective business reason. The reason for that, to go through that process, you have to be mindful of discrimination and disparate treatment claims. You don’t want a situation where employees feel discriminated against.”

The general rule of thumb is that employers must treat similarly situated employees similarly.

“Employers often forget about that. They often are trying to manage a practice group or business line, but if you are saying everyone in this business line can work from home three days a week, make sure you are identifying a business reason for that and implementing that fairly across the board,” Alt said.

Gardner added that if remote work and work flexibility are integrated thoughtfully into a company, they can have tremendous benefits on employee/employer relations.

“One of the biggest is a shift in the way managers interact with employees. Instead of managing by face-time, focusing on the amount of time someone spends in the office, managers in flexible work arrangements need to focus more on the results people have and the processes that make them effective at work,” she said. “It really deepens the relationship between managers and employees because they communicate in more meaningful ways, they both understand what’s expected for a role, and they have to work together to make sure things proceed accordingly.”

She added that managing remotely is different than managing people in-house. The good news, she said, is that the skills that make really good remote managers can make really good managers from any location.

“The main difference is that remote managers need to shift management practices to rely less on visuals and more on proactive communication, regular check-ins, goal-setting, and results-focused management. But really, all managers can benefit from relying less on face-time and more on processes and results,” Gardner said.

Out-of-state employees

If some employees are working from other states, it is important that employers understand those states’ legal requirements. Each state has different wage and hour laws, minimum-wage requirements, paid time off, vacation and sick-leave requirements. They even have different laws impacting how employees get reimbursed for business expenses.

If there are specific wage and hour laws around discrimination and harassment, a company should follow the laws in the state where the company is based because those laws apply to the employer. Laws that apply to employees specifically must be followed in the state where the employee lives and works.

“It can be very complicated,” Alt said, adding that employers don’t need to hire an attorney to help them with these issues. Many companies have turned to professional employment organizations to administer their benefits, timekeeping and payroll.

Such organizations help companies manage the HR aspects of their business, including developing the employee handbook and managing all of the forms a company would need, as well as policies that must be followed depending on which state the company and employees operate from.

Another thing to consider when allowing employees to work remotely is computer data and data privacy issues.

“When you have remote workers, you have this issue of a distributed computer network environment, so breaches are more common,” Alt said.

To keep a company’s customer and client data secure, she recommends getting cybersecurity insurance and having policies and procedures in place that govern how remote workers keep their data secure. That might mean providing laptops to those workers so that the company can partition what they are doing for the company from what they are doing personally. It is important that employees sign off on these rules and regulations to protect a company from liability.

“Part of the challenge of having remote workers is you don’t know how much your employees are working because you are not right there,” Alt said. Non-exempt employees are still entitled to overtime pay so it is important that there are policies and procedures in place for how they track their time.

“The onus is on the employer to make sure it is keeping accurate time records for employees so employees are properly paid.”

Some employees don’t need a lot of oversight. They do what they need to do and put in their hours every day, but others need a bit more structure. It is up to the employer to put procedures and policies in place to ensure that every remote worker knows exactly what is expected of them. Employers don’t want employees to work too much, but they also don’t want them to work too little. It is a double-edged sword.

It is important for employees to know a company’s expectations for how much they should work and when. Many companies now insist that remote employees log off by 6 p.m.

“Know your workforce and set expectations for availability. Make sure they are not working all the time because it does lead to burnout,” Alt said.

Kathy Gardner, vice president of communications at FlexJobs (Courtesy of Kathy Gardner)

Remote work poses daily challenges for workers, such as the inability to unplug, dealing with non-work distractions and dealing with technology problems, Gardner said.

“Many strong remote workplaces institute boundary-setting initiatives like unplugged hours (where emails cannot be sent or received after hours), have minimum time-office policies (rather than maximums) to ensure adequate time away from work, and regular workshops to help employees with developing skills like mindfulness, focus and self-care,” she said. “Technology stipends and financial support can often help employees deal with technology and Wi-Fi issues to ensure their home offices are well equipped.”

She added that it is critical to be considerate about the time zone and working hours of team members, and also pay attention to the “amount of time a team needs to have synchronous versus asynchronous communication to thrive and be successful, individual team members’ preferred work hours, and a clear schedule that takes into consideration these points and is respected by the team members.”

Alt recommends that employers have their human resources directors speak to each remote worker to make sure there aren’t any safety or data security concerns.

It is always a good idea to speak with your workers compensation carrier, agent or broker to make sure your company is covered by cybersecurity insurance and expanded workers compensation for remote workers. Workers compensation policies should cover injuries that take place at home, like people tripping over their dog and breaking a bone.

Alt also encourages employers to get employment practices liability coverage. It won’t protect them from overtime or wage an hour claims but it will protect them from discrimination and harassment claims.

State and local taxes

Different states have different tax requirements— some more onerous than others— so it is important that companies research the areas in which they are searching for employees or allowing their remote employees to work from before it happens.

“When an employee earns wages in another state, this may subject the company to many state and local tax filings due to that employee’s presence, including payroll withholding, unemployment filings, income tax filings, sales tax filings, gross receipt tax filings to name a few,” said Jeanette Tolar, state and local tax partner at Plante Moran. “There are thousands of taxing jurisdictions in the United States at both the state and local levels, and it is almost impossible to be 100% compliant.  If we just look at sales-tax jurisdictions, there are over 7,000 jurisdictions that administer their own sales tax, have their own returns, and tax base.”

Tolar said that it is important that companies think about the tax implications of having remote workers in other states before they hire someone to work in those states.

“Clients come to us and say we’re thinking of hiring a person here, what does that mean for us as a company?” she said. It is important that “companies be as proactive as they can. They don’t want to be on the back end trying to clean it up,” she added.

During the pandemic, many states were offering safe harbor provisions limiting taxation of remote workers, but as the pandemic restrictions wind down, so have those safe harbor provisions. It is important that employers understand which states to avoid.

Tolar and her team in state and local tax conduct nexus reviews all the time determining where companies should be filing taxes. If for some reason a company hasn’t been filing proper taxes in a different state where it has remote workers, she works with them and the state in question to work out a voluntary disclosure agreement. Usually if a company comes forward voluntarily, a state will only make them pay back taxes for the prior three or four years and waive the rest, she said.

“Many companies are unaware they may have employees that moved to other states if the employee has not notified [their] employer,” Tolar said. “This causes errors in payroll withholding and a nightmare to fix when the employee realizes the wrong state withholding has occurred when they receive their W2.”

Another issue companies should be aware of is that states are fighting over employee wages and where they should be taxed and employers are in the middle of it.

New York, for example, has a “convenience of the employer” rule that states that an employee who is a resident of another state and works for a New York employer will have New York source income regardless of whether they worked remote in another state, unless the employee is required to work outside of New York, she said.

“If the remote employee works in a state that does not provide a credit for taxes paid to New York, the remote employee may face double taxation. This also can be a liability to the employer … which tax does the employer withhold from the employee?” she asked.

As with legal help, companies should make sure they have a qualified tax person either on staff or on retainer to help them navigate all of the intricacies of taxation.

“You have to be familiar with the laws of the states in which you are operating as they apply to the employer and to the employees,” Alt said.

The University of Colorado Boulder has an extensive policy regarding remote work. The CU Boulder Remote Working Toolkit states upfront that not every job at the university is suited to a remote work environment, and that being able to work from a remote location is “not an entitlement, it is not an organizational benefit, and it does not change the terms and conditions of employment with the University of Colorado.”

If a company allows its employees to work remotely in another state, it may wish to consider using a professional employment organization to help administer benefits and manage payroll and timekeeping in accordance with the laws in the states where they employees live. (Shutterstock)

Employees who are working in other states are responsible for any tax or legal implications under IRS, state and local government laws, and/or restrictions of working out of a home-based office. The toolkit emphasizes that “responsibility for fulfilling all obligations in this area rests solely with the employee.” It adds that some of the university’s benefit plans are not available outside of the state or have limited coverage outside of Colorado. International employees are required to meet with an International Tax Specialist to ensure accurate taxation of their pay and to review for potential tax treaty benefits that might be available to them.

Many employers would prefer their employees come in to the physical workplace to collaborate and for better supervision, but the “workforce is so tight right now, what workers are looking for now is flexibility, to work remotely and in different parts of the country where it is less expensive or just where they want to be,” Alt said. “Because of workforce constraints and what workers are demanding, employers have to adjust on a per person basis. That is not going away.”