Multistate Payroll: What Businesses Need to Know

Multistate Payroll: What Businesses Need to Know

Businesses with employees who work in multiple states may find that paying them correctly and on time can be confusing and complex. There’s more to consider than just the payroll tax requirements for the states where employees work.  Read on to learn more about the unique challenges of operating a business with remote workers and how to handle payroll. 

State and Local Taxes

When it comes to withholding taxes, businesses must be aware of the state and local laws in each location where employees work. Employers are responsible for collecting taxes from employee wages and remitting them to the appropriate tax authority. Therefore, it is essential to understand each state's tax rates and filing requirements or deadlines. Employers should also be aware that some localities impose income tax that should also be withheld from the employee’s paycheck in addition to state and federal tax.

Time Tracking

Time tracking is also a critical part of multistate payroll. Employers must have an effective system in place to track when employees work in each state, as some states may have different overtime rates or other pay regulations. Time worked must be accurately recorded to be compliant with state laws. In many cases, time tracking software can automatically send time data to a payroll system. Payroll systems can be set up to calculate worker wages and adjust payroll taxes by tracking remote worker time and location.

Paying Employees

Paycheck distribution is another crucial factor when it comes to multistate payroll. Paying employees by direct deposit may be the easiest way to ensure they get paid on time. But, some states have laws that govern the use of electronic payment systems. Therefore, employers should understand the various regulations in each state to determine how paychecks should be distributed. Many businesses have benefited from using payroll providers who can handle the complexity of multistate payroll.

Unemployment Insurance

Unemployment insurance is also something businesses need to consider with multistate payroll. Each state has its own unemployment insurance program, and employees are typically eligible for benefits only in the state where they work. Therefore, employers must understand and comply with each state's requirements to ensure that employees are eligible for benefits.

Workers Compensation

Businesses should also be aware of additional insurance requirements, as each state has laws governing employees' compensation if injured on the job. In most cases, workers' compensation insurance is required, and companies must ensure they have the necessary coverage to protect their employees.

Paying employees located in multiple states can be challenging, but it doesn’t have to be complicated. From withholding taxes to time tracking, paycheck distribution, and workers' compensation, there are many factors to consider. However, with proper preparation, businesses can ensure compliance while providing fair wages and benefits to their employees.

Learn more from CBIZ professionals by accessing a recent on-demand webinar: Navigating Multistate Payroll: Compliance for Today's Remote Workforce

The information is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. This information is provided as general guidance and may be affected by changes in law or regulation. This information is not intended to replace or substitute for accounting or other professional advice. You must consult your own attorney or tax advisor for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.

Multistate Payroll: What Businesses Need to Know with a remote workforce across multiple states face unique payroll challenges. Learn how to navigate state and local taxes, time tracking, paycheck distribution, unemployment insurance, and workers' compensation to ensure compliance and efficiency.2022-12-05T17:00:00-05:00Businesses with employees who work in multiple states may find that paying them correctly and on time can be confusing and complex, but it doesn't have to be.NoneHRIS SolutionsPayroll ServicesYes