Is This Legal? A Complete Guide to Remote Staffing Compliance
If you’re a business owner, executive or HR manager who found yourself suddenly thrust into the world of remote work and managing remote staff, you probably experienced a pretty big learning curve. Not only in setting up remote systems, learning remote tools and ensuring remote security, but also in comforting the anxieties of your new remote staff, and trying to maintain company culture and morale in a dispersed environment.
This type of emergency-shift to remote work is definitely unprecedented, so applaud yourself and your business if you managed to maintain any sense of normality.
Now that the dust is beginning to settle, you might be starting to see some benefits of having a full or partially remote workforce that you hadn’t considered before, or just hadn’t had the time to explore.
You wouldn’t be alone, either. In a very recent survey, nearly three out of four finance leaders in a variety of industries said they now plan to move at least 5% of their workforce that had previously reported to an office to a full-time, remote schedule.
As a remote-first company and advocate in the remote workspace, we love hearing that other businesses are experiencing the benefits of remote work first-hand. However, If you’re considering looking into remote staffing as an option for the future, there is another learning curve you might need to master: remote staffing compliance.
In this article, we’ll walk through all of the different options for remote staffing, the pros and cons of each, and how to maintain remote staffing compliance when using each of them as a solution for your business.
Note: Companies in the medical and financial sectors may have additional requirements or legal obligations that require further research, but the information below will give you a good baseline on where to start with remote staffing.
Staying Compliant with Remote Freelancers and Virtual Assistants
Freelancers (also referred to as ‘gig economy’ workers) and virtual assistants offer companies the attractive benefits of hiring pre-trained remote staff without incurring the costs associated with a full-time employee.
However, this type of remote staffing can often present a dilemma when it comes to remaining compliant. The laws are complex, and many businesses are often confused about how to classify freelancers.
It’s a widespread problem, too, with an estimated 3.4 million employees classified as independent contractors when companies should report them as employees. And even if unintentional, misclassification can lead to dire consequences for businesses, including heavy fines, penalties, lawsuits and even jail time.
One of the reasons these laws are so complex is because there is an element of ambiguity in their language and varying criteria used by the Department of Labor (DOL) and the Internal Revenue Service (IRS). However, a few key criteria are consistent among all guidelines, (apply to both remote and in-house staff equally) and center around:
- Behavioral Control of the staff member
- Financial control of the staff member
- Relationship between the staff and business
Behavioral control of the staff member
Behavioral control refers to the when, where, and how for your staff member. If you’re looking to classify a new member of your team as a freelancer or independent contractor, you cannot attempt to control where they work, when they work, and how they work (i.e. what type of equipment they use, etc.) The same criteria apply to bringing on a remote virtual assistant.
Financial Control of the remote staff member
The first aspect of measuring financial control of the contractor is whether or not they rely on your business solely or largely for financial support. (For example, does 80% or more of their income come from you?). If so, it’s a slippery slope when it comes to classification, as they probably need to be considered an employee.
There are also other factors to be aware of, like the fact that the freelancers should have some unreimbursed business expenses (i.e. their own equipment or travel costs) are paid hourly, and set their own prices.
Relationship Between the Staff and Business
The ‘relationship’ factor of employee classification vs contractor classification is where most of the ambiguity comes in. According to IRS guidelines, the relationship with a contractor should follow the following factors:
- The contractor was not offered vacation time or other benefits
- The contractor has a contract that’s separate and different from the contract of an employee
- The contractor does not perform a role within the company that is directly related to the purpose of your business
- The contractor is not a long-term presence at the company
This means, if you plan to hire a contractor or virtual assistant for the long-term, it’s likely that you are not within remote staffing compliance regulations. And if for example you’re a marketing firm and you plan to hire a freelancer to do anything related to marketing, that would be considered a key role within your business and, again, count as misclassification.
Staying Compliant with Remote Employees (W2’s)
If your goal is to hire remote workers as direct employees, the process is not quite as murky, but can still be complex and time-consuming.
The legal requirements for conducting business vary by each state in the US, and each different country. Employers of remote employees must always be mindful of the state and local laws where their remote employees reside (because remote employees will be considered an employee in the state where they live, not your businesses HQ). Therefore, there are a few things you ask yourself each time you hire a remote employee in a new location:
- Have you registered (foreign qualified) to do business in that state?
- What are the corporation tax implications in this particular state/location?
- Have you registered with the state’s labor department in order to employ people in that particular state? (required)
- What are the wage, overtime and hour requirements in this state/location?
- Posting requirements: what posters do you legally need to ‘display?’ (For a remote workforce, you can mail posters!)
- Does your new hire have legal authorization to work and have you filled out an I-9 for them (required!)?
- What are the state disability insurance requirements and other benefit requirements (around vacation time, breaks, paid sick leave, etc.)
- If you’re hiring in another country, have you taken into account local requirements??
This is not an exhaustive list, however, it’s a good starting point to get you familiar with the issues. Again, each state is different, so if you’re planning on hiring nationwide, you’ll need to familiarize yourself with the laws and the additional expenses involved every time you add an employee in a new state. Oftentimes business tax implications can far outweigh employment expenses.
You can also look into using a PEO (professional employer organization) to help you with things such as payroll for remote employees in different states, but be aware this does NOT guarantee compliance across the board, and you’ll still need to register to do business in each state.
As we said, time-consuming. But after you get a few new hires under your belt and streamline the process, it may become easier.
Staying Compliant with Subscription Staff
If all of the above feels overwhelming, you might want to consider a different approach to remote staffing: Subscription Staffing.
Subscription staffing burst onto the scene in 2018 to provide a more efficient and compliant solution for remote staffing that would appeal to both small businesses and Fortune 500’s. Subscription staffing is a ‘people as a service’ model whereby businesses simply pay for the hours they need for remote talent to fill key roles.
This is particularly attractive for businesses that don’t require a full or part-time person, allowing them to bring on skilled team members for the long-term while the subscription staffing company takes care of employment and all compliance issues.
Here are the key components of how subscription staffing works:
- Businesses and executives get fast matching (usually within a week) to talented, guaranteed staff without recruitment
- The subscribing business or executive pays a single monthly payment to the subscription company without the burden of payroll, contracts, and other legal issues
- Most importantly, businesses get the flexibility and scalability to work with someone or multiple people on a fractional basis for the exact amount of time you need each month in the role they need
The reason subscription staffing differs from freelance or virtual assistant solutions is because subscription staff are employees (W2 employees) of the subscription staffing company.
Boldly pioneered this revolution after realizing the need for a compliant solution in bringing on top-talent flexibly. All of Boldly’s team members have 10-15+ years of experience in their field, so being able to utilize that expertise on a monthly basis has been a win-win for both small and large companies in a variety of different industries.
Not only does a subscription staffing model cover legal and HR compliance, but it also has a built-in support, retainment system and inclusive culture for the team member assigned to you.
Remote work can be lonely but Boldly ensures inclusive and empowering support to keep its remote employees as engaged and productive as possible. There’s also no payroll, taxes, or invoices to deal with; businesses just pay one simple monthly subscription based on the number of hours they need.
Subscription staffing is currently an option for businesses seeking support in executive assistance, marketing, project management, bookkeeping or paralegal.
Create Your Remote Staffing Compliance Plan
No matter how you choose to approach remote staffing, the best thing you can do is to formulate a plan. Ask yourself:
- What roles should I start with when hiring remote staff?
- How long do I need these roles to come onboard and how many hours per week or month do I want to allocate for these roles?
- What’s my current bandwidth? Do I have time to explore compliance or should I pursue an out-of-the-box solution like subscription staffing?
Best of luck to you in your remote hiring journey!
If you have questions about remote compliance or subscription staffing, get in touch!
Topic: Remote Staffing
Updated on December 9th, 2022