Today’s guest blogger is Mark Arrow. Mark is the CEO/President of Headcount Management. Besides being an NPAworldwide vendor, speaker and staffing industry advocate, Headcount currently services multiple NPA clients. Headcount is a leader in back-office solutions designed specifically for staffing agencies. Today he discusses some of the legal, tax, and payroll challenges associated with distributed workforces.
Headcount makes doing staffing deals (also known as: contract, temp, contingent) simple for NPAworldwide members. Essentially, once candidates are placed, Headcount will professionally onboard, insure and payroll employees. Headcount also invoices clients (with your agency’s branding), accounts for all monies, provides detailed KPI’s and profit reports…and of course, profits. The Back Office, their newest initiative, is the industry’s easiest way for agencies to produce weekly payroll, invoices, and profit reporting via agency insurance and funding.
Since 2008, Headcount has helped staffing firms across all 50 states mitigate liability, reduce costs, and maintain full hiring compliance. Here are some testimonials.
Technological advancements have paved the way for increased work flexibility among employees. Remote working, coupled with the freedom for employees to choose their working hours has emerged as crucial factors in attracting and retaining talented individuals. Yes, some companies have resisted remote work. However, embracing distributed workforces and contingent labor can prove advantageous for both the company and the workers involved.
Distributed Workforces Allow Employers to Access Global Talent Pool
Organizations that offer remote work have a unique opportunity to tap into a global talent pool. Forgoing geographical location equips companies to hire the most skilled individuals at competitive rates, irrespective of their proximity. Additionally, most industries are still navigating widespread talent shortages in virtually every position. Implementing global talent acquisition strategies can play a significant role in addressing these gaps and filling critical vacancies.
Despite its many advantages, a distributed workforce still presents its fair share of obstacles. Engaging with dispersed or remote employees introduces legal, payroll, and tax challenges. Organizations must be well-informed about employment compliance and taxation requirements in each jurisdiction where their employees operate. This intricate and time-consuming process demands careful attention and navigation.
Every U.S. State Has Individual Employment Laws to Consider When Hiring Remotely
Like most legislation, individual U.S. states (as well as territories such as Puerto Rico and Guam) have individual laws to consider when hiring remotely. Every hire brings with it considerations for various withholdings, compliance mandates, and different paperwork requirements.
Additionally, if you are hiring beyond the United States, maintaining legal compliance gets exponentially more complicated. Whether you employ permanently remote employees or leverage cycles of contingent labors, most distributed workforces will typically reside in several states, and potentially even several countries. As a result, employers must stay up-to-date on the various laws and regulations specific to each location.
Non-Compliance With Individual State Laws Can Carry Penalties and Fees
Non-compliance with state hiring laws can result in substantial financial repercussions, such as fines and fees. As a result, it is crucial for companies to ensure compliance with labor laws in the respective jurisdictions where their workers reside or work from. This entails adhering to HR, tax, and payroll regulations, as well as fulfilling mandatory benefits requirements, such as state-mandated retirement plans or worker’s compensation.
Payroll Tax Legislation Varies Across Individual States
As your workforce becomes more geographically dispersed, ensuring compliance becomes increasingly intricate due to variations in payroll taxes across states and countries. Taxation rules differ not only at the local and global levels but also between state and federal jurisdictions.
The payroll tax challenge is further compounded by the constant evolution of legislation. Organizations must not only adhere to existing regulations but also stay vigilant about ongoing changes and make necessary adjustments.
Given the divergent legislations at the local level, standard contracts may fail to align with labor laws in different areas. Consequently, in addition to compliance considerations, organizations should have contracts that can be easily updated to adhere to regulations.
Payroll for Distributed Workforces — What You Need to Know
Payroll encompasses more than just transferring funds to your workers. It entails various aspects that come into play when adjusting payroll according to different jurisdictions. Organizations bear the responsibility of managing withholdings, deductions, tax filings, and deposits, which can include taxes related to unemployment, retirement, benefits, and more. These obligations vary depending on the state or country where your employees reside.
Also, remote or contingent labor qualifie as a “digital nomad,” moving across different regions or even countries while remaining employed by your organization, they may establish a tax nexus.
As the employer, you would then be accountable for fulfilling the corresponding tax obligations associated with this nexus.
Seeking Professional Assistance for Your Global Workforce
Managing workforce compliance can be overwhelming, even for seasoned HR professionals. Companies that prioritize talent acquisition based on skills and capabilities, rather than location, gain a significant advantage over organizations that limit themselves geographically. For organizations on the fence, there is help available to navigate the complexities of remote payroll taxes.
What is The Role of an EOR?
Engaging an employer of record (EOR) or agent of record (AOR) ensures compliance with employment classification, streamlines onboarding processes, and facilitates efficient payroll processing.
An employer of record (EOR) assumes the legal employer responsibilities for tax purposes. The employee performs work for the end-user hirer, staffing firm, or another business entity, while the EOR handles essential back-office functions such as payroll taxes.
Engaging an EOR streamlines all personnel-related functions associated with “professional payrolling,” including payroll processes, tax deposits and filing, and employment contracts and paperwork. A global EOR is well-equipped to handle international hiring complexities, possessing local entities in multiple countries and a deep understanding of local labor laws and regulations.
Headcount Management creates customized EOR solutions for staffing and recruiting companies across the U.S. Our extensive local and national insight on constantly changing laws and regulations can help you hire the best talent — and maintain compliance. Contact us today for more!