As a small business owner who’s had remote employees across the US, there are two big problems. (These are specifically about remote employees, not remote contractors.)
First, to pay payroll taxes to employees who live in different states, you have to jump through a bunch of hoops with each state’s government. For example, when we had an employee living in Colorado, we had to set up a business relationship with the state of Colorado - using a fax machine. They literally wouldn’t accept paperwork any other way - it had to be via fax. Later, when that employee moved to another state, we had to tear down our relationship with Colorado (or else keep paying business fees to Colorado), plus set up tax paperwork with the employee’s new state. All of this cost us time & money.
Second, health insurance was a lot more complex. We wanted to offer the best possible health insurance to all of our employees, but health insurance companies make that massively complicated, with various rules about where the majority of staff lived, where each person lived, which plans were available in which states, etc. If I could do it all over again, I probably would have just given each employee an allowance to use on their local state’s open health insurance market, but that’s a hot mess too.
I am doubtful the author is truly managing people carelessly across 14 time zones without jumping through significant legal hoops, or is rather hiring contractors instead that manage their own legal responsibilities.
I’m in the same situation, with the exact same problems.
We also found 401k's to be a problem that our payroll vendor that had helped us with all the state issues before we had a 401k, couldn’t handle (or didn’t want to handle). So we had to change everything to switch to Paychex.
Basically everything is harder than it should be, because the states all have crazy rules and are set up to deal with local companies.
> First, to pay payroll taxes to employees who live in different states, you have to jump through a bunch of hoops with each state’s government.
While this is a pain and can be costly, isn't it still far cheaper to pay the fees to the states and your accountant than renting an office?
> If I could do it all over again, I probably would have just given each employee an allowance to use on their local state’s open health insurance market
Doing that would save you money by not having to manage the health insurance yourself. It's ridiculous that companies are even responsible for providing health insurance but that's another conversation.
The savings you get from not managing healthcare would probably offset the extra cost of multi-state payroll.
> While this is a pain and can be costly, isn't it still far cheaper to pay the fees to the states and your accountant than renting an office?
Depends on your location. At one point, we had 9 people scattered across multiple states. On one hand, it would have been cheaper to have a small office in an inexpensive location, and force folks to come into an office say, 2 days per week. We’d have been able to ensure that everyone lived in the same place, and avoid the multi-state tax & health care hassles.
We chose to be fully remote because it enabled us to hire better people. The people you want aren’t necessarily in a specific geographic location (nor do they want to move there), and the people you want may have financial incentives to stay where they’re at. The people you want may also choose to live in more expensive areas for quality of life reasons, too.
I found it amusing that, even though we were fully remote and our employees could live in cheap places to maximize their salaries...they didn’t. In fact, we all chose some of the most expensive places in the US to live: downtown Chicago, Manhattan, Miami, San Diego, etc.
This is all true from a straight up numbers perspective, but in my experience, a fixed expense like a 3 year office lease is less stressful than managing fluid expenses like fees imposed by a dozen state governments.
I'm still very pro remote work, but people tend to underestimate how logistically expensive it can be—especially when a team gets bigger—compared to simply leasing an office and saying "Everyone works here."
It's possible to have a remote company that only hires employees in one or a few states, though. As an employee, I would much rather work for one of those than one that required me to work from a specific office.
Yeah, that is a thing. At my last job, we had a mix of remote and in office workers. If you did end up going remote, there were some states that weren't allowed because of, from what I guess, OP is saying.
Trinet is a PEO[0] and Gusto is just for managing your payroll and benefits...two very different business models. In the former, your employees technically become TriNet employees and have agreements with virtually every state (so yes they would cover the). It's just not cheap. Gusto just facilitates the process to find/manage insurance/benefits and your employees are still your employees.
Gusto will make the correct payments, but you still have to set up your "business" in each state. I have the same problem too. I still get a bill from the State of Washington every month, despite the fact that my last employee there left over a year ago.
> Compensate your employees well, have them be independent contractors.
Absolutely, that’s a valid choice. We chose the employee approach because that’s what I would have wanted as an employee: I didn’t want to hassle with health insurance, taxes, vacation, hardware, etc. I wanted to just show up to work and have my employer take care of the rest, so that’s the company I built. (We definitely went overboard trying to make things easier for the employees.)
Most of our competitors in this same space take the contractor approach, and I’d say that’s better for the company for sure. I understand why folks do it, and I don’t think there’s a wrong answer - both have pros and cons. My comment just wanted to lay out a couple of answers to the post’s question, “Why aren’t more companies remote-first?” Hopefully I achieved that.
Within the USA, I like hiring people via the employee route.
I'm paranoid that one or more contractors will do something like not pay their payroll, file for unemployment, or simply claim they should have been an employee all along. I'll consider contract arrangements for people that are clearly contractors with their own business, people outside the USA, and short term engagements where someone specifically asks in writing to be a contractor. Anyone who doesn't otherwise say so is going to be an employee. I consider the certain overhead of having employees to be insurance against the uncertain overhead of are-my-people-employees-or-contractors shenanigans.
That is likely not legal in the US. An independent contractor needs to be "independent" for the most part. If they work 40 hours a week, 50 weeks a year, for the same company they are considered an employee and can't be given a 1099. They should be a W-2 type employee. Now if the company wants to hire another company to be the legal employer of the employee they can do that. But still need to be a W-2 employee.
Not to say that people/companies don't do it, but the companies that do are leaving themselves open to legal issues.
> If they work 40 hours a week, 50 weeks a year, for the same company they are considered an employee and can't be given a 1099
IANAL but this is not the legal framework for determining whether someone is a 1099 resource. There are plenty of people who work 40 hours a week, 50 weeks a year for the same company and are still legally considered IC's.
Behavioral: Does the company control or have the right to control what the worker does and how the worker does his or her job?
Financial: Are the business aspects of the worker’s job controlled by the payer? (these include things like how worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
Type of Relationship: Are there written contracts or employee type benefits (i.e. pension plan, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the business?
Are remote contractors easier due to how things get billed out? I am assuming that puts the accounting burden on the contractor instead of the employer.
That’s correct, however, it is a one-stop shop instead of becoming a local employer. It can be tricky though because contractors without their own legal entity can be qualified as employees in many countries, especially if they have only one client or only a few clients.
Fortunately none of those two issues are relevant where I live. That sounds very tricky indeed.
I used to work a few months at a time from my home office in another country. It worked fantastically well. I like to be able to concentrate without interruptions, and, as the timezone was different from the office, I got a very nice overlap where co-workers would provide work for me as they left for the day, and I would have that sitting in my inbox when I started working. Then, when my day was over, they would have the work ready for them when they got in (for that kind of one-day jobs).
Of course there was also video conferences and such. But, as our customers are everywhere anyway, it didn't make any difference if one or two of us from my company were in different locations when we had video conferences with them.
Don't mean to burst your bubble but they are. If you don't have proper work visa, you can't work from the country you are in. Most companies ignore local immigration laws and allow you to work remotely from wherever. And this is fine by what I consider should be allowed. However it doesn't mean it's legal.
Hold on, I didn't add all details to my post. Didn't think that would be necessary, it's not the point of the discussion after all. Of course I had the relevant regulations covered. There are detailed bilateral agreements between my home country and those countries I have worked in.
We were talking about regulations that make remote work difficult. I am not aware about bilateral agreements between countries that allow remote work. Can you share?
Remote work simply falls into the category 'working for a company that does not have a local presence', which (depending on the bilateral agreements, which can vary a lot) can have different rules than when the company has a local presence. This is almost always about taxation (where to pay the tax). In other words, to work remotely you may need a working permit of some kind, which I've had in various countries.
First, to pay payroll taxes to employees who live in different states, you have to jump through a bunch of hoops with each state’s government. For example, when we had an employee living in Colorado, we had to set up a business relationship with the state of Colorado - using a fax machine. They literally wouldn’t accept paperwork any other way - it had to be via fax. Later, when that employee moved to another state, we had to tear down our relationship with Colorado (or else keep paying business fees to Colorado), plus set up tax paperwork with the employee’s new state. All of this cost us time & money.
Second, health insurance was a lot more complex. We wanted to offer the best possible health insurance to all of our employees, but health insurance companies make that massively complicated, with various rules about where the majority of staff lived, where each person lived, which plans were available in which states, etc. If I could do it all over again, I probably would have just given each employee an allowance to use on their local state’s open health insurance market, but that’s a hot mess too.