payroll tax for remote employees

Dollars and Sense: Managing Payroll for Remote Employees in Multiple Time Zones

Although employers want to return to the office, it’s clear that remote work is here to stay. A 2022 Buffer poll showed that 97% of remote employees want to continue to work from home. To keep up with the work-at-home demand, companies must streamline payroll management to manage payroll for remote employees, payroll taxes including working in different time zones.

How to Manage Payroll for a Remote Employees or Hybrid Team

If you want to manage payroll across multiple time zones, you need to establish a system that caters to everyone and ensures prompt payment. You should also utilize payroll software.

Create a Procedure That Covers you Legally to Manage Payroll for Remote Employees

Payroll can be a complex endeavor, especially if your team is distributed in different locations across the globe. To cover yourself legally, you need to understand the payroll and employment laws that govern your freelancers and employees in their countries and follow them to a “T.” 

One thing that often trips up employers is employee classification. Freelancers and contractors are often hired remotely, but more and more employees are starting to work out of their homes. If you misclassify your remote staff or miscalculate wages, you’ll pay a hefty fine, so be careful!

Consolidate Employee Pay Dates 

Payrolls for remote employees on the same day and time, regardless of department or location, can maximize payroll efficiency. Not only does this reduce the number of pay cycles, but it also eliminates possible errors and duplication. Consolidating your pay dates is the best way to limit mistakes.

Manage Employees’ Leave and Attendance

Accurately collecting employee leave, attendance and overtime help you maintain reliable payroll documents. If you’re using Buddy Punch’s time clock software, you can track employee schedules, limiting payroll mishaps and ensuring everyone is paid what they’re owed.

By tracking your employees via software, you receive up-to-the-minute attendance data thanks to its clock-in and clock-out functions. More sophisticated software can provide insight into how team members spend their time. With this data, you can better understand your budget limits.

Set Up Alerts for Payroll Deadlines

If you don’t process payroll for remote employees on time, you could damage your reputation with the government and your employees. Be sure to set payroll deadlines for taxes and paydays based on the laws in each individual country. You can set alerts in your payroll software if you need a reminder.

Implement an International Payroll Software

Speaking of payroll software, its adoption is absolutely necessary if you want to manage payroll in multiple time zones. An online payroll management system will give your team the ability to access data all over the world, which allows them to make changes and collaborate instantly.

The best part about a payroll system is automation. You can cut down on repetitive tasks (and save yourself a lot of time) if you set your software up to distribute payslips and tax worksheets automatically. In the end, payroll software will drastically improve your daily payroll operations.

Cross-Train International Payroll Staff

Whether you have a large or small team, you shouldn’t rely on one person to handle all of your payroll tasks. While setting up a communication channel can fast-track your workflow, be sure to cross-train your payroll staff to empower them to undertake more than one task at a time.

Consider Outsourcing Payroll 

Switching over to a remote workplace is a long and complicated process, especially if you can’t navigate multiple languages or regulations. If you need to hire talent from a different time zone but you don’t have the knowledge to handle this task yourself, consider outsourcing your payroll.

An outsourcing company is a third-party service provider that takes care of the international payroll process for you. Thus limiting your compliance risks for remote employee payroll management. By eliminating the stresses of payroll, you can focus on other core business needs, such as expansion and engagement.

Payroll Taxes for Remote Employees

In general, when you pay a remote employee, you are responsible for paying the state and local taxes that are mandatory  in the state in which the employee works.
If an employee of yours working in the same state in which your company works, then you need to withhold state income taxes and pay state unemployment insurance (SUI) taxes in this state. It’s possible that you’ll also need to deduct state and local taxes from their paychecks.

What about Employees Who Work from Home and Reside in Different States?

In any state in which it has remote employees, your business will be required to register with the relevant tax authorities (state and maybe local). It is possible that you will also be required to register with the labor and unemployment bureaus in each of the respective localities.
After that, you will be obliged to make tax deductions and withholdings in the states in which your employees are employed.
Let’s imagine for example that your company, which is situated in Washington, hires a remote worker in the state of Florida. You will need to ensure that you are in compliance with all of Florida’s regulations regarding your tax liability. In addition to this, you are obligated to conduct study on their labor laws and comply with them.

Payroll Tax for Remote Employees and Contractors

Independent contractors are responsible for their own tax preparation and filing. However, this does not release your organization from all of its obligations in any way.

Freelancers based in the United States will still need to complete the following two steps:
1. Give a W-9 form to your contractor and have them fill it out. This document, titled “Request for Taxpayer Identification Number and Certification,” is an official request for a taxpayer identification number. In order to complete step two, you will need the information on this form.
2. If you have paid a contractor more than $600 throughout the year, you need to fill out a 1099 form for them. Use this form to report to Uncle Sam the amount of non-employee remuneration that you provided to members of your team. One copy will be sent to the IRS, and the other will be to the freelancer.
They are responsible for everything else.


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