Remote work compliance

Colleen Malmassari
Founder of Back40 Advisors LLC

As remote and hybrid work continues to shape the workplace, many employers are discovering that flexibility comes with a complex set of compliance challenges. When employees live and work in different states than where their employer is located, new rules come into play—especially around taxes, labor laws, and reporting requirements. This can even be a factor for short-term travel arrangements. Staying compliant across multiple jurisdictions requires more than good intentions; there needs to be structure, tracking, and a clear understanding of each state’s regulations.

The first step toward compliance is knowing where employees are actually working. What may seem like a simple detail can quickly become complicated when employees move, travel, or work from multiple states throughout the year. Tracking employee work locations is critical because it affects everything from payroll tax withholding to workers’ compensation coverage. Employers should have clear policies requiring employees to report changes in their work location and use technology that can help monitor where remote work is being performed. Accurate data ensures tax and legal obligations are handled correctly from the start.

Once employee locations are confirmed, the next challenge is navigating the web of state-specific employment laws. Each state has its own requirements regarding minimum wage, paid leave, overtime, final pay, and workplace postings. Even states that border one another can have vastly different rules. Employers that fail to comply are at risk for costly penalties and even employee claims. Conducting a review of each state where employees work—and documenting compliance measures in standard operating procedures—helps ensure nothing slips through the cracks.

Tax compliance is another area where multi-state remote work can create confusion. In many cases, employers must withhold income taxes and pay unemployment insurance in the state where the employee performs their work, not necessarily where the business is headquartered. In rare cases, both states may have applicable payroll deductions.  This may also trigger registration requirements for new state tax accounts or even business nexus obligations. Partnering with a knowledgeable payroll provider or tax advisor can help streamline these processes and prevent costly mistakes.

Worker classification should also be reviewed in light of remote work. Some states have specific tests for determining whether an individual is an employee or independent contractor, and misclassification risks can multiply across jurisdictions. Employers should ensure consistent use of classification standards and document decision-making processes to maintain compliance in audits or disputes.

Clear communication is key in managing remote work compliance. Employees should understand their responsibilities when working out of state, including reporting their location, maintaining accurate time records, being responsive to administrative changes, and adhering to state-specific requirements. Transparent policies make expectations clear and reduce misunderstandings that can lead to compliance issues.

Building a strong infrastructure around remote work compliance means integrating HR, payroll, tax, and legal processes. Establishing standard operating procedures ensures that employee location changes are tracked, tax accounts are updated, and legal requirements are reviewed on a regular schedule. This structure helps personnel with assigned HR responsibilities manage complexity with confidence and provides leadership with the assurance that compliance risks are being addressed proactively.

The shift to remote work has transformed how—and where—business gets done. But with that flexibility comes new responsibility. Organizations that invest the time now to formalize tracking systems, update policies, and clarify procedures will be better positioned to manage a distributed workforce in 2026 and beyond. Remote work can remain a competitive advantage, but only when supported by strong compliance practices and clear operational discipline.

Colleen Malmassari, a Society for Human Resource Management-Certified Professional, Professional in Human Resources, is the founder of Back40 Advisors LLC.