Hiring a remote employee or managing team members across state lines in 2025?

This guide breaks down exactly what small business owners need before they hire remote workers—legally and financially.

From multi-state registrations and payroll to remote onboarding, you’ll learn how to protect your business from fines, unexpected taxes, and HR headaches.

You’ll learn:

✅ What to do before you hire a remote employee
✅ How to handle state registrations and tax withholding
✅ Common mistakes to avoid (and how they can cost you thousands)
✅ Why payroll software like OnPay is essential for multi-state compliance
✅ Remote onboarding tips to streamline your process

👉 Ready to simplify multi-state payroll and onboarding? Explore OnPay: https://www.jamietrull.com/onpay

Why Remote Hiring Is Worth It (But Risky if You Wing It)

I run a fully remote team spread across four states.

The upside is massive: access to the best people (not just the nearest), stronger culture built on trust, and the ability to scale without office overhead.

The trade-off?

Compliance expands with every state line you cross.

You’re not just hiring a person—you’re hiring in a state with its own payroll taxes, wage laws, and reporting rules.

Handled right, it’s smooth.

Handled casually, it’s costly.

Step 1: Decide—Employee or Contractor? (Don’t Misclassify)

“Remote” ≠ “contractor.”

If you set hours, provide tools, and direct how work is performed, that worker is very likely an employee—paid via payroll with taxes withheld.

Some states make classification even stricter (hello, California’s ABC test).

Misclassification penalties add up fast in back taxes, interest, and fines.

Quick help: Use the free Worker Classification Tool to stress-test your decision:
👉 https://onpay.com/tools/worker-classification-checker/

Tip: If you do engage contractors, require an executed agreement, collect a W-9, and track 1099 obligations.

Re-evaluate status as the relationship evolves (added control or ongoing schedule often tips to employee).

Step 2: Before the Offer—Do a State Readiness Check

When your employee works from another state, that state gets a say. Complete these tasks before their start date:

A. Register as an employer in the employee’s state

• State Workforce/Labor (Unemployment Insurance) – to pay SUTA/UI.
  
• State Department of Revenue (Withholding) – to withhold and remit state income tax (if the state has one).
  
• Local tax agencies where applicable (some cities/municipalities levy payroll or local income taxes).
  

B. Confirm workers’ compensation requirements

Some states require coverage for your first employee; others have thresholds or industry carve-outs.

Remote and home-based employees can still trigger coverage.

C. Check local rules you’ll need to budget for

• State or local minimum wage above federal
  
• Paid sick leave/paid family leave mandates
  
• Expense reimbursement rules for remote work (e.g., internet, phone, equipment in some states)
  
• Meal/rest break laws and daily overtime rules
  

D. Add the state to your new hire reporting workflow

Most states require reporting a new employee within 10–20 days. Many payroll providers file this automatically when you onboard.

Pro move: Build a simple intake form for candidates that captures their work location (down to the city/county). That lets you quote compensation and total employer cost accurately before you send an offer.

Step 3: Pick Payroll Built for Multi-State (This Is Non-Negotiable)

DIY payroll breaks down fast when you add states (SUTA rates, local add-ons, reciprocal agreements, city withholding, varying forms and due dates…).

Use software that automates multi-state rules, files federal/state forms, and reports hires to the right agencies.

Why I recommend OnPay for remote teams:

• Multi-state included (no extra per-state upcharges that quietly blow up your budget)
  
• Files federal and state tax forms automatically
  
• Handles new-hire reporting to the proper state agencies
  
• Streamlined onboarding packets (W-4, I-9 support, direct deposit, handbook acknowledgments, e-sign)
  
• Live, human support (invaluable when you’re adding a new state)
  

👉 Try OnPay and get a $100 referral reward with my partner link: https://www.jamietrull.com/onpay

Step 4: Price the Role Correctly—Your Total Employer Cost Formula

To avoid margin shock, estimate the all-in cost before you post the job:

Base wages

• Employer payroll taxes (FICA match + FUTA + SUTA; SUTA varies widely by state and by your experience rate)
  
• Local payroll/income taxes (where applicable)
  
• Workers’ comp (state- and role-specific)
  
• Statutory paid leave premiums or funding (where applicable)
  
• Benefits (health, retirement match, stipends)
  
• Equipment & remote stipend (if required by law or your policy)
  = Total employer cost
  

Example snapshot (illustrative):

• $65,000 salary
  
• 7.65% FICA match ≈ $4,973
  
• FUTA (capped) ≈ up to $420 (often net lower with credits)
  
• SUTA at 2.7% on first $7,000 ≈ $189 (your rate/state may differ dramatically)
  
• Workers’ comp: role/state dependent (say 0.6%–2% of wages)
  
• Local taxes: e.g., certain cities in OH/PA/CO; NYC has personal income tax (employee-withheld), some local employer taxes exist elsewhere
  
• Benefits & stipends as designed
  

Bottom line: Two offers with the same base pay can vary by thousands once state and local costs land. Model your top candidate locations and choose salary bands accordingly.

Step 5: Remote Onboarding—Paperwork + Experience

Remote doesn’t mean casual. A crisp onboarding builds compliance and culture.

Compliance packet:

• Offer letter with state-specific language (at-will, pay frequency, exempt/non-exempt classification, overtime expectations, remote-work policy highlights).
  
• Form W-4 (federal) + any state/local withholding forms.
  
• Form I-9 verification within 3 business days of start. If using remote verification options, follow DHS-approved methods or use an authorized representative notary/agent per current rules.
  
• Direct deposit authorization.
  
• Notice of pay rate/payday and benefits notices required by some states.
  
• Handbook acknowledgments (anti-harassment, timekeeping, leave, device security, confidentiality/IP).
  
• New hire report to the state (your payroll software can do this).
  

Experience excellence:

• Ship equipment early; include clear device/security setup steps.
  
• Day-1 agenda, team intros, 30-60-90 plan.
  
• Define how to track time (for non-exempt staff) and how to request leave.
  
• Assign a buddy and set weekly touchpoints for the first 4–6 weeks.
  

OnPay can centralize the paperwork/e-sign pieces and feed data straight to payroll and filings, which is why I recommend it for remote teams: https://www.jamietrull.com/onpay

Step 6: Which Laws Apply? (Follow the Employee’s Work State)

As a rule of thumb, wage & hour rules (minimum wage, overtime, breaks, final pay timing) are based on where the employee physically works.

If they move, your compliance obligations move with them.

Get a heads-up before relocations and build a quick “state move” checklist:

• Pause payroll for that worker only until the new state UI/withholding accounts are active.
  
• Update tax profiles in payroll.
  
• Confirm workers’ comp and any new local filings.
  
• Share updated policies (e.g., new paid sick leave accrual rules).
  

Step 7: Avoid the Most Expensive Pitfalls

1. Misclassification.

If it walks/ducks like an employee, it’s an employee (even remote). Use the Worker Classification Tool and document your determination.

2. Unregistered payroll.

1. Paying before your state accounts are set up leads to late filings and penalties. Register first; many systems (like OnPay) will guide this.

3. Ignoring local taxes.

1. Cities/municipalities can have their own rules. Capture the exact work address and configure payroll accordingly.
   

4. Underestimating SUTA.

1. New employer SUTA rates vary—and so do wage bases. Budget by state.
   

5. Skipping workers’ comp.

1. Some states require it for the first employee (even remote).
   

6. No timekeeping for non-exempt staff.

Remote hourly employees must track hours. Daily overtime and meal/rest rules can be state-specific.

No relocation policy.

Require advance notice of moves; a surprise relocation can leave you out of compliance mid-pay period.

Step 8: Policies That Make Remote Work…Work

• Remote Work Agreement. Work location, work hours, time-zone expectations, equipment ownership, data security, reimbursement framework, travel expectations.
  
• Expense Reimbursement. Some states require reimbursement for necessary business expenses (think: internet/phone use). Clarify what’s covered and caps.
  
• Timekeeping/O/T. Spell out break compliance, time rounding, pre-approval for overtime.
  
• Data & Device Security. MFA, VPN, password managers, device encryption, and return-of-property rules at separation.
  
• Pay Frequency. Some states dictate weekly/semi-monthly minimum frequencies. Configure payroll to match.
  

Step 9: Your 12-Point Remote Hiring Checklist

1. Confirm employee vs contractor status (save your analysis).
   
2. Register for state UI and withholding where the employee works.
   
3. Confirm local taxes/registrations (if applicable).
   
4. Set up/confirm workers’ comp.
   
5. Choose OnPay (or a comparable multi-state payroll) and add the new state.
   
6. Prepare the offer letter with state-specific details.
   
7. Build the onboarding packet (W-4, state forms, I-9 method, direct deposit, notices).
   
8. Schedule new hire reporting (or confirm automated).
   
9. Ship equipment and share security policies.
   
10. Configure timekeeping and leave accruals per state rules.
    
11. Model the total employer cost (wages + taxes + comp + benefits + local add-ons).
    
12. Block Day-1 and Week-1: orientation, team intros, 30-60-90 plan.
    

The “Sneaky Cost” Most Owners Miss

Here’s the budget hit too many discover the hard way: state-specific employer costs that weren’t priced into the offer—higher SUTA rates, mandated paid leave, local payroll taxes, higher minimum wages that drive exempt salary minimums upward, and workers’ comp premiums.

Add those up and your profit margin may shrink by thousands per year per employee. Price roles by location, not just title.

Tool Stack I Recommend for Multi-State Teams

• OnPay – Multi-state payroll, filings, new-hire reports, and employee onboarding packets in one place.
  👉 https://www.jamietrull.com/onpay (includes a $100 referral reward through my partner link)
  
• Worker Classification Tool – Helps you determine employee vs contractor status.
  👉 https://onpay.com/tools/worker-classification-checker/
  
• Accounting & reporting – Pair payroll with your accounting system so labor costs flow cleanly into your P&L and job costing.
  

Frequently Asked Questions (FAQs)

Q: We’re in Texas; my new hire is in New York. Do I need to register in New York?

A: Yes. You’ll register for NY withholding and unemployment, follow NY wage/leave rules, and withhold any applicable local taxes based on where they work.

Q: Can I keep paying them as a contractor if they moved?

A: Not if the relationship actually functions as employment. Re-evaluate status objectively—remote ≠ contractor.

Q: Do reciprocal agreements matter?

A: Reciprocity usually affects where the employee pays state income tax when they live in one state and work in another. You still register/pay unemployment where the work is performed.

Q: What about I-9s for remote hires?

A: You must complete verification within 3 business days using an approved method (authorized representative or DHS-approved remote processes, as applicable). Keep copies per your policy.

Q: Should I wait for state account numbers to run first payroll?

A: Ideally yes; if timing is tight, work with your payroll provider on interim steps. Don’t file late—penalties compound.

Final Word (From Your CPA Who Loves Remote Teams)

Remote hiring is one of the best ways to build a dream team—but it’s also a compliance project.

With the right sequence (classification → registrations → payroll → onboarding), it’s absolutely doable.

Get the setup right once, and you’ll hire your next out-of-state teammate with confidence.

👉 Make multi-state hiring simple with OnPay: https://www.jamietrull.com/onpay

Disclaimer: this post is sponsored, but as always—we’re only sharing tools and resources we personally use and love. Your support helps us keep showing up and supporting our small (but mighty!) team.

Educational note: This content is for educational purposes and isn’t a substitute for advice about your specific situation from your tax advisor. 

Transcript note: This transcript was generated from the video for your convenience, but it may contain typos or slight errors due to the transcription process. For the most accurate and complete information, we recommend watching the full YouTube video!

Transcript:

How to Hire Remote Workers: What Every Small Business Owner Needs to Know

Thinking about hiring a remote employee or maybe one of your current team members wants to move outta state. If you don’t handle this the right way, it could turn into a payroll and tax nightmare real fast.

Today, I’m breaking down the must know steps to legally and successfully employ remote workers without losing sleep or money Over multi-state payroll compliance.

Hey y’all. I’m Jamie Troll, your favorite CPA and financial educator, and on this channel I bring you all the information you need to stay informed, organized, and profitable in your business finances. So make sure to like and subscribe so you don’t miss a thing.

And make sure to stay into the end because I’m gonna tell you about the biggest, costly mistake that most small business owners don’t see coming before they hire those remote employees.

And how you can stop it before it drains your profit margin.

Why Hiring Remote Workers Can Help You Find the Best Talent

Remote Hiring Process and Benefits of a Remote-First Culture

Now importantly, the reason that I’m doing this video is not just from the standpoint of A CPA, it’s also because I have a fully remote team. My team is in four different states in the United States.

And that means I’ve really seen the benefits of being able to hire remote employees, but also the drawbacks and what that comes with.

Now, personally, I’ve loved being able to hire remote employees because it means that I’m able to hire a dream team. I’ve been able to find the best of the best and not be constrained by geography.

Now, I love my team and I would not want it any other way. However, I have learned some lessons along the way that I wanna be able to share with you.

Step 1: You’re Not Just Hiring Remotely — You’re Hiring in a State

Understanding Remote Hiring Process and Multi-State Employment Laws

So lesson number one is that you’re not just hiring an employee, you’re hiring in a state. And when you hire someone in a different state, that means that you are now subject to that state’s employment laws, taxes, and reporting requirements.

And that means a few things.

Number one, it means that you likely need to register with the state’s labor department and their income tax department.

And it also means that you might be responsible for new state specific withholding taxes or forms, and that’s why hiring a remote employee isn’t just a business decision. It’s also a compliance one.

Now that said, if hiring remote employees is the best thing for your business, don’t let the compliance requirements dissuade you with the right guidance and tools.

Hiring remote employees isn’t as hard as it might seem.

Step 2: Set Up Payroll and Compliance for Remote Work

Managing Multi-State Payroll When Hiring Remote Workers

Which leads me to point number two, which is to make sure to get your payroll system set up for multi-state.

That means you need a payroll provider that’s gonna be able to handle multi-state payroll requirements. That means state unemployment insurance, local tax rates, and local required reporting.

Now, not only that, you’re also gonna want to look for a payroll platform that ideally isn’t gonna charge you. Extra to employ in various different states, because I can tell you that can add up really fast, especially for a remote team.

So I actually went on the hunt a while ago looking for different payroll providers and how they handled multi-state payroll.

If you’re looking for a great payroll platform that handles multi-state employment, well then on pay is actually my top choice. And you don’t have to pay extra for multi-state payroll like you do for some other platforms.

They also file both your federal and your state tax forms automatically and will report new hires to proper state agencies.

They make it really easy to hire and onboard workers that live in various different locations without an added cost to you or your business.

Now of course, as with any of the tools that I research and recommend, I am a partner with them, and therefore, I have negotiated a special deal for you if you sign up using my partner link.

So just check out jamietrull.com/onpay.

You can learn more about them and get a $100 referral reward for using my link.

Step 3: Understand Worker Classification Laws Before You Hire Remotely

Legal Rules for Remote Working and Hiring Remote Workers

Now, the third thing you need to be aware of when you are hiring a remote employee is you need to understand worker classification laws in the state you’re hiring.

Just because they’re working remotely does not make them a contractor.

Now, if they follow your processes, work on your schedule and use tools provided by you, they’re most likely a employee in the eyes of the IRS. And that means you should be paying them through payroll, withholding the proper taxes, and paying them to the federal and state authorities.

Now, when it comes to remote employees, it can get even more confusing because some states are even more stringent with how they classify employees versus contractors.

So for example, in states like California, it is much harder to justify that a worker for you is actually a 10 99 independent contractor and not an employee.

That would mean you would have to be withholding taxes on their behalf and potentially even offering benefits.

So before you hire an employee in a particular state, make sure to familiarize yourself with those state labor rules because they may impact you as an employer.

I went into a more detailed discussion of this in a recent video I did all about the most common payroll mistakes that are made, so definitely go check that video out next if you wanna learn more.

Step 4: Comply With State Labor Laws When Hiring Remote Workers

Remote Job Compliance, Paid Leave, and Worker Protections

Now, piggybacking off of that, the fourth thing you need to know when you’re hiring remote employees is that you now are responsible for following that state’s labor laws.

Not just the federal labor laws.

So like I just said, one of those laws may be around classification of workers, and the law that exists for that state might actually be more stringent than the federal law.

But worker classification is just one of the things that can differ by state. Each state can also have its own laws around tax withholdings, overtime breaks and paid leave, paycheck, timing, and workers’ compensation coverage.

Even if you don’t live there, your employee does, and that means those laws will apply.

This is where a good HR and payroll system like on pay can be a lifesaver. They can come alongside you as you hire those remote employees and make sure that you are compliant with those state laws from day one.

They also offer expert support and resources to help simplify that process for hiring remote employees in new states.

Step 5: The Onboarding Process for Remote Workers

Creating a Remote-First Culture and Smooth Hiring Process

And the fifth and final thing that you need to know about hiring for remote work is that the onboarding process matters maybe even more than it matters when you’re hiring someone locally.

Remote employees still need clear onboarding, proper documentation, and a welcoming onboarding experience.

That means all the fun things like sending offer letters, collecting forms like I nines and W fours, setting up direct deposit, giving them access to handbooks and tools, and reporting the new hire to the state, which, like I said, onPay can do for you.

And that’s the great thing about working with a payroll provider like Onpay.

Is that they can also do those HR onboarding tasks and help simplify everything for you as you onboard new employees, even in different states.

Hidden Costs to Watch When You Hire Remote Workers

How to Protect Your Profit Margin When Hiring Remotely

Now, I mentioned something to watch out for at the beginning of this video, so what was I talking about?

It’s those sneaky state specific employer costs that you might not be aware of.

Things like higher minimum wages required, paid sick leave, or even local specific payroll taxes.

You think you’re just paying someone remotely, but all of a sudden these costs start to add up and you are eventually taking a big profit hit that you did not budget for.

And that’s why it’s really important to do this legwork upfront so that you can adequately estimate how much it’s truly going to cost you to employ someone.

And then ideally work with a multi-state payroll provider like on Pay, who can help you simplify the process because we certainly have enough things to stress about.

Final Thoughts on the Remote Hiring Process

How to Hire Remote Workers and Manage Payroll Efficiently

Now if this helped you feel either more confident about hiring remote workers or maybe made you realize there’s more to think about than you initially thought, make sure to hit that like and subscribe button so you don’t miss any more straightforward tips and tricks for your business finances.

And if you’re thinking about hiring soon, I’ve put the link down below to Onpay.

So that you can go and explore how they make it simple to hire new employees, pay your team, and stay compliant across multiple state lines, and even help with onboarding forms and tax filings so that you have one less thing to worry about.

Thanks for watching, and I’ll catch you next week.