For nonprofits that struggle with recruiting and retention, it can be difficult to adjust to the dynamics and ‘new normal’ of the post-COVID-19 world. The nonprofit staffing crisis will not be solved by sticking to outdated hiring and recruiting practices, but you should also have a clear understanding of the challenges that have arisen from changes to the labor market. One of the most obvious examples is the prominence of remote work as a potential perk offered to employees.
The potential benefits are obvious. Say a long-time and valued employee decided to move away to another state. Normally, this would mean a loss in productivity as you scramble to replace their valued contributions and institutional knowledge. However, the availability of remote work tools and increasing adoption of this practice could make it a valuable tool for retention. This applies just as much to hiring — being able to hire from anywhere creates a massive increase in the pool of potential new employees. Despite these benefits, hiring or employing people out of state is not without risks.
If you’re considering exploring or expanding your remote work policy, here are some key issues you might face:
Legal Considerations
As legal residents of another state, your out-of-state employees are subject to the various labor laws and regulations that apply to anyone working in that state. This can make compliance difficult, as you will have to reexamine everything from the questions you ask in job interviews to your employee handbook and onboarding process. This can have a number of impacts on the terms of employment, including:
- Licensing: Depending on the nature of your organization and the kind of work you do, some states may require a license for you to employ people in that state.
- Employment law: As each state has a unique set of employment laws, these may be significantly different from those governing your home state employees, particularly laws around overtime hours, the accrual of vacation time, parental leave, or collective bargaining rights.
- Non-discrimination and employee rights: Many states will require you to physically or digitally ‘post’ information regarding that state’s employee laws, minimum wage, and nondiscrimination regulations. If you are hiring out of state, you may also be restrained in what you can ask, particularly around criminal history or their previous salary. Some states also restrict the use of noncompete agreements.
Benefits and pay
As with labor law, the benefits and pay you are required to provide can change from state to state, and as such, you will need to be able to track exactly how this works should you recruit or employ out-of-state team members. Even in areas not specifically governed by laws, your benefits package could also create potential issues. Here are some important considerations:
- Minimum wage and base pay: Anyone working in a different state is subject to their minimum wage laws, and will have to be remunerated to that minimum amount by their employer.
- Paycheck frequency: This is something that can change from state to state, and impacts everything from when employees receive their paychecks to when they receive their last check should they quit, be laid off, or fired.
- Overtime, paid vacation, and other pay codes: Each state has different regulations on what qualifies as overtime, when, and for how much. This also applies to accrued sick and vacation time, which may be wildly different from your organization’s home state.
- Expenses and home office bonuses: Some states may require you to reimburse out-of-state employees for expenses like home office equipment, internet service, phone service, or rental fees for a coworking space or other arrangement.
Taxes
One of the most complex aspects of utilizing out-of-state workers is the taxes, as this can quickly become cumbersome both on the employer and the employee. Depending on where your employee chooses to move, they and you may be subject to payroll or other employee taxes in both states. While the pandemic led to some states relaxing these rules, and allowing employers and employees to simply tax from the ‘home’ state of the employee, many of these rules have expired. Here are some of the most common issues that come up when dealing with out-of-state employees and taxes:
- Unemployment: A key consideration, as the nature of unemployment funding and disbursement may change from state to state, and depending on the two states in question, maybe more favorable to the employer than the employee, or vice versa. Here, determining the localization of work is critical, as this will decide where unemployment taxes are paid.
- Double-taxing payroll: Your decision to operate out-of-state employment or work with an employee who wants to move out of state could depend on the states in question, as some states do not waive the requirement to have employee pay taxed by both states. As remote work becomes more and more common, regulations around these rules are likely to change, as they can create excessively complex situations that limit organizational and employee flexibility.
Communication is key
The nature of and difficulties that can arise from this new normal are not just a product of legal hurdles. The question of remote work, especially across state lines, has become a ‘battleground’ of sorts, creating tension even at otherwise harmonious workplaces. Being able to communicate with your team members, being honest about these considerations and difficulties, and helping them feel comfortable disclosing their desire to move will help smooth this process in a way that works better for everyone. Even if you opt to not support an out-of-state employee hiring or retention program, clearly explaining why to your staff will help them understand the unique challenges such a program can bring and why they don’t work for your organization.
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The information contained in this article is not a substitute for legal advice or counsel and has been pulled from multiple sources.
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