Remote Workers and Payroll Considerations

​Remote work has always been an attractive proposition to employers because they can maintain productivity while cutting costs. Prior to 2020 having a remote workforce was an optional decision. Despite the benefits, many companies still chose to maintain employees in-house to foster a positive organizational culture and reduce technology needs. However, the recent pandemic has proven that external factors can influence the workforce at any time. This has necessitated organizations to be ready to manage the challenges that accompany virtual work even if they do not plan to have employees working remotely permanently.

Managing a remote workforce creates numerous barriers to “business as usual.” Cultural shifts occur, technology demands increase, security risks arise, performance criteria change, and bookkeeping must keep up as well.

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 There are significant payroll considerations when employing remote workers. For books to remain in order, sound accounting practices must accompany HR procedural shifts related to:

Hiring
When employees are hired, new documents like I-9 and W-4 forms are required. Copies of important documents like a social security card, driver’s license, and passport may also be required. These documents are primarily used by HR to verify an employee’s identity and indicate tax status. However, they are also crucial from a bookkeeping standpoint because payroll calculations cannot be accurate without these forms being completed correctly in a timely manner. 

Employers may also ask new hires to fill out health insurance, life insurance, and 401K forms depending on the benefits package offered. These elections will also affect payroll withholdings, making them essential from an accounting standpoint.  

Hiring employees remotely requires these documents to be provided, verified, and stored to equip withholdings calculations from day one. Otherwise, employers may end up having to take additional sums out of employees’ paychecks to make up for missed withholdings. 

Employment Distinctions
Workers must be classified as “employees” or “independent contractors” because there are firm legal distinctions between these two titles. It is essential to determine this as part of the hiring process because the burden of withholdings falls on companies for employees and on the individuals themselves for independent contractors. 

While most organizations understand the difference between these classifications under normal circumstances, hiring remote employees can complicate matters. Remote work poses a challenge because of differentiators like whether the company has the right to control how the worker does the job or who provides the tools and supplies necessary to do the job are muddled when workers are at home. A professional accountant can advise on which type of worker a new hire should be classified as and what kinds of accommodations must be provided to uphold that distinction. 

Time Tracking
Company protocol and policies must be provided to staff to track hours (like hourly employees or contract workers). While some smaller companies still use manual time tracking, larger employers typically utilize software to allow staff to punch in and out or track their labor hours as they do work online. Using the right technology to fit the work performed is crucial. Still, it is just as essential to ensure that time tracking software integrates seamlessly with your payroll platform to reduce the occurrence of payroll errors or fraud. Lean on your bookkeeper or accountant to determine which system will best tie in with your existing financial software. 

Reimbursements
Employees that need reimbursement for their expenses must submit completed reimbursement forms and wait for repayment regardless of where their location. However, when the employee, manager, HR team, and bookkeeping/accounting staff are all in different places, this process can drag on needlessly if the procedures are not in place to encourage timely communication. When workers are remote, having streamlined systems in place is essential for avoiding processing delays and accounting for these expenses appropriately.

Termination
When employees and contractors are fired, laid off, or furloughed, the paperwork required to process these transitions is just as necessary as the hiring procedures that brought them on board. Severance packages or termination benefits must also be processed and accounted for in a way that maintains bookkeeping best practices. Always ensure that the expenses associated with releasing employees are recorded in the period incurred, or reporting can be skewed, and fines and penalties can result.
 
Contractual Obligations
The contractual obligations that employees agree to when hired further complicate termination and turnover proceedings. Employer contracts like nondisclosure and non-compete agreements can be required and affect termination benefit values if there is a contract breach, which requires that information about these areas be conveyed to bookkeeping and accounting staff if an issue arises. 

Are you looking for additional payroll information? Visit our payroll resource hub to learn more about Washington and Oregon payroll laws and other timely payroll topics for businesses.