This is an excerpt from my chapter in IR Global‘s latest publication ‘A Global Guide for In-House Counsel’, which you can download here.

How are you helping your clients to manage legislative and taxation issues around their transient workforce? For example, are there bi-lateral agreements with other jurisdictions or tax provisions to be aware of?

With respect to tax compliance, clients should use a payroll service or software that accommodates workers in all the US states and provides a fully compliant process for the payment and withholding of taxes for both employer and employee. Often this requires business registration in other states and cities, a new employer tax identification number and the filing of corporate tax returns and payment of taxes on revenue earned where employees are located. In order to avoid costly legal and financial surprises, it is critical that businesses carefully consider these issues with an accountant and/or tax attorney in connection with each jurisdiction where they permit employees to work.

Employers should regularly review their personnel policies and practices and raise the level of internal sophistication in terms of human resources and personnel management. Companies are expected to comply with the laws applicable to the location where employees actually provide services even if the business does not have a physical presence or office location there. For a remote workforce within US borders, that would include compliance with federal and state laws and regulations, as well as local ordinances. Employment laws vary significantly across the states with the most common differences found in minimum wage requirements, the method and timing of payment of compensation, leaves of absence, paid sick time benefits, harassment and discrimination protections and employer recordkeeping requirements.

For US employees working outside the country, it is critical that employers get local legal and accounting assistance or risk being out of compliance in very significant ways.