Key takeaways
- Employment law generally follows the employee's work location, not your headquarters.
- Every new remote state can bring payroll registrations, pay rules, leave laws, and notices.
- Several states require employers to reimburse necessary work expenses, which can include home internet and phone costs.
- Employees working from another country can create tax and legal exposure for the company.
- Judge remote employees on outcomes, and watch for proximity bias in reviews and promotions.
A remote workforce works mostly or entirely outside company offices, while a hybrid workforce splits time between home and an office. Managing either one means handling the legal, payroll, policy, and management questions that come with people working in many locations.
A product designer tells her manager she is moving from Austin to Denver. The manager says that's fine, since she is remote anyway. Nobody tells HR for four months. In that time, the company hasn't withheld Colorado income tax, hasn't registered for Colorado unemployment insurance, and hasn't applied Colorado's paid leave or pay transparency rules, even though the company now posts jobs open to Colorado residents.
The fix involves back registrations, amended filings, and an awkward conversation about the designer's own state tax return. A single sentence in the remote work policy would have prevented all of it.
Why work location drives everything
US employment law mostly follows where the employee physically works, not where the company is based. An employee working from home in New Jersey is generally covered by New Jersey wage laws, leave laws, and tax rules, even if the company has never had an office there.
That has practical consequences. Each new state can require income tax withholding registration, unemployment insurance registration, sometimes local tax registration, workers' compensation coverage that applies in that state, compliance with that state's minimum wage, overtime, pay frequency, and final pay rules, paid sick leave and family leave programs, required notices, and in some cases pay transparency rules for jobs open to residents there.
This is why every remote policy needs a rule about where employees can work and how they request a move.
Payroll tax complications
Generally, income tax is withheld for the state where the work is done. A few states complicate that. New York and several others apply a "convenience of the employer" rule, which can tax nonresident employees who work remotely for a New York employer for their own convenience as if they worked in New York. Reciprocity agreements between some neighboring states let employees pay only their home state.
Unemployment insurance generally goes to one state per employee, based on where the work is localized. A full-service payroll provider that supports every state where you have people is the practical answer. Our payroll guide covers multi-state payroll.
Equipment and expense reimbursement
Several states, including California and Illinois, require employers to reimburse employees for necessary business expenses incurred in doing their jobs. For remote workers, that can include a reasonable share of personal phone and internet costs when they are required for work. Federal law also limits deductions or unreimbursed costs that would push a non-exempt employee's pay below minimum wage.
Many companies handle this with a monthly remote work stipend plus company-provided equipment. Write the policy down, and make sure it meets the requirements of the states where you have employees.
Remote hiring paperwork and notices
Form I-9 still requires document examination within three business days. Employers enrolled in E-Verify and in good standing can use the DHS remote alternative procedure. Others can use an authorized representative who examines documents in person. Our I-9 guide explains both.
Required federal and state posters must be available to remote employees, usually electronically in a place they can easily find, such as the HRIS or intranet. Some states also require written notices at hire, such as wage notices.
Hours, breaks, and non-exempt remote employees
Non-exempt remote employees must record all hours worked, including the quick email at 9 p.m. Make it easy to track time, prohibit off-the-clock work in writing, and set expectations for when people should and shouldn't respond to messages. State meal and rest break rules still apply at home. Managers who send late-night messages expecting a reply create overtime exposure without realizing it.
Safety, workers' compensation, and data security
Injuries that happen while working from home can be covered by workers' compensation if they arise out of and in the course of employment. Encourage a safe home workspace and make it easy to report injuries.
Data security matters just as much. Require company-managed devices where possible, secure connections, password managers, and clear rules about printing and storing sensitive documents, especially for HR, payroll, and finance staff who handle employee personal information.
Employees working from another country
An employee who moves abroad, or a new hire who lives outside the US, raises bigger questions. Working from another country can expose the company to local employment law, social security contributions, income tax withholding obligations, and sometimes corporate tax exposure if the activity creates a taxable presence. Immigration permission to work there is the employee's problem only on paper. It becomes the company's problem quickly.
Set a clear rule for working abroad, often allowing short stays and requiring approval for anything longer. For permanent international hires, an employer of record is often the safest route. See our EOR and global payroll guide.
Writing the remote and hybrid policy
A good policy answers the questions employees and managers actually ask. Who is eligible, and how are roles designated as remote, hybrid, or on-site? Where can employees work, and what is the process for moving? What are core hours and response expectations? What equipment and stipends are provided? How do in-office days work for hybrid roles, and are they team-coordinated? What are the security requirements? How are performance and promotions handled fairly regardless of location?
Hybrid policies work best when teams coordinate their office days. Commuting in to sit on video calls with colleagues who stayed home frustrates everyone.
Building connection across locations
Remote and hybrid teams don't lose culture automatically, but they do lose the accidental parts of it: the hallway conversation, the quick question answered over a desk divider, the lunch where someone learns how another team works. Teams that stay connected replace those moments on purpose. They write things down, so decisions don't live only in one person's head. They schedule regular informal time, which works better in small groups than at all-hands meetings. They bring people together in person a few times a year if the budget allows, with an agenda that favors collaboration and relationships over presentations. And they make onboarding especially deliberate, because new remote hires can go weeks without the informal introductions office workers get on day one. Our onboarding guide covers remote onboarding in detail.
Training managers for distributed teams
Managing remote people is a different skill, and most managers were never taught it. Train them to set clear outcomes instead of monitoring activity, to run effective one-on-ones over video, to notice signs of isolation or burnout without the visual cues of an office, and to make decisions in writing so everyone sees the same information. Be cautious with employee monitoring software. Beyond the trust it costs, several states require notice before electronic monitoring of employees, and New York is one example.
Managing performance and avoiding proximity bias
Proximity bias is the tendency to favor people you see in person. In hybrid companies it can quietly steer stretch assignments, praise, and promotions toward people in the office. Counter it by judging work on outcomes, documenting contributions in a shared place, rotating visible assignments, and reviewing performance ratings and promotions by work location during calibration.
Remote employees also need deliberate connection: regular one-on-ones, clear onboarding, occasional in-person gatherings if the budget allows, and written norms that office workers learn by watching. Our performance review guide covers fair reviews for distributed teams.
Remote and hybrid workforce checklist
Work through this list with your team. The printable PDF version has space to tick each item off.
- Write a rule about where employees may work and how to request a move
- Register for payroll taxes in every state where employees work
- Confirm workers' compensation coverage in each work state
- Apply each state's wage, leave, and notice rules
- Check the convenience of the employer rule and reciprocity agreements
- Reimburse necessary expenses where state law requires
- Provide posters and notices electronically
- Use the right remote Form I-9 process
- Track all hours for non-exempt remote employees
- Set security requirements for devices and data
- Require approval before working from another country
- Use an employer of record for permanent international hires
- Coordinate in-office days for hybrid teams
- Review ratings and promotions by work location during calibration
Where to go from here
Wherever you are in the process, there is a next step that fits.
Keep reading
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Email templates for this topic
Ready-to-edit emails with subject lines, compliance notes, and a free PDF.
- Return to office announcement email templateAnnounce a return-to-office or hybrid policy with the schedule, reasons, flexibility, and accommodation process.
- Flexible work request response email templateRespond to a request for remote work, a compressed schedule, or reduced hours, with a decision and a trial plan.
- Accommodation request acknowledgment email templateAcknowledge a disability, pregnancy, or religious accommodation request and start the interactive process.
- Onboarding buddy introduction email templateIntroduce a new hire to their peer buddy and explain what the buddy is for.
Frequently asked questions
Which state's laws apply to a remote employee?
Do I have to register in a state for one remote employee?
Do I have to pay for remote employees' internet?
Can employees work from another country?
What is proximity bias?
Sources
We checked the facts in this guide against these primary sources. Laws and thresholds change, so confirm current rules before you act.
Written by the HRTally Research Team
Our guides are written and reviewed by people with hands-on US HR, payroll, and HR technology experience. Legal and tax facts are checked against primary sources, such as the Department of Labor, IRS, EEOC, and USCIS, and linked at the end of each guide. Vendors never review or pay for our editorial content.