Following the start of the COVID-19 pandemic, working remotely is more popular than ever before. Business owners and employees have had to work around the current situation which means making accommodations for nearly every business endeavor. If you’re in charge of a whole team, then you know how important it is to continue the payroll process without any interruptions. Even though handling payroll while working remotely may seem a great deal more difficult, in reality, it doesn’t have to be. Paying your employees is necessary and that’s why we have outlined a few tips that you can implement to ensure that your employees are taken care of.
Figure Out the Type of Remote Worker
Before you take on payroll duties and try to figure out how it works, it’s important to determine whether your team members are employees or contractors. When it comes to the IRS, there is a specific set of guidelines to highlight the key differences between the two but to save you time, you can ask yourself the following three questions:
- Is it necessary for your team member to take part in an onboarding process or schedule?
- Does your team member need to abide by a set of guidelines or are there specific tools they need to use?
- In terms of work schedule, is there a certain number of hours they need to complete weekly?
After reviewing these questions and saying “yes” to at least two of them, then your team member can be classified as an employee. If otherwise, then they are a contractor. The key difference here is that contractors have a bit more freedom in the way they work and at the same time need to handle their taxes.
Once you have a better understanding of the types of workers that make up your team, you can think about how you are going to go about compensating your employees. Because they are working remotely, there are several options:
- Pay based on company location: Depending on where your company operates from, you might offer your employees a set salary based on the cost of living and the average salary for that job title.
- Pay based on employee location: In the case that your employee lives in a different state than the one your company operates in, then you would need to consider the cost of living in their state and to remain equitable.
- Pay based on national median: If you are considering this pay option, then this ultimately means you will be paying your employee the median annual wage for that job title.
Remember to Have Your Employees’ Payroll Forms on File
Organization and being on top of all your files and paperwork is a vital component to running a business and remote employee forms should not be an exception. As a best practice, here are a few important documents you should always have accessible:
- Form I-9: This form will confirm that your employee is legally eligible to work within the United States.
- Form W-4: This document will determine your employee’s federal income tax withholding.
- Employee Handbook Acknowledgement: Depending on your business, you might require all employees to read through the company handbook to understand all guidelines.
- Direct Deposit Forms: If you offer direct deposit to your employees, this is an important document to refer back to.
Payment Methods You Can Use
Now that you are aware of the types of employees, have given thought to how to approach salaries, and know what documents to have on file, it’s important to ask yourself how you will be paying your employees. There are several payment methods out there to help you in the payroll process. Whether you want to take a more traditional route or upgrade to something more tech-based, there is a payment solution for you.
Consider these options:
- Direct Deposit: This is perhaps one of the easiest and most common methods. Your employee’s earned wages are deposited directly into their bank accounts on payday.
- Paycard: If you have unbanked or underbanked employees, paycards are a great tool to offer to your team. With a paycard, you can deposit their earned wage onto the card, and your employee can use their card to pay for bills or make any purchases as if it was a debit card.
- Check: With a paper check, you can pay your employees either through a payroll software or by handwriting them yourself.
Withhold the Proper Payroll Taxes
Regardless of the payment method you choose to implement, every time you pay your employees you must withhold payroll taxes. The most important and immediate taxes are the federal income tax, Social Security tax, and perhaps a Medicare tax. Depending on your state, you may even need to withhold state and local income taxes. If your employees reside in a different state, then it is essential that you look into any state taxes you need to account for when paying those employees.
Follow State Laws
Just like how you are required to withhold payroll taxes, there are specific pay and employment laws for remote employees that you must uphold.
These laws include:
- Minimum wage laws
- Local income taxes
- Pay frequency
- Workers comp requirements
These laws differ from state to state so be sure to follow the set of laws designated for your state.
As life begins to go back to normal, remote work has become a fixture in how companies are operating. With your employees being spread out and even in different states, figuring out the best way to pay them may seem like a challenge but it can actually be quite simple if you follow a few simple steps.
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