By Susan H. McCollum – October 2022
What does it mean to work remotely? It is a worker who does their job from a location other than a central office run by the company. It could be at home or anywhere outside the traditional office building.
Given the option to work remotely, 87 percent of employees take employers up on that offer. A mere 13 percent of employees say they could work remotely at least some of the time but choose not to. Forty-one percent of employed respondents don’t have the choice.
The Good News for a Company With Remote Workers
Companies have good reasons to offer remote work. A remote workforce can help lower the high costs of office space, parking, and other on-site benefits. Growing companies can plan ahead to expand and venture into new markets without the time and expense of expanding their physical footprints. Remote, flexible workers tend to be happier and more loyal employees. Remote work is a great way to recruit and retain excellent employees. Talented self-starters are drawn to companies that offer flexible working arrangements. Employees may work harder to keep the trust to work off-site. A remote workforce takes fewer sick days and there is no danger of spreading a sick worker’s germs to other employees. Employees seem better prepared to be productive and innovate when they are on the job.
The Good News for Workers
Working from home has been shown to provide better work-life balance, lower stress, allow more time for fun, and improve personal relationships. Research shows that people who want to work remotely report feeling happier and more productive when they do. Choosing telecommuting over a daily drive also benefits employee wellness, as commuting by car has been linked to both higher stress levels and respiratory problems from pollution. Those working from home are better able to take breaks in the workday for exercise and to prepare healthier meals.
The Bad News for Employers
In some businesses, face-to-face meetings and office collaboration are important. Without them, gaps in communication can occur. Without onsite supervision, some employees may find it difficult to stay motivated. Without social interaction, the esprit de corps can suffer. Sometimes remote workers don’t stay in sync with the daily pulse of on-site work. Managers may not know how to manage remote workers. Sometimes, organizations don’t realize near-term cost savings from remote work. But these challenges can be overcome with the right upfront investment in tools and resources. At a bare minimum, most people will need reliable high-speed internet, a computer, and a phone to work from home. Some remote jobs require certain upload and download speeds, typically anywhere between five and 15 MBPS. Invest time teaching teams to optimize virtual collaboration tools such as file sharing and virtual meetings.
One thing that employers cannot escape is compliance with the laws of the state where their workers are physically present and working. If an employer permits remote work outside the locality or state of operations, the employer must take steps to ensure compliance with those state and local laws. Employers could inadvertently become liable for diverse state benefit programs or mandates, such as paid leave requirements, minimum wage, required disclosures, wage statement requirements, etc.
The employer is responsible for withholding payroll taxes from a remote worker’s paychecks, just as they do for a worker in the home office. The employer will need to register with the tax agencies and labor/unemployment agencies in each state it has remote employees.
If the worker is an independent contractor or freelancer, the company does not pay employer taxes, does not withhold income taxes, and does not need to register with the agencies in the state where the worker is physically working. However, the company must have the contractor fill out a W-9 form; and, at the end of the year, the company must complete a 1099 form for each contractor the company paid more than $600 during the year. The freelancer must take care of paying all appropriate taxes, regardless of where they live.
Beware! If the company classifies an employee as an independent contractor and it has no reasonable basis for doing so, then the company may be held liable for employment taxes. So, the company must be very careful not to label a worker as an independent contractor if they are really an employee.
Bad News for Workers
Remote workers might miss the social benefits of being present with a team. Employees have a responsibility to take reasonable care of their own health and safety at work. Anyone who works from home should keep in regular contact with their manager. They should also tell their manager about any physical or mental health and safety risks.
The remote worker is ultimately taxed on all income as a California resident, and California-sourced income as a part-year resident or nonresident. The worker’s state may have an income tax requirement for anyone working in their state. This can lead to being taxed by both the state of residence and California.
Independent contractors or freelancers are self-employed, not employed by the company. So contractors handle their own taxes, including self-employment tax. This means that when the company pays independent contractors or freelancers, the company does not have to withhold payroll taxes from their pay.
The independent contractor or freelancer worker must fill out a W-9 form. At the end of the year, the company must complete a 1099 form for the contractor which reports to the IRS how much the company paid the contractor in non-employee compensation. The independent contractor or freelancer must take care of paying all appropriate taxes, regardless of where they live.
Making a Winning Remote Work Environment
There are a number of ways that a company and remote workers can help to assure the success of remote working. All of them are important.
- Dependable tools.
Both solo work and team-based work can now be done remotely if people have the right tools. Design your systems for efficient searching and indexing. Make sure your system security and mobile access allow remote workers full ability to collaborate. Remote work can reduce costs in the long run. However, it takes an upfront investment to see savings later on. Put the right tools and resources in the hands of remote workers. Be flexible and generous, and see the results
- Fair policies.
Remote working may bring up issues of fairness, especially if working remotely is viewed as a perk. Policies perceived as unfair or inconsistent quickly affect morale and camaraderie. Develop a remote working policy. Clearly define participation rules and guidelines for remote workers, including expectations and etiquette around remote meetings. Make remote workers feel part of the team. Give them digital access to publications and business information that others have or may share onsite. Keeping remote workers in the loop builds team camaraderie.
- Responsive support.
The company wouldn’t let onsite employees’ computers stay down for a day. Similarly, a remote worker needs the same degree of attention to IT performance, security and support. The company’s support needs to pay attention to remote worker requests, and maintain the tools to handle issues remotely.
- Manage change.
Remote work is an organizational change that affects everyone. Manage the change that comes with remote working by thinking and planning ahead. Develop training and communicate with leaders and workers to help them adjust to the new work environment. Show trust in remote workers. Keep listening and communicating.
Remote Working is Here to Stay.
Great companies are becoming less about where employees work and more about the talent, energy and commitment they bring to their work. A healthy remote workforce can attract and keep high-caliber people, improve productivity and lower costs. It can make it possible for your company to grow. If your company can provide dependable tools, fair policies, and reliable support, it can make the changes necessary to reap all of the benefits of a remote workforce.
 Learn more about how to determine whether a worker is an employee or an independent contractor at https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee .