Remote and hybrid work give teams more flexibility, but they can also add a few extra wrinkles to payroll.
Most of the issues stem from what’s called “nexus.” Nexus is a link between a business and any state that can create income, sales, or franchise tax requirements. Having even one remote employee in certain states is enough to trigger withholding.
The primary driver for income tax withholding is where an employee performs services, not their state of residence.
Some states offer limited exceptions through reciprocity agreements or de minimis thresholds for short-term work. But most mandate withholding from the first day.
Beyond income tax, unemployment insurance sourcing, paid family and medical leave reporting, and new state registration obligations add additional complexity.
The key is having solid systems that accurately track where work happens. Consistency in hybrid schedules can also make wage allocation easier to manage.
If you need help with your payroll, let us know.