All of my employees are remote W2 employees with health benefits, etc. Over time, employees have moved to different states and now I am paying having to pay unemployment and payroll taxes in multiple states. I use Quickbooks for payroll which automatically calculates and pays the taxes so that part is not difficult but it increases our accounting expenses having to deal with multiple states and I am wondering if there is a better way to pay people?
I do not want to pay them as contractors so that is not an option. I’ve looked at PEO’s in the past but they seem to be more expensive than just doing it the way we are already doing it.
Is there anything else out there I should be looking at to make payroll and taxes more efficient?
Disclaimer - I work for Justworks.
It likely depends on the remote states that your employees have moved to determine whether a PEO is right for you, or if you can save costs with a payroll-only provider. States like Texas and Florida tend to be pretty light on compliance, but others have a ton of payroll and employment laws to follow. Some companies get frequent state fines when doing it themselves, but some never do. That’s the risk.
The benefit of a PEO is that you have protection from employment compliance laws since we’d be taking on your compliance liabilities and handing the admin on your behalf. A payroll company would offer compliance support, but ultimately you are responsible if you ever get a fine.
Consolidating insurance, workers comp, and any ancillary benefits you offer usually provides a significant cost relief to make it less of an expense, or even a cost-neutral solution. Then you’ll spend less time on admin and have other resources to lean on for you and your employees in the form of HR consultants, additional benefits at no cost, etc. There are cheaper PEOs out there than Justworks, but you’ll want to see if they are a Certified PEO by the IRS, and check if they have other extra fees associated. Happy to chat over DM if you have other questions
If you’re at a size where the additional accounting is a pain, but not yet to the point where you’re large enough to have a dedicated payroll department/person, the expense of using a payroll service provider might just be a cost of having grown to the point that you need one.
I do not claim to know if having to pay different state taxes is needed instead of just your own. I live/work on the border between 2 states. Have employees from 2 states. I only pay them from one state, my own. Is it possible you are able to just do it from one state like I do?
“I only pay them from one state, my own.”
That is fine as long as they are regular employee who commute to the workplace in your state. Remote employees, however, generally create business nexus in the state where the remote employee lives.
We just migrated to ADP’s PEO. Our insurance is cheaper and better, and they handle all the interstate stuff. So far, it’s been a breeze.
I am curious about what your insurance plan covers and if we would get better rates via a PEO since it is a bigger group? We are currently on a high deductible HSA plan. We basically have about $5500/person out of pocket before everything is fully paid.
It’s the main reason we switched. Got an HSA plan with $3000 max OOP for same as our old $7,000 max OOP. We also offer a $6,000 OOP ($13k family) for those insuring others. It’s still better than our old plan ($14k family) but the rate is almost $400/mo lower for family.
Can’t get around multi state payroll unless you demand your employees to live in your state. To my knowledge, there is no reputable payroll company that charges the same for single and multi state payroll.
Or do what my last employer did and mark us as 1099s. It’s gonna be a fun time when April comes around.
For anyone looking for answers, do not do this.
Lol tell that to the tech industry…
Half of my co-workers switched to 1099 and have fucked off overseas to Bali and the like…
Deel is in hot water for this and its something that is gonna burn every company that does it eventually
LMFAO how stupid do you have to be to do this holy shit.
Patriot Payroll does offer multi-state payroll tax filing and doesn’t charge more for multi-state, regardless of how many states
Though there are payroll providers that help inform and guide the process better than others. I would say a conversation with Gusto is worthwhile. I’ve had clients fed up with Intuit’s lack of support and antiquated interface put the gears in motion to move over.
PEO’s take away your ability to control your company policies as the employees work for the PEO. Niural offers multi-state payroll at the same price point as multiple states. Niural is able to calculate all state, local and municipal taxes for you ensuring full complaince.
Small group rates also are about the same as a PEO rates and Niural is a full benefits broker in all 50 states.
Its got a quickbooks integration that creates journal entries for you automatically.
If they are contractors hire them thru Upwork
OP explicitly stated they are not and that OP intends to keep it that way.
In the DMV this is just the norm lol
True of lots of metros Hell when I lived in Detroit 20% of our office lived in Canada
What’s more expensive? Your time to do it the way you are doing it now, or a PEO? Our company of 20 or so is 100% remote. We use JustWorks.
Are you using just the Basic plan with JustWork or the Plus with benefits? How happy have you been with them?
At my “real” job I am grandfathered in as a remote employee in my state due to it being a smaller state that requires employers to pay out banked PTO and a couple of other legal odds and ends.
They decided to to restrict remote positions to certain states for reasons like these. (More are allowed than aren’t; I’m thinking 45-5.)
This is an issue for many employers. Easier when they lie to you and don’t tell you they are in other states. Fortunately e have employees in 48 states anyways so have to deal with ir but I’ve worked with employers who will let someone go over dealing with it.
Yeah its a big issue which is why I don’t some people’s oh no one is ever going to know mentality. Sure the larger the company you work, the better your chances are. But if you work for a smaller company, it’s more of a when not if kind of situation.
I actually know someone who moved to a new state, got caught 7 months later and was fired. Over a few drinks I listened to him bitch about how it was bs, it’s illegal for the company to fire him, he’s going to sue, how a coworker must of snitched on him cause it’s impossible for the company to know where he’s working from, so on and so on. He just ignored me when I tried to explain that the state likely sent a letter asking why they weren’t getting paid and of course his company got angry after finding out they’ve been paying the wrong state for 7+ months.
I use Gusto. I have out of state employees for the first time this year. Gusto is super affordable and they take care of all the out of state taxes and filing all the paperwork with that state.
I think processing your own payroll in-house is a really bad idea for most small businesses. Pay a payroll company to handle it for you, and I guarantee you’ll never look back. Even then, if you are paying remote employees in multiple states, you have to set up and manage employment tax accounts in each state, which is a pain. I tried it last year and couldn’t manage it. I was always getting notices from one of the states that we owed another tax or fee or that the rate the payroll company was using was wrong. I ended up terminating 2 of my remote employees for performance issues and switched the last one to 1099 (her job really fits the qualifications for contractor status). I will never hire employees in another state again.
It’s best to stick with quickbooks or use something like Patriot. We have employees scattered about in multiple states. It is a lot to keep up with. I suggest hiring a payroll manager for your business to help.
EORs and PEOs get pricey. The only benefit with Employer of Record is they do file with their tax id and you pay a bill. Technically, it makes your employees their employees. My company has used EORs. We found, cheaper and more efficient to manage it ourselves.
You could also work with ADP, or another payroll company that’s more full service.
What is patriot exactly? Im new to all this.
Sorry. Patriot is just payroll software.
I worked with a large company that only allowed moves within the state that was registered for this reason only.
Not sure how to pass that on to employees but would definitely be a factor in annual raises.