For startups in pandemic times, the accelerated shift to remote work felt like either a godsend or a nightmare. Closing the office put thousands of dollars back into company pockets, but left startups scrambling to support a workforce that went remote overnight. The past year has proven that teams often perform just as well while distributed. And a remote-first employment model may be a catalyst for greater diversity in the workforce and increased gender inclusivity for women.
Sixty-five percent of newly remote workers prefer not to return to the office, according to a FlexJobs survey. But while employees may enjoy greater flexibility, companies are discovering some unexpected challenges with managing HR, payroll, benefits, and IT for a distributed team.
“My team grew 3x in 2020 and is now spread across seven states,” says Jack Haines, CEO and founder of healthcare IT company, Healthcare Integrations. “The hardest part was that our payroll provider didn’t support state tax registration nor automate compliance. Finding a professional employer organization (PEO) to do that and help manage apps and devices saved us a ton of time.”
Haines discovered that supporting a distributed workforce for the long term has a heavy administrative burden. For example: Are you following each state’s laws on minimum wage? What about pay schedules? Do you know the PTO policies for every state where you have employees? Harassment training requirements? Termination procedures?
At Rippling, we’ve helped thousands of customers make the leap to a fully remote workforce during Covid-19. Here are the hidden landmines startups should look out for, and the best solutions to overcome them.
Issue #1: Ensuring benefits are available to all employees
Covid-19 has made it harder for small businesses to compete for talent with big companies that offer best-in-class employee benefits and, increasingly, the ability to work from anywhere. This comes at a critical time: One-third of small businesses surveyed by HBS during the pandemic say they can’t afford their health insurance premiums anymore.
Having a distributed workforce only adds to the challenge, because where your employees live and work determines the carriers, benefits, and workers’ compensation policies that apply to them. Offering the same benefits to workers in every state is no small task, especially if you don’t have a large HR team.
How to avoid it
Small businesses typically pay a lot more than large businesses for benefits because they can’t bargain with insurance carriers. Rippling decided to build a modern PEO platform to level the playing field by offering your employees access to “big company” benefits at a lower cost. According to the National Association of PEOs (NAPEO), on average companies that use a PEO save $1,775 per year per employee.
Issue #2: Multi-state tax registration is mayhem
Ask any startup founder their concerns about letting employees work from anywhere, and you’ll likely learn a new acronym: SUI, or state unemployment insurance. If it sounds bureaucratic, that’s because it is. Every time companies hire an employee in a new state or an existing employee moves to a new state, the company needs to get a state unemployment account. Get it wrong, and you’ll likely face sizable fines and penalties in each state where you’re not paying applicable taxes.
How to avoid it
Invest in hiring an experienced tax accountant like Kruze Consulting, or opt for HR software that can handle these issues end-to-end. Certain PEOs, like Rippling’s newly lauched PEO, will automatically register your company in every new state where you hire employees, file and pay your state taxes, handle unemployment claims, and manage changes to your SUI tax rate.
Issue #3: Securely manage employee app access and devices from afar
One of the most tedious tasks for HR and IT teams to handle remotely is managing employees’ access to apps (like Salesforce, Slack, GSuite, etc). This includes giving new hires access to the right business tools, Slack channels, and email lists, and configuring and shipping a company laptop in time for their start date. And then there’s the challenge of ongoing management—when people leave, change roles, or get promoted, you have to adjust every single application manually.
How to avoid it
Good device management software, like Jamf or Rippling, will give you peace of mind by letting you remotely set up, manage, and disable all of your employees’ apps and devices. The right platform will enable you to automatically add employees to every app when they need it, and remove them when they no longer do. Rippling takes it a step further and will automatically wipe an employee’s laptop when they leave.
Issue #4: Staying compliant with 1,001 different state labor laws
Each state has its own regulations for wage and hour requirements, paid leave, paychecks, pay schedules — the list goes on. Staying compliant with this hodgepodge of different rules in every state where you have employees is time-consuming, tedious, and has legal ramifications if mishandled. In other words, managing and meeting HR requirements in multiple states is a logistical nightmare.
How to avoid it
Some companies opt to hire specialized HR consultants. If you want an automated solution, Rippling’s PEO was specifically built to help distributed teams cut through this complexity, with in-product guardrails to help you stay compliant across every state.
Navigating all of the rules and red tape around managing a distributed workforce may seem daunting, but it doesn’t have to be. The right technology can lift the administrative burden and free your teams to focus on the stuff that matters.