The Compliance Tips You Need for Hiring Out-of-State Employees

May 22, 2023

When it comes to compliance tips for hiring out-of-state employees, many employers may not know the recruiting compliance requirements they must follow. Hiring employees from another state comes with its own challenges, and ensuring that your business complies with all the necessary regulations is crucial. In this article, we will review the compliance tips you need for the hiring process for out-of-state employees.

As your business expands, hiring employees from outside your local area or state may be an attractive option to find top talent and fuel growth. Hiring out-of-state employees introduces a new layer of complexity from payroll, income taxes, labor laws, worker's compensation, health insurance premiums, health reimbursement arrangements, and licensing.

To help you navigate the compliance income tax issues under multi-state employment laws, here are the key tips you'll need to remember when hiring employees outside your state.

The Seven Tips You Need When Hiring Out of State:

Register with the Appropriate State Agencies

Before hiring out-of-state employees, you must register with the appropriate state agencies. Every state has its requirements, so you must research and identify the agencies you need to register with. This may include the state's Department of labor, the state tax agency, and the state and unemployment insurance agency.

Comply with State and Local Taxes

When you hire job applicants from another state, you may be subject to state and local taxes in the state where the employee works. It's important to comply with all the state income tax and other tax requirements to avoid penalties and fines. You may also need to register for a state tax ID number in the state where the employee is working.

Verify Employment Eligibility

Employers must verify the employment eligibility of all new hires, regardless of their state of residence. This means that you need to complete Form I-9, Employment Eligibility Verification, for all new employees out of state. You also need to ensure you're using the most current version of the form, which can be found on the U.S. Citizenship and Immigration Services (USCIS) website.

Comply with Wage and Hour Laws

Employers must comply with the wage and hour laws of the state where the employee is working. This includes minimum wage requirements, overtime pay, and meal and rest breaks. You also need to ensure that you comply with the federal Fair Labor Standards Act (FLSA), which sets the minimum wage and overtime pay requirements for covered employees.

Follow Workers' Compensation Laws

Employers in multiple states are required by federal law to have workers' compensation insurance to cover their employees in case of a work-related injury or illness. If you're hiring out-of-state employees, you must comply with the workers' compensation laws of the state where the employee works.

Consider State and Local Employment Laws

Employment laws can vary significantly from state to state. You need to ensure that you comply with all the state and local employment laws that apply to the employees working in your business. This may include paid sick leave, family and medical leave, and other leave laws.

Develop a Remote Work Policy

If you're hiring remote workers or out-of-state employees, you need to develop a policy outlining the expectations and requirements for remote work. This remote workers' policy should cover work hours, communication expectations, and equipment requirements.


In conclusion, hiring out-of-state employees can be a great way to expand your business, but it comes with regulatory compliance and challenges. By following these hiring compliance tips, you can ensure that your business complies with all the necessary state laws and regulations during the recruitment process. Always consult with a qualified attorney or HR professional to ensure you comply with all the applicable laws.

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The Compliance Tips You Need for Hiring Out-of-State Employees

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