According to research and advisory firm Gallup, more than 25% of the U.S. workforce works exclusively remotely. Though reports of corporate return-to-office mandates abound, remote work remains a significant factor in 2025. In turn, HR professionals need to have a thorough understanding of compliance issues regarding remote work.
Specifically, they need to know state-specific payroll and tax laws and learn how to determine residency. It’s also crucial for them to ensure accurate timekeeping and classification and to establish fair remote work policies.
Taking the time to understand these matters can enhance HR operations and risk management. Find out what you need to know about remote compliance risks and how to mitigate them.
How Remote Work Has Complicated HR Compliance
Remote compliance presents unique challenges that HR professionals must learn to navigate.
Time Tracking
Remote employees cannot clock in and out using localized, on-premises systems. You need a remote timekeeping platform to ensure employees are paid for working hours, taxes are accurately withheld from paychecks, and all labor laws are followed regarding breaks.
Data Privacy and Security
Your remote employees often use home internet connections to access sensitive data and applications. HR departments must be concerned about data safety on behalf of employees, customers, and the business itself.
Workplace Safety
The Occupational Health and Safety Administration’s workplace safety regulations and guidelines still apply to remote employees. It can be tricky to conduct inspections or monitor an employee’s home office for hazards.
Monitoring and Violations
Because you’re not able to observe employees’ behavior directly, it can be challenging to monitor and document poor performance and behavior. This can complicate things when it comes to harassment, discrimination, and wrongful termination complaints.
Location-Specific Laws
Each state has different laws pertaining to issues like:
- Pay transparency
- Paid time off
- Minimum wage
- Overtime
- Taxation
If you’ve hired employees in multiple states, your processes and practices must abide by all laws in each jurisdiction. You must also pay all employees correctly and withhold the proper amount of taxes from each person’s paycheck.
Strategies for Managing Remote Employee Taxes
Managing taxes for remote employees presents a challenge, especially if you employ people in multiple states. Here are a few strategies to help you stay organized and reduce your tax compliance risk.
Understand the Jurisdiction-Specific Laws
Some states require employers to withhold income taxes and report taxable benefits like bonuses and stipends, but others do not. As an HR professional, you need to know the tax regulations enforced in each state where employees reside to understand how much tax to withhold.
Determine Residency and Location
The amount of tax you withhold from an employee’s paycheck depends on where your business is located, where the employee lives, and where they conduct most of their work. Some states collect income taxes on remote workers who live in another state, even if their state does not.
Ensure Accurate Timekeeping and Classification
Use technology platforms to document working hours so you can calculate taxes appropriately. Additionally, employees should be classified correctly, as independent contractors may not need to have taxes withheld. In contrast, full or part-time employees are subject to tax withholding laws.
Remote vs. In-Office Work Ensuring Equal Benefits and Policies
One significant challenge HR professionals face is how to ensure work arrangements are fair for in-person and remote employees. To achieve this goal, you can:
- Establish policies for working hours to ensure remote employees have clear boundaries and a proper work-life balance
- Be fair about covering work-related expenses, like travel, equipment, and internet
- Provide open channels of communication and equal access to HR support
- Consider equal access to training and career development opportunities
- Ensure the health and safety of remote employees by offering guidance to mitigate possible health challenges, such as eye strain or overuse injuries
Following these best practices can help you achieve remote compliance while raising employee morale and performance.
Key Remote Compliance Changes and Legal Updates for 2025
Staying up-to-date with regulations that affect remote work is key to maintaining compliance. Some upcoming changes that you may need to be aware of include:
- Minimum Wage: 21 states are raising the minimum wage, affecting 9.2 million employees across the U.S.
- Pay Transparency: Many states, including Illinois, Vermont, and Massachusetts, now require employers to disclose pay in all job descriptions
- Harassment: Some states have updated requirements for harassment training, while the EEOC issued expanded guidance for virtual environments
- Classification: The Department of Labor has increased the minimum salary threshold for exempt employees
States have also updated laws regarding reimbursing remote employees for work-related expenses, cybersecurity and data access, and employee health and safety.
Reduce Risk by Staying Ahead of Remote Compliance Requirements
Understanding remote compliance requirements helps to keep the business out of hot water with regulatory agencies and ensure smooth HR operations. With so many regulatory changes taking place this year, this can be a daunting task.
Fortunately, VirgilHR provides an automated platform to help you quickly determine legal requirements for your HR tasks and stay updated with relevant employment labor law changes. Schedule a demo to see how we can help HR professionals thrive in 2025.
Sources:
1. https://www.gallup.com/401384/indicator-hybrid-work.aspx
2.https://www.osha.gov/enforcement/directives/cpl-02-00-125
3.https://www.epi.org/blog/over-9-2-million-workers-will-get-a-raise-on-january-1-from-21-states-raising-their-minimum-wages/ 4.https://www.eeoc.gov/laws/guidance/enforcement-guidance-harassment-workplace
