Payroll Tax Withholding and Benefits Policies for Remote Employees

Administration, Compliance, and Reporting

Summary

This research analyzes policies that manage payroll tax withholding, work schedule flexibility, state unemployment and disability benefits, and leave for remote employees who reside in non-adjacent states. The project will also analyze reporting, compliance, and administration of payroll tax withholdings and benefits

Key observations from our research

1. All profiled institutions withhold payroll taxes according to each employee’s state of residence rather than requiring employees to file and remit their own taxes.

2. Four of five profiled institutions employ remote faculty and staff in non-adjacent states, and all four withhold payroll taxes for 10 to 24 non-adjacent states.

3. Three of five profiled institutions use in-house staff to administer payroll tax payments, file reports, and manage disability insurance and unemployment compliance.

4. Three of five profiled institutions identify out-of-state or remote employees prior to beginning work.

5. Contacts report that setting up state withholding accounts for remote employees requires a few hours of staff time per state.

6. Leave benefits at profiled institutions are based on the remote employees’ status as a benefits-eligible employee, and flexible work policies vary by department and division.

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