Complying with local law in every jurisdiction where you have team members.

Walter Chen is founder of investor at Golden Wok, and previously co-founder at i done this. He wrote a brilliant Twitter thread, and because we’re not all on Twitter, he has allowed us to repost it here. Below is a copy and paste of that tweet storm, looking at remote from the perceptive of a US company, and it may answer some questions for everyone involved!

Having a remote team means complying with local law in every jurisdiction where you have team members.

It’s u.s. corporate tax season for those of us who filed extensions. Remote teams not only file federal income tax and state income tax, they have to file in every state that they have employees. @AnimalzCo is filing in 12 states. Most tax preparers charge for every additional state you need to file in on top of what it costs to do your federal income taxes. We’re getting quotes at around $15k to file our taxes for 2019 (federal + 12 states). You need state registrations in every state you have an employee. when an employee leaves, you need to cancel your registration. Each state has local law around worker’s comp, hiring/firing, unemployment, benefits, etc (and don’t forget labor law posters).

Gusto and Justworks handle a bunch of compliance for you, and that’s why I think of them as more critical for remote teams than tools like @SlackHQ, @basecamp, etc.

However, neither handles state registrations which means you need to DIY or hire someone to do it for you. With a peo (professional employer organization) like Justworks, your employees are effectively justworks’ which means you don’t need to register except in the 24 states where you still need to register. You end up getting a lot of physical mail. I take photos and then shred the docs, though services like Earth Class Mail sound incredibly useful. States constantly send me random notices and refund checks. We work with a back office team Office Engine which helps sort through it.

For international employees, you’re technically required to have a subsidiary in every country that you have employees. Remote teams mostly get around this by classifying their international team members as contractors. A few issues:

  • cultural: you treat your international employees differently from your domestic employees re benefits, time off, etc to justify your classification.
  • Legal: you incur the risk of audit and you have the ongoing admin of documenting/defending your classification. The biggest thing you’ll notice from hiring internationally re benefits is the insane cost of health insurance in the u.s.
  • Tools wise, Gusto and Justworks don’t work for international payments. You have to add another tool to your stack simply to pay international team members. Ours invoice us and we pay using Go Veem.

Similarly, if you use the HR tools in Gusto and Justworks, eg, for managing time off, they only work for your domestic team members. That’s why our HR system of record is Airtable It aggregates across systems and isn’t tied to any of these jurisdictional restrictions. Not using built-in tools in Justworks, e.g., for time off, means that you don’t get the built-in functionality for calculating and paying out accrued time off. That makes it harder to comply with local law which means you need to be more on top of it. We use Tettra as our internal wiki to keep all of these policies straight and be as transparent as possible with the team.

No question remote is still worth it in spite of all this. I’m just excited to see more merging of services and software to solve these challenges specifically for remote companies.