Hiring employees from multiple states broadens your talent pool.
But it also comes with its own set of payroll headaches.
For instance, you now have to worry about creating compensation packages and processing payroll for employees across different states.
As your distributed workforce grows, so does the administrative workload. As a result, mistakes happen and the company suffers.
But that doesn't have to be the case if you set up your multi-state payroll system the right way.
In this article, you'll learn the best practices for setting your organization up for success with multi-state payroll. You'll also learn how to streamline your multi-state payroll process to achieve operational efficiency.
But before we get into that...
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Understanding Multi-State Payroll
You must start thinking of a multi-state payroll system if your organization is registered in one state but you hire employees from several others and pay statutory deductions to the government of those states.
It also applies to you if:
- Your business operates in multiple states.
- Some of your employees live in one state and work in another.
- Some of your employees work in more than one state.
- Some of your employees travel between states.
Multi-state payroll processing is like juggling multiple plates � each state with its tax authorities and procedures for remitting statutory deductions.
Multi-State Payroll Processing
Now that we understand what multi-state payroll entails, here are some best practices for ensuring that your multi-state payroll processing goes smoothly.
Best Practices For Multi-State Payroll Processing
- Select your payroll software or partner carefully. Managing payroll is no walk in the park, especially when your workforce is spread across the nation. You need to be extra careful when selecting a payroll system or partner to help you remit your employees' salary and statutory deductions accurately.
We put together a guide on how to choose the right payroll software for your organization. It's a great place to kick off your search. - Understand the differences between employees and contractors. Misclassifying them, regardless of where they work, can lead to severe repercussions for your organization. We're talking tax penalties, fines, and (maybe) even criminal charges.
Employees typically have their PAYE deducted straight from their paycheck, with the employer handling this remittance. On the other hand, contractors usually handle their own tax payments. - Register as a legal entity in each state your employees call home.
In Nigeria, it is your responsibility as an employee to deduct and send off an employee's PAYE to the tax authorities in the state where they live. And here's the kicker: You'll only have proof that you're doing this if you're officially registered in that state.
How To Streamline Multi-State Payroll Processing
- Centralize payroll operations: The first thing you should do is bring your payroll operations under one roof. Whether it is through a centralised system or a dedicated department, having a single hub for payroll helps ensure consistency and efficiency in all the states your organization has a presence in.
- Implement a payroll processing system: Unless you're fine with handling your multi-state payroll process manually, you should invest in a payroll system that can automate your payroll processes. Look for a payroll solution that can handle different tax regulations and reporting requirements across multiple states.
- Standardize your processes: Having a centralized system is a great start but it is not the finish line. You also need standardized procedures that can be applied across all states. This means getting everyone on board with the same payroll data collection methods, remittance schedule, and reporting practices.
Good news! PaidHR's (formerly Pade HCM) payroll processing system is already fine-tuned for organizations that want to automate payroll processing and statutory remittances, no matter how far their team spreads.
Request for a demo here.
- Conduct regular audits and reviews: Regular reviews of your payroll data will help you identify areas for improvement and ensure that your processes align with state and federal requirements.
- Stay up-to-date on regulatory changes: Stay in the loop with any change in tax laws and compliance requirements in each state that your employees reside in. Don't have in-house compliance experience? Then you should work closely with legal and compliance experts.
Conclusion: Automate your payroll process with the right multi-state payroll system
With PaidHR's (formerly Pade HCM) automated payroll solution, you can streamline your multi-state payroll processing and stay compliant wherever your employees reside.
Want to see PaidHR in action? Request a demo here.
FAQs
- Do I need to register in every state where I have employees?
Yes. To ensure compliance with Nigerian tax laws, register with the tax body in each state where you have employees residing. - How can technology streamline multi-state payroll processing for me?
A payroll automation solution like PaidHR will make sure that your employees' salaries is calculated and sent directly to their bank accounts, regardless of where they live. Statutory remittances will also be deducted automatically and remitted to the right regulatory bodies. - What features should I look for in a multi-state payroll system?
Some of the features you should look out for in a multi-state payroll system are
1. Multi-state tax compliance
2. Remote employee support i.e remote onboarding
3. Employee self-service portal
4. Employee classification management
5. State-specific reporting
PaidHR has all of these features and more that'll help you streamline your multi-state payroll process. Want to see them in action? Request a demo here.