Skip to main content
  • Foundation
  • Executive network
  • CEO Circle
  • Enterprise Solutions
  • Linkage Logo
  • Store
  • Sign In
  • Account
    • My Account
    • Logout
    • Global
    • India
    • MENA
SHRM
About
Book a Speaker
Join Today
Renew
Rejoin Now
Renew
  • Membership
  • Certification
    Certification

    Smiling asian student studying in library with laptop books doing online research for coursework, making notes for essay homework assignment, online education e-learning concept
    Get Certified!

    Be recognized as an HR leader with your SHRM-CP or SHRM-SCP credential.

    • How to Get Certified

      Demonstrate your ability to apply HR principles to real-life situations. No other HR certification compares.

      • How to Get Certified
      • Eligibility Criteria
      • Exam Details and Fees
      • SHRM-CP
      • SHRM-SCP
      • Which Certification is Best for Me
      • Certification FAQs
    • Prepare for the Exam

      Give yourself the best chance to pass your SHRM certification exam.

      • Exam Preparation
      • SHRM BASK
      • SHRM Learning System
      • Instructor-Led Learning
      • Self-Study
      • Study Aids & Add-ons
    • Recertification

      Recertify your SHRM Credentials before your end date!

      • Specialty Credentials
      • Qualifications
  • Topics & Tools
    Topics & Tools

    Stay up to date with workplace news and leverage our vast library of resources to streamline day-to-day HR tasks.

    The white house in washington, dc.
    Executive Order Impact Zone

    Do not abandon, but evaluate and evolve. It is about legal, equal opportunity for all.

    • News & Trends

      Follow breaking news and emerging workplace trends.

      Legal & Compliance

      Stay informed on workplace legal updates and their impacts.

      From the Workplace

      Explore diverse perspectives from your peers on today's workplaces.

      Flagships

      Get curated collections of podcasts, videos, articles, and more produced by SHRM.

    • HR Topics
      • AI in the Workplace
      • Civility at Work
      • Compensation & Benefits
      • Inclusion & Diversity
      • Talent Acquisition
      • Workplace Technology
      • Workplace Violence Prevention
      SEE ALL
      SHRM Research
    • Tools & Samples

      Access member resources and tools to streamline HR tasks.

      • Forms & Checklists
      • How-To Guides
      • Interactive Tools
      • Job Descriptions
      • Policies
      • Toolkits
      SEE ALL
      Ask an Advisor
  • Events & Education
    Events & Education

    SHRM25 in San Diego, June 29 - July 2, 2025
    Join us for SHRM25 in San Diego

    Register for the World’s Largest HR Conference being held on June 29 - July 2, 2025

    • Events
      • SHRM25
      • The AI+HI Project 2025
      • INCLUSION 2025
      • Talent 2026
      • Linkage Institute 2025
      SEE ALL
      Webinars
    • Educational Programs

      Designed and delivered by HR experts to empower you with the knowledge and tools you need to drive lasting change in the workplace.

      Specialty Credentials

      Demonstrate targeted competence and enhance credibility among peers and employers.

      Qualifications

      Gain a deeper understanding and develop critical skills.

    • Team Training & Development

      Customized training programs unique to your organization’s needs.

  • Business Solutions
  • Advocacy
    Advocacy

    Make your voice heard on public policy issues impacting the workplace.

    Advocacy
    SHRM's President & CEO testifies to Congress on "The State of American Education"
    • Policy Areas
      • Workforce Development
      • Workplace Inclusion
      • Workplace Flexibility & Leave
      • Workplace Governance
      • Workplace Health Care
      • Workplace Immigration
      State Affairs

      SHRM advances policy solutions in state legislatures nationwide.

      Global Policy

      SHRM is the go-to for global HR leaders and businesses on workplace matters.

    • Advocacy Team (A-Team)

      SHRM’s A-Team is a key member benefit, giving you the tools, insights, and opportunities to shape workplace policy and drive real impact.

      Take Action

      Urge lawmakers to support policies that create lasting, positive change.

      Advocacy & Legislative Resources

      Access SHRM’s curated policy materials and content.

    • SHRM-Led Coalitions
      • Generation Cares
      • The Section 127 Coalition
      • Learn More & Partner with SHRM Government Affairs
  • Community
    Community

    Woman raising hand in group
    Find a SHRM Chapter

    Easily find a local professional or student chapter in your area.

    • Chapters

      Find local connections from over 607 chapters and state councils and create your personalized HR network.

      SHRM Connect

      Post polls, get crowdsourced answers to your questions and network with other HR professionals online.

      SHRM Northern California

      Join SHRM members in the greater San Francisco Bay area for local events and networking.

    • Membership Councils

      Learn about SHRM's five regional councils and the Membership Advisory Council (MAC).

      • Membership Advisory Council
      • Regional Councils
    • Volunteers

      Learn about volunteer opportunities with SHRM.

      • Volunteer Leader Resource Center
Close
  • Membership
  • Certification
    back
    Certification
    Smiling asian student studying in library with laptop books doing online research for coursework, making notes for essay homework assignment, online education e-learning concept
    Get Certified!

    Be recognized as an HR leader with your SHRM-CP or SHRM-SCP credential.

    • How to Get Certified

      Demonstrate your ability to apply HR principles to real-life situations. No other HR certification compares.

      • How to Get Certified
      • Eligibility Criteria
      • Exam Details and Fees
      • SHRM-CP
      • SHRM-SCP
      • Which Certification is Best for Me
      • Certification FAQs
    • Prepare for the Exam

      Give yourself the best chance to pass your SHRM certification exam.

      • Exam Preparation
      • SHRM BASK
      • SHRM Learning System
      • Instructor-Led Learning
      • Self-Study
      • Study Aids & Add-ons
    • Recertification

      Recertify your SHRM Credentials before your end date!

      • Specialty Credentials
      • Qualifications
  • Topics & Tools
    back
    Topics & Tools

    Stay up to date with workplace news and leverage our vast library of resources to streamline day-to-day HR tasks.

    The white house in washington, dc.
    Executive Order Impact Zone

    Do not abandon, but evaluate and evolve. It is about legal, equal opportunity for all.

    • News & Trends

      Follow breaking news and emerging workplace trends.

      Legal & Compliance

      Stay informed on workplace legal updates and their impacts.

      From the Workplace

      Explore diverse perspectives from your peers on today's workplaces.

      Flagships

      Get curated collections of podcasts, videos, articles, and more produced by SHRM.

    • HR Topics
      • AI in the Workplace
      • Civility at Work
      • Compensation & Benefits
      • Inclusion & Diversity
      • Talent Acquisition
      • Workplace Technology
      • Workplace Violence Prevention
      SEE ALL
      SHRM Research
    • Tools & Samples

      Access member resources and tools to streamline HR tasks.

      • Forms & Checklists
      • How-To Guides
      • Interactive Tools
      • Job Descriptions
      • Policies
      • Toolkits
      SEE ALL
      Ask an Advisor
  • Events & Education
    back
    Events & Education
    SHRM25 in San Diego, June 29 - July 2, 2025
    Join us for SHRM25 in San Diego

    Register for the World’s Largest HR Conference being held on June 29 - July 2, 2025

    • Events
      • SHRM25
      • The AI+HI Project 2025
      • INCLUSION 2025
      • Talent 2026
      • Linkage Institute 2025
      SEE ALL
      Webinars
    • Educational Programs

      Designed and delivered by HR experts to empower you with the knowledge and tools you need to drive lasting change in the workplace.

      Specialty Credentials

      Demonstrate targeted competence and enhance credibility among peers and employers.

      Qualifications

      Gain a deeper understanding and develop critical skills.

    • Team Training & Development

      Customized training programs unique to your organization’s needs.

  • Business Solutions
  • Advocacy
    back
    Advocacy

    Make your voice heard on public policy issues impacting the workplace.

    Advocacy
    SHRM's President & CEO testifies to Congress on "The State of American Education"
    • Policy Areas
      • Workforce Development
      • Workplace Inclusion
      • Workplace Flexibility & Leave
      • Workplace Governance
      • Workplace Health Care
      • Workplace Immigration
      State Affairs

      SHRM advances policy solutions in state legislatures nationwide.

      Global Policy

      SHRM is the go-to for global HR leaders and businesses on workplace matters.

    • Advocacy Team (A-Team)

      SHRM’s A-Team is a key member benefit, giving you the tools, insights, and opportunities to shape workplace policy and drive real impact.

      Take Action

      Urge lawmakers to support policies that create lasting, positive change.

      Advocacy & Legislative Resources

      Access SHRM’s curated policy materials and content.

    • SHRM-Led Coalitions
      • Generation Cares
      • The Section 127 Coalition
      • Learn More & Partner with SHRM Government Affairs
  • Community
    back
    Community
    Woman raising hand in group
    Find a SHRM Chapter

    Easily find a local professional or student chapter in your area.

    • Chapters

      Find local connections from over 607 chapters and state councils and create your personalized HR network.

      SHRM Connect

      Post polls, get crowdsourced answers to your questions and network with other HR professionals online.

      SHRM Northern California

      Join SHRM members in the greater San Francisco Bay area for local events and networking.

    • Membership Councils

      Learn about SHRM's five regional councils and the Membership Advisory Council (MAC).

      • Membership Advisory Council
      • Regional Councils
    • Volunteers

      Learn about volunteer opportunities with SHRM.

      • Volunteer Leader Resource Center
Join Today
Renew
Rejoin Now
Renew
  • Store
    • Global
    • India
    • MENA
  • About
  • Book a Speaker
  • Foundation
  • Executive network
  • CEO Circle
  • Enterprise Solutions
  • Linkage Logo
SHRM
Sign In
  • Account
    • My Account
    • Logout
Close

  1. Topics & Tools
  2. Workplace News & Trends
  3. Compensation & Benefits
  4. Employees Working Out of State Often Fail to Let HR Know
Share
  • Linked In
  • Facebook
  • Twitter
  • Email

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Vivamus convallis sem tellus, vitae egestas felis vestibule ut.


Error message details.

Copy button
Reuse Permissions

Request permission to republish or redistribute SHRM content and materials.


Learn More
News

Employees Working Out of State Often Fail to Let HR Know

Employers need to track employees' work locations for payroll tax compliance

February 24, 2021 | Stephen Miller, CEBS

A man sitting in a lawn chair using a laptop.


Remote work has created tax compliance risks for employers. Since the COVID-19 pandemic began, 28 percent of employees have worked outside their home state or country but only one-third reported all those days to HR, a 2021 survey shows. Consequently, their employers may have failed to withhold payroll taxes appropriately without realizing it.

Unless HR monitors where employees work—something 94 percent of employees say they would accept—their companies risk hefty tax penalties in the event of an IRS or state/municipal tax audit.

The 2021 Adapt or Lose the War for Talent survey, conducted on behalf of Topia, a talent mobility software company, polled 1,250 employees—half in the U.S. and half in the U.K.—who work for international companies with at least 2,500 employees. The survey, which included 250 HR professionals, was conducted from Dec. 11, 2020, to Jan. 12, 2021.

"HR leaders recognize that remote and distributed work offers a competitive edge for attracting and retaining talent and for building diverse, highly skilled teams," said Topia's CEO Shawn Farshchi. "As flexible work becomes a mainstay of business culture and talent strategy, HR and finance leaders must collaborate to make it work from a compliance perspective. The potential advantages are too important to ignore."

Compliance Blind Spots

Despite increased support among employers for allowing remote work, many HR and finance departments are unprepared from a compliance standpoint. Employees may forget to report days worked outside their home state or country, for instance, while others appear to hide their location to avoid cost-of-living adjustments to their salaries, Topia noted. Among other survey findings:

  • 93 percent of HR professionals were confident they know where the majority of their employees are working, and 78 percent were confident their employees self-report when working in another state or country.
  • However, only 33 percent of employees said they reported all those days, and 24 percent admitted reporting none at all, even though 61 percent were aware of the tax compliance implications.
  • HR professionals were more likely to have worked in a different state or country (42 percent) but still struggled to report these workdays, suggesting that self-reporting is a challenge, even for those who know the rules.

"The mobility landscape has shifted dramatically in the past 12 months. Now, every remote employee is a mobile employee," said Richard Tonge, global mobility services leader at professional services firm Grant Thornton. "Most critical for employers is the need to manage remote-work policies once they've been implemented"—for instance, by requiring employees to self-report their work locations using online platforms.

"Whether for compliance or for tax savings, it is going to be critical for companies to ensure they have the proper data to defend themselves in audits as governments everywhere have large fiscal deficits and are likely to be aggressive," said Nishant Mittal, senior vice president of Topia. "It will be extremely difficult for companies to fight an audit if they can't prove who is working from where and for how long."

[Visit SHRM's resource page on Remote Work.]

Tax Strategies

The term "nexus" in tax law describes a business's tax presence in a particular state or locality. "Companies may inadvertently create nexus in jurisdictions where they have previously not deemed to have presence," Mittal explained. "There may be registration requirements, statutory laws to be followed and various types of taxes" such as unemployment insurance (UI) that may need to be paid and state taxes that may need to be withheld.

Not everything about remote work and taxes is negative, he added. "In some cases, companies may have an opportunity to save on some taxes as employees work outside high-tax jurisdictions" and to avoid, for instance, San Francisco's gross receipts tax or New York City's unincorporated business tax that would otherwise be owed on business income earned in those cities.

"As employers consider integrating work-from-home policies on a more permanent basis, they must examine any compliance challenges to these arrangements," said Frank Fiorille, vice president of risk, compliance, and data analytics at Paychex, which provides technology for HR, payroll and insurance services. While some states gave a reprieve from businesses establishing tax authority based on the employee's home location as a result of the pandemic, he noted, "that relief was not permanent."

Adopting New Policies

Employers should "consider whether new policies regarding where employees can work should be adopted," along with policies to ensure that employees keep HR informed if they are working out of state or in a different municipality, even temporarily, Ted Bernert, a partner with law firm BakerHostetler, recommended during a webinar presented by the firm. His advice was as follows:

  • Be prepared to explain these policies to employees and the C-suite.
  • Employ mechanisms to track employees' work locations and prepare for ongoing dispersed workforces.

During the webinar, Liz Bucko, senior director of compliance products at UKG, a workforce management software company, urged employers to "ensure employees are in the correct work and home locations [they've given you], down to the rooftop."

Remote Workers' Unemployment Insurance

Tax withholding rules may differ from UI rules, said Dave Ebersole, an associate at BakerHostetler. Employers generally only contribute to UI taxes in one state for any one employee, typically under the Interstate Reciprocal Coverage Arrangement for multistate employees, adopted by 45 states.

"Employers may elect to report and pay in one state for a particular employee, provided that an employee's services are performed in that state and the employee takes steps to obtain approval" from the state, Ebersole explained.

Generally, an employer may file an election for employee UI coverage under the laws of the state where the employee is working. The agency of the elected state approves or disapproves the election, the employer notifies each person affected of an approved election and sends the elected agency a copy of the notice.



State Law Determines T
ax Obligations

States vary significantly when it comes to requiring nonresidents to pay state income taxes on earned income, according to the personal finance website How Stuff Works, which explains that in some states workers can be a nonresident who works in-state for 2 to 60 days before becoming liable for nonresident income tax, while other states have earned income thresholds instead of waiting periods. 

Georgia, for instance, has a combination, in which workers must have taxes withheld if they've worked for more than 23 days or else made $5,000 or 5 percent or more of their total income in Georgia.

Among other examples of state variations:

  • Two dozen states operates under a "first day" rule, meaning nonresident workers will owe state taxes even if their work there is temporary, while others don't tax income at all if workers are nonresidents.
  • 16 states and the District of Columbia have reciprocity agreements with neighboring states, so that employees who commute to work in a nearby state only owe income taxes in their home state.

In some instances, "states are giving corporations a pass for employees who relocated due to the COVID-19 pandemic," according to the How Stuff Works website. In these states, "tax authorities are not requiring corporations to establish 'nexus' in their state if an employee relocates there temporarily due to the pandemic."

How these states define "temporarily" may also vary, however.

Related SHRM Articles:

Technology Can Help Prevent Tax Withholding Miscues Tied to Remote Work, HR Magazine, August 2021

Remote Workers Expect Pay to Reflect Their Locations, SHRM Online, April 2021

Out-of-State Remote Work Creates Tax Headaches for Employers, SHRM Online, June 2020


Related SHRM Resources:

Remote Work and State Tax Issues, SHRM Express Request


[Need help with legal questions? Check out the SHRM LegalNetwork.]

Benefits
Compensation
Remote and Hybrid Work
Tax Compliance
Technology
Work Life Integration

Artificial Intelligence in the Workplace

​An organization run by AI is not a futuristic concept. Such technology is already a part of many workplaces and will continue to shape the labor market and HR. Here's how employers and employees can successfully manage generative AI and other AI-powered systems.



Related Content

Kelly Dobbs Bunting speaks onstage at SHRM24
(opens in a new tab)
News
Why AI+HI Is Essential to Compliance

HR must always include human intelligence and oversight of AI in decision-making in hiring and firing, a legal expert said at SHRM24. She added that HR can ensure compliance by meeting the strictest AI standards, which will be in Colorado’s upcoming AI law.

(opens in a new tab)
News
A 4-Day Workweek? AI-Fueled Efficiencies Could Make It Happen

The proliferation of artificial intelligence in the workplace, and the ensuing expected increase in productivity and efficiency, could help usher in the four-day workweek, some experts predict.

(opens in a new tab)
News
How One Company Uses Digital Tools to Boost Employee Well-Being

Learn how Marsh McLennan successfully boosts staff well-being with digital tools, improving productivity and work satisfaction for more than 20,000 employees.

HR Daily Newsletter

Stay up to date with the latest HR news, trends, and expert advice each business day.

Success title

Success caption

Manage Subscriptions
  • About SHRM
  • Careers at SHRM
  • Press Room
  • Contact SHRM
  • Book a SHRM Executive Speaker
  • Advertise with Us
  • Partner with Us
  • Copyright & Permissions
  • Post a Job
  • Find an HR Job
Follow Us
  • LinkedIn
  • Facebook
  • Twitter
  • Instagram
  • YouTube
  • SHRM Newsletters
  • Ask An Advisor

© 2025 SHRM. All Rights Reserved

SHRM provides content as a service to its readers and members. It does not offer legal advice, and cannot guarantee the accuracy or suitability of its content for a particular purpose. Disclaimer


  1. Privacy Policy

  2. Terms of Use

  3. Accessibility

Join SHRM for Exclusive Access to Member Content

SHRM Members enjoy unlimited access to articles and exclusive member resources.

Already a member?
Free Article
Limit Reached

Get unlimited access to articles and member-exclusive resources.

You've reached the limit of 1 free article this month. Join to access unlimited articles and member-only resources.

Already a member?
Free Article
Exclusive Executive-Level Content

This content is for the SHRM Executive Network and Executive Content Subscription members only.

You've reached the limit of 1 free article this month. Join the Executive Network and enjoy unlimited content.

Already a member?
Free Article
Exclusive Executive-Level Content

This content is for the SHRM Executive Network and Executive Content Subscription members only.

You've reached the limit of 1 free article this month. Join and enjoy unlimited access to SHRM Executive Network Content.

Already a member?
Unlock Your Career with SHRM Membership

Please enjoy this free resource! Join SHRM for unlimited access to exclusive articles and tools.

Already a member?

Your membership is almost expired! Renew today for unlimited access to member content.

Renew now

Your membership has expired. Renew today for unlimited access to member content.

Renew Now

Your Executive Network membership is nearing its expiration. Renew now to maintain access.

Renew Now

Your membership has expired. Renew your Executive Network benefits today.

Renew Now