In recent years, remote workers have become a staple for businesses worldwide. Allowing team members to work remotely — or hiring only remote workers — provides companies with access to a larger pool of talent, reduces turnover, and saves money. However, having remote workers can create complications in three important areas of doing business: injuries, taxes, and employee classification.
Remote workers and personal injury claims
In 2017, the average compensation payment for minor injuries in Queensland (Australia) was $65,957 AUD and $1,952,602 AUD for critical injuries. In the United States, the average compensation amount was $52,900 USD and the highest was $75,000 USD with a few exceptions. While not all of these injured parties were driving for work, it’s a good example of what you can expect to face if an employee is injured and you don’t have proper insurance.
If you have remote employees, even if they never set foot in your office (or if you don’t have an office), you need workers’ compensation insurance. This especially applies to businesses whose employees drive as part of their job duties. It doesn’t matter where your business is operating from or where your employees live – you can be held responsible for their injuries that occur on the job.
If you don’t carry workers’ comp insurance, injured employees will have to file a personal injury lawsuit against your company to recover compensation for their injuries. Remote workers who drive are at high risk for injury considering the severity of injuries sustained in many car crashes. Personal injury lawsuits filed as a result of these accidents can cost you a pretty penny no matter where you live.
Do your best to limit personal injuries
Smart business owners attempt to limit their losses as much as possible, which includes limiting personal injury lawsuits and workers’ compensation claims. The majority of injuries can be mitigated by creating safety protocols, proper training, and following up to ensure all rules are being followed. Of course, accidents do happen so not all accidents can be prevented.
Remote workers and tax withholding
Just because your employees work remotely doesn’t mean you don’t have to run a professional payroll department. As with any other employee, you’re required to withhold state and federal taxes according to where the work was performed, according to BenefitMall. For example, if you’re located in California and your employees are in Florida, you’ll need to withhold state taxes according to Florida’s laws.
Not withholding taxes can get you in serious trouble, not to mention create a large amount of tax debt for your employees who may not realize their payments are pre-deduction amounts. Additionally, if you pay your workers through Paypal, you still need to send them an itemized statement of their earnings and deductions. Not providing this documentation is grounds for severe penalties, including fines.
Remote workers and misclassification
The last thing your business needs is a lawsuit of any kind, but if you’ve misclassified your remote workers for your convenience, it’s always a possibility. If you’re not classifying your employees and contractors correctly, you might end up getting sued later on.
How to limit your financial liability
Everything in life comes with risks, and there’s no reason to avoid having remote workers if it works for you. However, you do need to take precautions to limit your liability.
Your first line of defense is to consult with a lawyer and a tax professional about the circumstances of your business and each employee. Your next line of defense is to check your city ordinances to make sure you comply with permit laws. Some municipalities require home-based workers to have a permit even if they’re not seeing clients.
Make sure your business is following all state and federal rules that make you a legal entity and legally able to operate. It’s easy to hire a bunch of people online and call yourself a business, but if you’re not operating according to the law, you could find yourself in hot water.
The last but most important line of defense is to create a cybersecurity policy to protect your company from cyber attacks that can expose personal information and get you fined for breaking data protection laws (like GDPR). Remote employees are more likely to put your company’s data at risk since they often work from public spaces using unsecured Wi-Fi.
You’ll never eliminate all risks in business, but you can mitigate a large portion of risk by taking a common sense approach to safety and security.
