In the News
Kennewick company answers the call when remote workers hit the road
Wendy Culverwell | July 2022
John Heaton, president and founder of Pay Plus Benefits Inc. in Kennewick, said the challenges of administering out-of-state employees is overlooked in breathless reporting about workers leaving high-cost cities such as Seattle for lower-cost ones such as Boise. Pay Plus created a business to address it.
Muncie, Indiana, is offering $5,000 cash for remote workers who move to the town an hour northwest of Indianapolis.
Muncie, home to Ball State University, is one of dozens of towns in dozens of states competing for well-paid workers on MakeMyMove.com, a website helping towns woo remote workers who can live anywhere.
John Heaton, president and founder of Pay Plus Benefits Inc., a Kennewick-based company that serves as the HR department for hundreds of clients, relishes the offerings and their flowery language.
Muncie, for example, touts its Cornerstone Center for the Arts, noting it “provides opportunities for creative expression.” It is the reputed birthplace of Garfield the cat, served as a model for “Parks and Recreation” and Ball State claims David Letterman as an alum.
Heaton laughs because the come-hither offers seldom disclose the downside to moving across state lines with an existing job: Each state has its own unique mix of income taxes (or not), workers’ compensation, family leave, health insurance and other requirements.
Employee and employer can easily run afoul of the rules of the new state if they don’t go in with their eyes open and the rules followed.
Finding a niche
Pay Plus Benefits spied an opportunity to serve companies with remote workers when Pew Research statistics indicated the share of remote workers interested in moving rose to 17%, up from 9% in 2020.
Heaton doesn’t think remote work is going away. He noted Amazon and other employers recruited Tesla workers upset over orders to return to the office.
“The genie is out of the bottle,” Heaton said.
Heaton’s new business line, Out-of-State Easy, manages the rules for a growing list of clients with workers who want to decamp from high-cost communities to lower-cost ones, or to be closer to family. It is set up to employ workers in 45 states on behalf of employer/clients and will add the remaining five if the need arises.
It charges a one-time set-up fee of $1,500 and a fee of $125 per pay period for the first employee, with discounts for additional ones.
While he is selling a service, Heaton said he sought publicity to raise awareness of the unintended consequences of interstate moves. The downside seldom gets mentioned in the breathless coverage of tech workers fleeing high-cost locales such as Seattle for lower-cost ones such as Boise.
Employees who move without alerting employers get tripped up when their new state sends a bill for, say, unpaid state income taxes. Or an employee who has moved to another state and is injured on the job may have trouble filing workers’ compensation claims. The employer’s health insurance plan may not align with the new state’s requirements.
Colorado is a telling example, he said.
To employ a Colorado resident, an out-of-state company first needs permission from the secretary of state. Then, it must register to do business in Colorado and engage a local agent. It needs an account with the state Department of Revenue and to begin deducting Colorado income taxes from the employee’s check.
The business itself must file quarterly tax statements in Colorado, even if it has no other presence there.
Colorado isn’t unusually challenging. It was just a convenient example, Heaton said, adding that there is no movement to simplify the rules regarding remote workers in different states.
“The states are not doing anything to accommodate this,” he said.
‘Fully flexible’ future
Color Creative LLC, a creative content company in Seattle with an office in Los Angeles, is a new Pay Plus client. Prior to the pandemic, all employees worked in the offices and the company valued its lively corporate culture.
“We were very much an in-office culture,” said Andrea Ostrovsky, chief operating officer and general manager.
As the pandemic lingers, 105 of its 115 full-time employees work from home and the company envisions keeping that as an option in the future.
As it considers a “fully flexible” future, it realized it needed to cast a wider net as it recruited animators, designers, illustrators and more. It was set up for California and Washington but knew talent could be anywhere.
It turned to Pay Plus Benefits in early 2022, allowing it to recruit from a broader geographic area. The results are encouraging, though Ostrovsky said it is still “early days.”
Ostrovsky said it has recruited remote workers from other states and allowed two employees to move.
The company pushes the limits of technology to maintain the social connections it had when everyone was in the office. It uses Teams, the Microsoft Office software, and has goofy channels where employees share interests in everything from manicures and horror films, to books, plants and hiking.
“I’m mindful of the fact that it might be harder for people who are fully remote to feel connected to the company. We’re going to do everything we can to help people feel fully connected,” she said.
Helping manage from afar
Heaton said the worst thing an employee can do is to relocate on the sly. The process should start with a question: Will you support me in a different state?
Washington is one of only eight states without an income tax, so odds are good the state a worker is looking at has one.
Applying for a driver’s license or registering a vehicle in a new state will trigger a residency requirement. Workers who aren’t paying local income taxes can expect to get a bill. Heaton said that can lead to awkward conversations and deteriorating relationships between employees and their employers.
Chad Mackay, chief executive officer of Fierro Tech, a Seattle-tech firm catering to the hospitality industry, turned to Pay Plus Benefits to manage its out-of-state workers earlier this year after its old payroll company couldn’t keep up with its growth.
Mackay, whose ventures include high-end restaurants such as El Gaucho in Seattle and Portland, said he was accustomed to managing the rules for Washington and Oregon. But prospective employees with experience in hospitality and software may live beyond the Northwest.
“Pennsylvania, Texas – workers’ compensation is totally different than Washington,” he said. “I can’t keep track of all that stuff as a small employer.”
He regards it as an advantage to recruiting workers who for whatever reason don’t want to move to Seattle or even Washington.
“We have people who’d rather be in Boise and frankly, I’m OK with that,” he said.
The Pay Plus Benefits Blog
The U.S. Department of Labor (DOL) recently published a final overtime rule that updates the Fair Labor Standards Act’s minimum wage and overtime pay protections. The
Final Rule increases the salary threshold for the administrative, executive, and professional exemptions from its current level of $455 per week ($23,660 annually) to $913 per week ($47,476 annually) beginning December 1, 2016. The salary thresholds will be automatically updated every three years, with the first update taking effect on January 1, 2020.
To qualify for an exemption from overtime, an employee generally must:
1. be salaried, meaning that they are paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the "salary basis test");
2. be paid more than a specified weekly salary level, which is $913 per week (the equivalent of $47,476 annually for a full-year worker) under this Final Rule (the "salary level test"); and
3. primarily perform executive, administrative, or professional duties, as defined in the DOL's regulations (the "duties test").
Certain employees are not subject to either the salary basis or salary level tests (for example, doctors, teachers, and lawyers). The DOL's regulations also provide an exemption for certain highly compensated employees ("HCE") who earn above a higher total annual compensation level ($134,004 under this Final Rule) and satisfy a minimal duties test.
Options available to you for an affected employee include:
• increase the salary of an employee who meets the duties test to at least the new salary level to retain his or her exempt status;
• pay an overtime premium of one and a half times the employee's regular rate of pay for any overtime hours worked (hours worked over 40 in any workweek or over 8 in a workday in California);
• reduce or eliminate overtime hours;
• reduce the amount of pay allocated to base salary (provided that the employee still earns at least the applicable hourly minimum wage) and add pay to account for overtime for hours worked over 40 in the workweek, to hold total weekly pay constant; or
• use some combination of these responses.
For more detailed information, the DOL has published a comprehensive list of questions and answers available at http://bit.ly/1OHMqxA.
Please be advised that employers must comply with both state and federal laws. Where differences exist an employer must follow the rule that is more favorable to the worker.
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