How to Stay Compliant with Payroll When Employees Work in Multiple States

In today’s remote and hybrid work world, it’s increasingly common for small businesses to have employees working across multiple states. While that flexibility opens the door to hiring great talent, it also introduces a tangle of compliance challenges when it comes to payroll, taxes, and HR.
Whether you have an employee who moved out of state or you’re expanding your team across state lines, here’s what you need to know to stay compliant.

1. Understand State Tax Withholding Requirements
Each state has its own income tax rules. If your employee lives and works in a different state than your business is based in, you may be required to:

• Withhold state income tax for the state where the employee physically works
• Register for a state withholding account in that state
• File state payroll tax returns

Pro tip: Even if your employee works remotely from a state with no income tax (like Florida or Texas), you may still have other obligations, like unemployment tax.

2. Register for State Unemployment Insurance (SUI)
Employers are typically required to pay SUI tax in the state where the employee works. That means you may need to register separately in each state where you have employees. Failure to register and pay SUI correctly can result in penalties and delays in processing unemployment claims.

3. Know the Local Labor Laws
Labor laws vary widely from state to state — and even from city to city. You’ll need to follow the labor laws of the state (or local jurisdiction) where the employee is performing the work. Here are a few examples of what might differ:

• Minimum wage
• Paid sick leave or family leave requirements
• Final paycheck laws
• Meal and rest break rules

4. Track Where Work Is Performed
It’s important to know not just where your employee lives, but where they are physically working. If an employee lives in one state but regularly works or travels to another, you may trigger “nexus” (tax presence) in more than one state. Some states have reciprocal agreements that allow employees to pay taxes in their state of residence, but these vary.
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5. Update Your Payroll System
A modern payroll system should be able to:

• Handle multiple state registrations and tax rates
• Calculate withholdings based on employee location
• Produce accurate state-specific reports and filings
• Support remote workers and location-based compliance

If your system can’t handle this, it may be time to switch to a provider (like SwiftChecks) that can.

6. Communicate with Employees
If an employee moves out of state, they should let you know before the move — not after. Encourage employees to notify you of any address changes so you can stay ahead of compliance issues.

7. Work with a Payroll Partner Who Has Your Back
Multi-state compliance doesn’t have to be overwhelming — but it does require attention to detail and up-to-date systems. At SwiftChecks, we help employers stay compliant no matter where their employees are located. From registering in new states to handling filings and tax payments, we make it simple and stress-free.

Have Questions? Let’s Talk.
If you’re hiring out of state or managing a remote team, we can help you get set up the right way — and avoid costly compliance headaches down the road. Contact us today to learn more about how we support growing businesses with multi-state payroll and HR.