Hiring someone in another state? It might seem as simple as sending an offer letter. However, it’s not quite that easy.

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As more businesses embrace remote work and look beyond their local talent pools, hiring across state lines has become more common and more necessary. But with this flexibility comes a new set of rules you must follow.

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Every state has its employment, tax, insurance, and reporting laws. Miss a step, and you could face penalties or delays you didn’t see coming. That’s why you must understand what’s required before you bring someone on in a new location.

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In this guide, we’ll discuss all you need to know about hiring employees in a new state, from registering your business properly to staying compliant with local labor laws.

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#1 Legal and Administrative Setup

Several steps are involved in expanding your business into a new state to ensure compliance and smooth operations. Here's a detailed guide to help you with this process:

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Register to Do Business in the New State

Before hiring employees in a new state, register your business as a "foreign entity" in that state. This process, known as foreign qualification, grants your company the legal authority to operate outside its home state.

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The steps to register include the following:

• Determine the Need for Registration: If your business conducts activities such as hiring employees, opening an office, or soliciting business in another state, you likely need to register there.
• Obtain a Certificate of Authority: This certificate allows your business to legally operate in the new state. For example, in North Carolina, you must apply to the Secretary of State's Business Registration Division.
• Appoint a Registered Agent: Most states require you to designate a registered agent with a physical address in the state to receive legal documents on behalf of your business.
• Pay the Required Fees: Filing fees vary. For instance, Georgia requires a fee when applying for a Certificate of Authority.

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Failing to register can lead to fines and the inability to enforce contracts within the state.

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State and Local Tax Registration

Once registered, you must comply with the state's tax requirements, which usually include:

• State Income Tax Withholding: If the state imposes an income tax, withhold the appropriate amount from employees' wages and remit it to the state tax authority.
• State Unemployment Insurance (SUI) or State Unemployment Tax Act (SUTA): Employers are generally required to pay unemployment taxes. For example, in California, employers must register with the Employment Development Department and pay SUTA if they pay wages of at least $100 in a calendar quarter.
• Local Tax IDs: Some municipalities have additional tax requirements. Check with local tax authorities to ensure full compliance.

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Most states offer online portals to facilitate registration for these taxes. For instance, many states provide combined registration systems for withholding and unemployment insurance taxes.

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Workers’ Compensation and Insurance

Workers' compensation insurance is mandatory in most states to protect employees who suffer work-related injuries or illnesses. These requirements vary, and failure to comply can result in penalties, fines, or even a stop-work order.

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Here are the main insurance requirements:

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Workers' Compensation Insurance Requirements by State

If your business has employees working in a new state, you must obtain workers' compensation insurance that complies with that state's laws. This may involve:

• Registering with the state's workers' compensation board or insurance fund.
• Purchasing a policy from a state-approved insurance provider.
• Complying with specific reporting and premium payment requirements.

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Some states operate monopolistic insurance systems, meaning employers must purchase coverage directly from the state-run fund. These states include:

• North Dakota
• Ohio
• Washington
• Wyoming

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In these states, private insurance providers cannot offer workers' compensation coverage.

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Coverage for Out-of-State Employees

If your business operates in multiple states or hires remote employees residing in different states, ensure your workers' compensation insurance covers all applicable locations. There are two main ways to achieve this:

• Multi-State Policy: Purchase a workers' compensation policy from an insurance carrier licensed to operate in all the states where your employees are located.
• State-Specific Policies: Obtain separate workers' compensation policies for each state where your employees reside and work.

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Note that not all states recognize workers' compensation reciprocity, and benefits may not be the same across states. Also, some states may have specific requirements for out-of-state employers, such as mandatory registration or additional reporting.

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#2 Compliance with Employment Laws

It’s important to comply with employment laws when hiring employees in a new state. This involves understanding and adhering to various federal, state, and local regulations.

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Understand State and Local Labor Laws

While federal laws like the Fair Labor Standards Act (FLSA) set baseline standards for minimum wage, overtime pay, and child labor, individual states and municipalities often have additional or more stringent regulations. These include:

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Minimum Wage and Overtime

The federal minimum wage is $7.25 per hour, but many states and cities have established higher rates. For instance, as of January 1, 2025, California's state minimum wage is $16.50 per hour, with cities like Emeryville setting it even higher at $19.36 per hour.

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Overtime laws also vary; while the FLSA mandates time-and-a-half pay for hours worked over 40 in a week, some states have daily overtime requirements.

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Paid Leave

States differ in their mandates for paid sick leave and family leave. For example, New York has implemented paid prenatal leave, allowing 20 hours of leave for prenatal care annually.

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Anti-Discrimination Laws

Beyond federal protections, states may have broader anti-discrimination statutes. New York, for example, has expanded its laws to include protections based on gender identity and reproductive health decisions.

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Local Ordinances

Cities and counties can enact their labor laws. In the Bay Area, for instance, minimum wage rates vary between neighboring cities. Employers must know such local regulations to ensure full compliance. 

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Employment Eligibility Verification

Employers are required to verify the identity and employment authorization of each new hire.

• Form I-9: All U.S. employers must complete Form I-9 for every employee hired after November 6, 1986. This form verifies the employee's identity and authorization to work in the United States.
• E-Verify: While voluntary at the federal level, several states mandate using E-Verify for certain employers. As of 2025, states like Alabama, Arizona, and Mississippi require all employers to use E-Verify. Other states, such as Florida and Georgia, have requirements based on employer size or for public contractors.

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New Hire Reporting

Federal law mandates that employers report newly hired and rehired employees to a state directory to assist in child support enforcement.

• Reporting Timeframes: Generally, employers must report new hires within 20 days of the hire date. However, some states have shorter deadlines. For example, Massachusetts requires reporting within 14 days.
• Reporting Methods: Employers can report new hires electronically or via mail using Form W-4 or an equivalent form. It's essential to check the specific requirements and accepted methods for each state.
• Penalties for Non-Compliance: Failure to report new hires promptly can result in penalties. For instance, Massachusetts imposes a $25 penalty for each late report.

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#3 Payroll and Benefits Administration

Managing payroll and benefits across multiple states requires a detailed understanding of several tax laws and regulatory requirements.

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Payroll Setup

Adjusting Payroll Systems for State-Specific Compliance

Each state enforces its tax codes, wage laws, and filing deadlines. For instance, while California mandates a higher minimum wage than the federal standard, Texas does not impose a state income tax.

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Employers must accurately withhold and remit state income taxes, unemployment insurance contributions, and adhere to local tax obligations based on the employee's work location.

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Using Multi-State Compliant Payroll Services

To tackle the challenges of multi-state payroll, use payroll services specializing in multi-jurisdictional compliance. Platforms like Justworks offer automated tax calculations, compliance alerts, and streamlined reporting across various states.

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Also, Hirechore provides tailored solutions to manage state-specific payroll requirements efficiently.

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Benefits and Insurance Adjustments

Ensuring Compliance with State-Mandated Benefits

Beyond federal mandates like the Affordable Care Act (ACA), several states have instituted their requirements for employee benefits.

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For example, some states have implemented mandatory retirement savings programs for employers without existing plans. Employers must stay informed about such state-specific mandates to ensure full compliance.

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Updating Health Insurance and Retirement Plans

Employers should regularly review and adjust their health insurance offerings and retirement plans to align with federal and state regulations.

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This includes ensuring health plans comply with the Employee Retirement Income Security Act (ERISA) and the Health Insurance Portability and Accountability Act (HIPAA).

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In addition, retirement plans should be evaluated for compliance with state-specific requirements and contribution limits.

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#4 Onboarding and Company Policies

Compliance with state-specific onboarding requirements and labor law poster obligations helps you fulfill legal mandates and also promotes transparency and trust with new hires.

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State-Specific Onboarding Documents

Each state mandates specific employment forms and notices that employers must provide to new hires. These documents include state tax withholding forms, wage notices, and other employment-related disclosures.

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They include:

• State Tax Withholding Forms: While the federal Form W-4 is standard, many states require their version. For instance, California mandates the DE 4 form for state income tax withholding.
• Wage Theft Prevention Notices: New York and California require employers to provide detailed wage notices outlining pay rates, paydays, and other compensation details.
• State-Specific Notices: Some states have unique requirements. For example, Massachusetts requires employers to provide a Paid Family and Medical Leave notice to all new employees.

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Employers can reference comprehensive resources, such as the State Law Chart: New Hire Notices and Forms, to ensure they meet all state-specific onboarding requirements.

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Workplace Posters and Notices

Labor law posters inform employees of their rights and employers' obligations. These requirements also exist in remote work settings.

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They include:

• Federal and State Posters: Employers must display federal and state labor law posters in a conspicuous location. For remote employees, this can be achieved by providing electronic versions accessible through the company's intranet or by mailing physical copies to the employee's home office.
• Electronic Posting Compliance: The U.S. Department of Labor has acknowledged electronic postings as a viable method for remote workers, provided employees have easy access and are notified of their availability.
• Regular Updates: Ensure all posters, whether physical or electronic, are updated promptly to reflect the most current laws.

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Services like Poster Guard® E-Service can help you manage and distribute compliant labor law posters to remote employees.

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#5 Strategic Considerations

When expanding your business into a new state, consider strategic approaches to hiring and team integration. In this case, you must evaluate the appropriate employment model and promote a cohesive remote culture.

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Evaluate Hiring Models

The right hiring model ensures compliance and operational efficiency. Two main options include:

• Establishing a Business Presence: This traditional approach involves registering your business in the new state, handling payroll, taxes, and compliance internally. While it offers full control, it requires significant resources and a deep understanding of state-specific regulations.
• Partnering with an Employer of Record (EOR): An EOR manages employment responsibilities on your behalf, including payroll, tax filings, benefits, and compliance. This model is beneficial for companies seeking rapid expansion without the administrative burden. 

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Build a Cohesive Remote Culture

A unified company culture is important in today's remote work environment. Effective strategies to achieve this include:

• Use communication tools like Slack or Microsoft Teams to ensure real-time connectivity. Regular virtual meetings and an open-door policy encourage transparency and trust.
• Break down departmental silos by organizing cross-departmental meetings and collaborative projects. This approach promotes a sense of unity and shared purpose across the organization.
• Offer access to online courses, workshops, and career progression plans. Investing in employee development not only boosts morale but also leads to higher retention rates.
• Promote an inclusive environment by offering cultural sensitivity training and celebrating diverse cultural events.
• While remote work offers flexibility, occasional in-person gatherings can strengthen relationships and combat feelings of isolation.

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Simplify Multi-State Hiring with Hirechore

HireChore offers comprehensive support to businesses expanding across state lines, handling all involved in multi-state HR compliance so you can focus on growth.

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Here's how HireChore can assist:

• State Registrations and Compliance: HireChore manages state and local business registrations, tax IDs, and ensures compliance with varying state employment laws, including workers' compensation and unemployment insurance requirements.
• Payroll and Benefits Administration: We oversee multi-state payroll processing, ensuring accurate tax withholdings and adherence to state-specific wage laws. In addition, HireChore assists in setting up compliant benefits packages tailored to each state's regulations.
• Employee Onboarding and Documentation: HireChore streamlines the onboarding process by providing state-specific employment forms, updating employee handbooks to reflect local laws, and ensuring all necessary labor law postings are in place (even for remote employees).
• Ongoing HR Support: With a dedicated operations partner, HireChore offers continuous support for HR tasks, from managing employee records to handling compliance updates, allowing your internal team to focus on strategic projects.

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Wrapping Up

Expanding your workforce into a new state involves scaling through complex legal, tax, and HR compliance requirements.

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From registering your business and managing state-specific payroll taxes to updating employee handbooks and ensuring adherence to local labor laws, each step will help you avoid costly penalties and ensure smooth operations.

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While thorough research and professional guidance are important, partnering with an experienced HR outsourcing provider can streamline the process and reduce risks.

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Hirechore offers tailored services for payroll setup, benefits administration, and employee onboarding, thereby streamlining your processes and ensuring that each new hire is set up for success from day one. Learn more.

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FAQs

What are the key payroll and tax requirements when hiring in a new state?

The main payroll and tax requirements when hiring in a new state include the following:

• Register your business as a foreign entity with the state's Secretary of State or equivalent agency. This process often involves obtaining a Certificate of Authority. 
• If your employee works in a state with an income tax, register with that state's tax authority and withhold the appropriate state income tax from their wages.
• Pay unemployment insurance taxes to the state where the employee works, not where the employer is located.
• Report new hires to the state within 20 days of the employee's start date. While this is a federal requirement, states may have different processes and deadlines for reporting new hires.
• Research and comply with any local tax obligations in the area where your employee works.
• Most states require employers to carry workers' compensation insurance to cover medical expenses and lost wages for employees who are injured on the job.
• Update your payroll system to accommodate the new state's tax rates, withholding requirements, and reporting obligations.

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Should I consider using an Employer of Record (EOR) when hiring in a new state?

Yes, partnering with an EOR can be beneficial when expanding your workforce into a new state. EORs manage payroll, tax compliance, benefits administration, and adherence to state-specific labor laws.

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Benefits of using an EOR include:

• Simplified compliance
• Cost efficiency
• Scalability
• Risk mitigation

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Do I need to update my employee handbook when hiring in a new state?

Yes, it’s important to update your employee handbook when hiring employees in a new state. This update ensures compliance with state-specific labor laws and provides clarity to employees regarding their rights and responsibilities.

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Here are the steps to follow:

• Create a state-specific addendum
• Include required state policies
• Regularly review and update
• Distribute updated handbooks

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