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08/20/13


Darla McClure publishes an article on telecommuting

By: Darla J. McClure

Publication Name:

The Free State Accountant

Media Type: Publication

Should you allow your employees to telecommute?

The answer to this question is maybe. Telecommuting, which is the opportunity to work for a business from the comfort of your own home or other desired location, is steadily becoming more and more of a common occurrence in businesses today. Roughly 3.1 million employees telecommuted in 2011 as reported by the Telework Research Network. Even with Yahoo’s CEO Marissa Mayer’s surprising decision to end telecommuting for the internet company effective this past June, experts believe that the number of telecommuters will only continue to grow as more and more companies weigh the pros and cons.

So what are the pros?

  • Increased employee satisfaction, which can lead to decreased turnover, and therefore a decrease in recruiting and training costs.
  • Work/life balance, which can lead to decreased absenteeism.
  • Savings on overhead.
  • Improved productivity. This one is subject to debate by the authorities but surveys have shown that certain employees are more productive at home because as a telecommuter they are likely to get the job done as soon as possible which means they are maximizing performance.

Now, how about the cons?

  • Fair Labor Standards Act compliance. Employers need to be careful with non-exempt employees who are telecommuting in that they need to make sure they are properly recording their hours. This can be accomplished by providing software that tracks employees’ hours by singing in and out or requiring employees to record their own time on a time-sheet that is handed in each week.
  • Loss of Routine.
  • Lack of interaction with colleagues.
  • Additional Tax Consequences. In 2010 a New Jersey Court held that a company that has a single employee who resides in the state of New Jersey and telecommutes for a company that is headquartered in Maryland may be subject to corporate business taxes. The facts of this case were as follows: The Maryland company withheld and remitted New Jersey income taxes for its single employee in New Jersey. This filing alerted the New Jersey Division of Taxation. The Division, and both the New Jersey Tax Court and Superior Court agreed, held that the Maryland company also owed New Jersey corporate business taxes because of the “nexus” with the state – the nexus being a single employee working from home. Based on a survey in 2012, thirty-five (35) other states would also find a “nexus” thereby creating a tax liability where there is no other connection except for a single employee working from home. Fortunately, Maryland is among the six (6) states who do not believe this sort of telecommuting arrangement would give rise to additional tax liability.
  • Unemployment taxes. Although somewhat of a grey area, in most cases unemployment insurance payments for telecommuters should be paid to the state where the employee is conducting the work – typically in their state of residence if they work from home.

As you can see there are both advantages and disadvantages to allowing employees to telecommute and the list above is an example and not by any means all inclusive. Telecommuting is not appropriate in all situations and is not right for everyone, and is not right for all positions.  However, if you are thinking about implementing a telecommuting policy it is best to discuss this with a human resource professional as well as employment counsel to make sure you have considered all of the ramifications associated with such policy.

This article was originally posted in The Free State Accountant, a publication of the Maryland Society of Accountants.


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