Get an accountant! Actually get an accountant though, you don’t need to pay someone full time, but the administration of pay is usually best left to professionals.
I don’t mind doing my own personal taxes, but when it comes to paying remote employees, business taxes, payroll taxes, etc. it’s better to hire someone part time (at least to start).
The gist of how to pay a remote employee is this: your employee’s income is taxed based on where the work is performed, and you pay payroll taxes based on where they (your employee) physically works.
If you spend a bunch of time trying to understand payroll taxes, you’ll probably just end up getting angry at the government, when you should really be focusing on growing your business.
Accountants should be integrated into your business just like any other remote worker – make sure everyone knows who is in charge of accounting and payroll.
I worked at a company where our accountant worked one day per week for us. So if I asked a question on Thursday of one week, I had to wait until Wednesday of the next week to get an answer (6 elapsed days). This is not good. Your accountant needs to be accessible, otherwise, you end up with a bunch of unhappy employees, and guess what: their questions get forwarded your way.
Can I pay my team less because they work from home?
Just because some, or all of your team works from home, doesn’t mean you can pay them less. If you want talented people, you need to pay them as such. I understand that most remote based companies are small, but underpaying is not the solution. Underpaying gets you workers that head straight for the door when a recruiter calls with a better opportunity.
Most companies will pay based on cost of living (COLA). If a company is based in San Francisco, it will pay San Francisco rates, and if the employee is located in Oklahoma City, he or she will still get paid SF rates.
For international employees, just read this post by Buffer, everything you need to know is in there (they do a great breakdown of 6 employees in 6 different locations).
Best advice: Get an accountant that knows how to do HR/ benefits too.
2nd best: just hire an HR person part time.
HR is yet another aspect of business best left to a professional. You are a manager/ owner, you need to focus on managing your team and growing your business. I use the same person for both payroll and accounting, he has done a great job and if you are on a budget, a similar strategy is advised.
Some of you brave people will not heed my advice about getting an accountant. If you decide against an accountant, software is an option.
I’ve seen some companies use a combined software like Gusto. I personally use Gusto for payroll and HR, but Quickbooks is a great solution as well. Going at Payroll and Benefits alone is not suggested, but if you have an HR/ accounting background – swim at your own risk.
Here is Gartner’s 2017 magic quadrant for payroll software, even with an accountant you’ll probably want to invest in one of these:
If you have any thoughts/ contradictions to anything I’ve written above, payroll and back office work is always a hang-up for startups, always curious to hear what people think.