Payroll 101: work location

Tags: General, Payroll, Tax

Work location overview

A work location (a.k.a workplace) refers to a company’s official legal address. A work location would be used for taxation purposes. This is likely different from the various locations where an employee could perform their job duties (i.e. different job sites).

For tax purposes, a company’s work location determines various tax obligations and considerations for both the employer and employee. Some of these considerations include:

• Employee state and local taxes to be withheld
• Employer state and local taxes to be withheld
• Potential for state tax reciprocity
• Employment tax reporting required by employers

Work location paired with residential addresses of employees will determine the following information:

• Which filing authorizations are surfaced for the employer at the time of onboarding
• Which withholding form(s) are surfaced when an employee is onboarding
• How taxes are calculated for state withholding, state unemployment, and local taxes at the employee level.

Employers have an obligation to withhold taxes according to the work location’s requirements.

💡 There are some exceptions to this rule, specifically around temporary work and employees that may travel from site to site for work.

General concepts employers should know

• Work location is different from a job site. Work location refers to a company’s official legal address. Separately, a job site would refer to the location where the employee (”worker”) goes to work.
• If an employer has job sites in a single state, then they only need to set up a single work location. If an employer has job sites in different states, then they will most likely need to record a work location for each state and file taxes for each state.
• If an employer has multiple work locations, then they should verify that each of their workers is assigned to the appropriate work location(s). If a worker only works in 1 state, they should only have that state’s work location assigned to them. If a worker has job sites in multiple states, they should have a work location assigned for each state where they work.
• A worker’s taxes withheld is determined by their work location, not by their home address.
• If an employer has job sites in different states for a single pay period, then they should assign the relevant work location to the appropriate shifts.

⚠️ Employers should consider consulting with payroll and tax professionals to navigate these complexities and ensure adherence to all legal requirements regarding work locations.

Multiple work locations for an employer

When an employer has multiple work locations, managing payroll and taxes can become more complex. Here are some key considerations and implications:

• State Tax Registration: For tax purposes, employers must register in each state where they have employees working. This involves obtaining a state tax ID and complying with state-specific withholding and unemployment tax requirements.
• Reciprocal Agreements: Some states have reciprocal tax agreements that allow employees who work in one state but live in another to pay taxes only in their state of residence. Employers need to understand and apply these agreements when applicable.
• Varying Labor Laws: Employment laws such as minimum wage, overtime, and employee benefits can vary significantly between states and localities. Employers must comply with the laws in each jurisdiction where they operate.
• Tax Withholding: Employers must determine tax withholding based on where employees work, which may differ from where they reside. This can impact state and local tax obligations and requires careful tracking and application.

⚠️ Managing payroll and taxes for multiple work locations requires careful planning, compliance with diverse regulations, and effective use of payroll technology. Employers should consider consulting with payroll and tax professionals to navigate these complexities and ensure adherence to all legal requirements.

👉 When an employer has job sites in different states, then they will have to report a work location for each state and file taxes for each state.

Multiple work locations for an employee

Employees that work in more than 1 state are subject to taxation based on the location where they are performing services. Typically, the number of hours/days for a specific work location should be tracked in order to tax the employee’s wages accordingly.

👉 In order to determine if and when an employee is applicable to multiple state or local withholding rules, employers must understand the requirements of each of the non-resident locations in which their employees work.

Some states do not require tax withholding until the employee has worked a certain number of days in the state. While other states may rule that an employee’s wages are subject to taxation from the first day of work performed in their state. Since each state and certain localities have different requirements, each situation must be reviewed separately and be addressed appropriately.

⚠️ Employers are responsible for specifying and sharing their work locations with their payroll providers. Employers are also responsible for specifying and sharing each employee’s number of hours worked for each work location. Payroll providers are responsible for recording this data and filing payroll appropriately to reflect work location allocations.