Keeping up with the complicated web of federal, state, and local laws is enough to frustrate any recruiter who places contractors and runs their own back-office. But some states’ employment, payroll, and tax laws are so complicated that recruiters are starting to avoid making contract placements there at all. Let’s take a look at the three most difficult states in which to place contractors:
California probably has the most complex wage and hours laws, starting with their generous overtime rules. Employees receive overtime (and even doubletime) based on the number of hours they work in a day and the number of workdays in a workweek. Federal law only requires overtime (time and a half) for hours worked in excess of 40 in a week. The state also sets its own minimum wage and establishes rules for how and when employees are to be paid. In addition, California has state-specific laws governing E-Verify, credit checks, and more. The state was named the worst state for employment tax laws on XpertHR’s Payroll Misery index, and a number of localities within the state have their own employment laws as well. For example, San Francisco is one of a growing number of localities that have their own paid sick leave (PSL) laws, which are causing recruiters and employers a lot of frustration as they try to determine whether they must comply, how to track the leave, and how to administer the program.
New York has a lot in common with California. In addition to being named as one of the worst states for employment tax laws by XpertHR, New York also has its own minimum wage law and restrictions on credit checks, just like California. And like San Francisco, New York City has its own PSL law. NYC was also the first city to ban discrimination against the unemployed. Focusing back on the state, employers in New York must notify newly-hired employees in writing of their hourly rate, overtime rate, and payday. For contractors, this requirement is fulfilled through the New York LS51 Form.
The third worst state for employment taxes, according to XpertHR, is also one of the most popular for paid sick leave laws. Two cities within the state (Jersey City and Newark) have such laws. New Jersey also has the distinction of being the first state to ban discrimination of unemployed applicants.
So ask yourself this question: Is it worth extra time, money, and frustration to accept contract placements in these and other difficult states? That depends on a number of factors, including how much business you can pick up there, the profit margin, and more. In general, though, it is rarely good for your profits or your reputation to turn down business. Instead, you may want to consider outsourcing the employment of your contractors (or at least those in particularly difficult states) to a contract staffing back-office provider that will handle all of the employment tasks and legal compliance for those contractors. That way, you can enjoy the additional revenue from taking placements in these states WITHOUT the state compliance frustration.