Gas prices remain uncomfortably high, which has led some employees and employers to consider telecommuting as a viable work option. Before any employee begins telecommuting, there are payroll issues you need to resolve.
Keeping time for nonexempts
Issues of working time, overtime and timekeeping under the Fair Labor Standards Act arise for nonexempts. Since they must be paid for every hour they work, you must have a reliable system to track their work hours.
Idea: Before you let employees work from home, work out very specific timekeeping procedures with them and their managers. Supervise this system closely. As an alternative, you can come to a reasonable agreement with telecommuters regarding their work hours. Be sure these agreements are in writing.
In any event, if you suspect that employees are working longer and not reporting their time, follow up and resolve discrepancies quickly and amicably, before your suspicions mushroom into a lawsuit for unpaid overtime.
How and when to pay
Employees generally can’t be forced into direct deposit or into receiving their pay via paycards, but telecommuting may be the incentive you need to get them to sign on. If you must mail paychecks, be aware that some states require that employees actually have their checks in hand on payday; postmarked envelopes won’t do. Similarly, the IRS says that employees who have no choice regarding how they’re paid (i.e., direct deposit isn’t an option) aren’t in constructive receipt of mailed checks; they must actually receive them.
When this matters: This will affect withholding and deposit rules if checks are mailed at the end of December, but not received until January.
Reimbursement for business expenses
Employees who work from home one or two days a week simply to beat gas prices won’t qualify for any tax breaks for their home offices. On the other hand, the tax code is much kinder to employees who must work from home, say, because you’ve turned their work space into a storage area.
What’s reimbursable tax-free: You can pick up the costs employees incur to work at home, including office equipment and supplies, Internet service so they can access their work files and exchange email with bosses and co-workers and dedicated phone and fax lines. Snag: Personal use of company-provided office equipment is taxable, so telecommuters will need to keep a log of their personal and business use.
Telecommuters will need a dedicated place to work. If their home offices are exclusively used on a regular basis as the principal place of business (which will be the case since they’re required to work from home), they can deduct some of the costs related to their home offices. Warning: Home offices generally must be separate rooms or structures that other family members can’t access. So a computer and filing cabinets in the den won’t do.