When you hire a new employee, head to the People section of your Gusto admin account to start onboarding them. Choose an accordion for steps to onboard an employee, how to handle remote and international hires, add a new hire to payroll, and more.
Watch our video below for guidance on hiring employees in new states.
If you're adding employees for the first time while setting up your account, reference this article.
If you're rehiring a previously dismissed employee, follow the steps in this article instead.
After you add your new employee to payroll, Gusto will email them an invitation to set up their account and complete their onboarding tasks. If you offer benefits with Gusto, they'll be automatically invited to enroll in benefits once their new hire waiting period is complete.
The work location you enter in Gusto for a new hire depends on several things: where your employees decide to live and work, how long they’ll live or work in a given state, if the states have reciprocity, and a variety of other factors.
Understanding these dependencies can sometimes feel like a challenge, but we’re here to help.
In most cases, you’re required to withhold taxes in the state where your employee physically works—which can either be their resident or non-resident state.
The golden rule is that taxes are owed in the place where work is done. When preparing to hire a remote worker in a new state, you’ll usually need to register with the state where the employee is living and working in addition to where your business is located. It’s important to understand your withholding obligations in both states.
Each employee's work address should be the address where their work physically takes place. Most employees work and live in the same state.
State laws vary. If you have employees working in another state, you’ll need to understand that state’s employment tax laws to determine if you are required to pay taxes to both their home and their work state. Consult a legal or tax advisor who can help you.
How to handle this in Gusto
Here too, the golden rule is that taxes are owed to the state where the work is done. But—some states have agreements that allow employees who work in one state and live in another to only pay income taxes to their state of residency (aka their home state). This is called a reciprocal agreement. Whether the states you’re dealing with have these agreements could affect an employee’s income tax withholdings.
How to handle reciprocal agreements in Gusto
To be able to withhold and pay income taxes on your employees’ behalf in their home state, your business needs to register for a withholding account in that state.
What if the home state and work state don’t have reciprocity?
If the two states do not have reciprocity, Gusto will withhold income tax (and unemployment, too) in the employee’s work state in Gusto. This means Gusto withholds income tax only from their non-resident state.
Gusto does not support flexible (variable) “courtesy” withholding–for now, there are safeguards in place to make sure that the required payroll taxes, both unemployment taxes and income withholding taxes, are calculated and withheld based on the work address on file for employees during the work period you pay them for.
*Exception: courtesy withholding is supported for employees who work in Idaho, and live in either Washington or Wyoming.
When hiring a remote employee, you’ll need to follow the pay and labor laws in the state where they are—which could differ from the laws in the state where your business is located.
Here are some considerations to familiarize yourself with for each employee that works in another state, so you stay compliant:
Overtime: learn when you’ll need to pay overtime to your employees and at what premium rate (e.g. 1.5x the regular rate).
Some employees are exempt from overtime but state and local laws vary, so be sure to check when the employee will be eligible for overtime and how much to pay him or her.
Pay frequency: determine payday (frequency) requirements in the new state.
Some states only allow semi-weekly or monthly payroll, while others also allow weekly and bi-weekly payroll. Additionally, some states have payday requirements based on the work your employee does.
If your pre-existing payroll frequency isn’t allowed in a remote worker’s state, you’ll need to follow the payday laws in that state. Learn how to set up pay schedules in Gusto.
Final paycheck rules: there are state-specific rules about how a regular paycheck or final paycheck should be delivered–you’ll need to deliver your employee’s final paycheck within the timeframe dictated by their state laws and this timeframe may vary if your employee quits or is terminated.
Meal and rest breaks: every state has laws about how many paid and unpaid breaks you need to provide employees. Be sure you communicate these laws to your employees and provide the mandatory break periods. Learn how to set up meal breaks in Gusto.
Disability insurance: withholding money from employee’s paychecks for state disability insurance is required in five states–California, New Jersey, Rhode Island, Hawaii and New York. If your employee works in California, New Jersey, Rhode Island or Hawaii, this is taken care of by Gusto. If your employee works in New York, you can elect for Gusto to withhold this, but you’ll have to remit the payments to the agency directly. Scroll to the “State Disability Insurance (SDI)” of this article to learn more.
Workers’ Compensation Insurance: requirements can vary by state, industry, and the size of your company. Check out our blog to learn about workers’ compensationand review state-by-state requirements. When ready, learn how toset up your workers on Gusto.
If the contractor’s mailing address is different from where the work was performed and you need a 1099 to be created for the work state, please contact us.
While hiring a remote contractor is generally less complicated than hiring a remote employee, misclassifying an employee as a contractor could lead to serious tax penalties. Before hiring a new teammate, check out our blog article on the difference between employees and contractors.
Gusto doesn't support employees living internationally or those living in U.S territories (ie. Puerto Rico or the U.S. Virgin Islands). Gusto only supports employees with all of the following criteria:
Employees must have a SSN. If you enter an ITIN, or otherwise invalid number, this may impact our ability to file W-2's and other payroll tax returns successfully.
Work address in the US
Home address in the US
Bank account in the US if being paid through direct deposit
Gusto supports on a limited pilot (beta), the ability to pay international contractors for work performed in the following countries:
You can expect Gusto-negotiated foreign exchange rates and no extra costs.
Gusto does not support withholding or reporting for these contractors. Contractors must self-report as required.
International contractors will not have access to a Gusto online account–when paying international contractors, please inform them so they know when to expect payment(s). On payday, Gusto will send an email letting your international contractor know that they were paid.
Requirements differ by country, but Gusto will usually ask for the below:
At this time, we do not support cross-border USD (United States Dollar) payments. All payments will be made in foreign currency.Domestic contractors
Gusto only supports domestic contractors with the following criteria:
If your benefits are managed by Gusto and you have a new employee joining your team, you can estimate their monthly benefits cost from your Gusto admin account:
Based on the employee’s date of birth, we’ll estimate their monthly premium cost. The summary provides a range of monthly premium costs based on the various benefits and plans you offer, and whether or not the employee has dependents.
If you’d like to see the premiums of each plan, click Download Cost Breakdown (PDF). The PDF breaks down the employee, spouse, and child cost for each plan that you offer.
Assumptions & methodology: estimated costs are used for illustrative purposes only. Actual costs will vary. The estimated cost assumes that any child dependent is younger than 18 and any spouse is the same age as the employee.
Review the onboarding timeline for your new employee and click Send invitation. On the next page, you'll see their onboarding checklist to review and complete other tasks as needed.
If you added an employee email address during onboarding and they did not receive the welcome email, you can resend it.
Important: you will only see this option once you've added the employee to payroll.
If an employee has already started self-onboarding and is having trouble gaining access, these troubleshooting steps should help.
If you chose to manually onboard the employee—you did not add their email address when setting up their account—go back to the employee's account, and add the email address in the add to payroll task. This will trigger a welcome email to be sent to the employee.