Home-based work was a niche employment model before 2020 and is now roughly 28% of U.S. paid workdays according to WFH Research's 2025 tracking. The shift created HR compliance questions that most employers are still catching up on. When a California employee moves to Nevada and doesn't tell HR, the employer has potentially created payroll tax nexus, workers' comp coverage gaps, and benefits-eligibility issues. Multi-state home-based workforces compound the complexity. For HR, the home-based worker question is less about remote-work policy and more about jurisdictional compliance.
Tax Nexus and Multi-State Payroll Issues Every state where an employee lives and works creates tax nexus for the employer. That means state income tax withholding, state unemployment insurance tax, and sometimes corporate income tax nexus. Most states assert nexus on the employee's first day of work from their state. A dozen states have reciprocity agreements with neighbors that simplify withholding, but the rest require separate registration and filing. See payroll for the mechanics.
Workers' Compensation and the Home Workplace Workers' comp covers injuries arising out of and in the course of employment. The home workplace counts. An injury occurring during work hours in a home office is typically compensable. The gray areas are injuries during breaks, during commutes between home and client sites, and in areas of the home outside the designated work space. Clear written home-office safety expectations help resolve the gray areas.
Expense Reimbursement for Home-Based Workers Seven states (California, Illinois, Massachusetts, Montana, New Hampshire, New York, Pennsylvania, plus D.C.) require reimbursement of necessary business expenses, including home office and internet costs for remote workers. California's Labor Code 2802 is the most aggressive. In other states, reimbursement is discretionary but often offered to compete for talent. The reimbursement is generally not taxable to the employee if properly structured under accountable plan rules.
Building Home-Based Worker Compliance Without Breaking the Model A clean home-based worker program combines a multi-state payroll stack, clear home-office safety expectations, a compliant expense reimbursement approach, and an HRIS that tracks work location accurately. The single most common failure mode is an employee moving states without notifying HR, which creates an undetected compliance gap. Build a quarterly location-confirmation process into the HRIS to catch moves. Related concepts: compensation geo-differentiation, onboarding for location-aware setup, and full-time hours for how remote schedules interact with ACA. BLS remote work statistics are at bls.gov .
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