Why do some remote jobs bar applicants from certain states?

“To be considered for this role, you must reside in one of the following states.” If you’ve searched for jobs lately, you might have come across this excerpt in job ads. 

People love remote jobs because you can work from anywhere. Except, not all remote jobs are hiring people from anywhere in the U.S.

In fact, job seekers might be seeing more and more advertisements that outline that people who reside in certain states won’t be considered for the position. And it’s not always just because they want you to work in the same time zone or to be within driving distance of the office for occasional meetings.

It’s actually because it’s a huge lift for HR departments when they employ someone from a state where they don’t have any other workers. And the states that have more employment laws, the harder it is. We spoke to employment and HR experts to better understand why remote jobs are sometimes limited to certain states.

“It’s a big pain to hire a worker in a state where you don’t have any workers yet,” said Kara Govro, chief HR legal expert at HR company Mineral. 

1. Business licensing, taxes and insurance

To hire in a new state, employers need to jump through a lot of hoops. The company needs to register with local and state tax agencies for every state in which they have employees, and will also need to pay taxes in those states. Before all of that, they need to acquire a business license in the new state they are operating in. The price for this can vary, but the paperwork and fees associated could make someone pass entirely on hiring workers in a different state.

It’s one of the biggest reasons that companies decide not to hire in states where there aren’t already other employees located. 

“They’re going to have to register, provide a registered agent and an address, licensing and business permits from the state,” said Govro. “You’re going to have to pay corporate and business activity taxes in that state because they’re basically operating there with even just one remote employee. Then they need to figure out the state’s income tax scheme.”

Samantha Bussard, director of talent strategy at Compass Business Solutions, says that it could be as simple as the fact that the employer is not looking to add additional states to their registration list at a certain point in time.

On top of that, companies need to provide workers’ compensation and unemployment insurance for every employee. It’s complicated for HR to handle, especially if it’s an HR team of one that is from a mid-sized company.

2. Complex employment laws like paid leave

Each state has its own set of employment laws, which range from paid leave to mandatory breaks. The more laws the state has, the more of a hassle it is to hire an employee there. Govro says that the states on both the east and west coast are much more difficult to hire in compared to the states in the middle of the country. California is notoriously known for employers having the most difficulty hiring due to all of the hoops to jump through.

“Hiring one employee in California would really make someone cry,” said Govro. “Also, New York, Oregon, or Washington for that matter.” 

Govro says there might be paid leave premiums for states that have passed paid leave programs or short-term disability programs. 

“You’re responsible for understanding all the rights that an employee has in that state,” said Govro.

3. Avoiding pay transparency 

More and more states are adopting pay transparency laws, but still not all of them have them. A company that is based out of a state that does not require pay transparency might not want to list jobs in a state where it is required. This could open up questions from employees who live in states without pay transparency laws and lead to confusion around salaries.

Additionally, average salaries vary significantly from state to state. While some companies pay in accordance with the cost of living in a certain area, not all do, nor do they want to go through the process of figuring that out. Mahati V Singh, a lead tech recruiter, says that an employer also might not have the budget to pay someone who is in a high-cost-of-living area, which is why they would avoid hiring from that state entirely.

“If they’re looking for someone with five to six years of experience in Florida, it might be a $120,000 or $130,000 compensation range,” said Singh. “In California, that would be $180,000 or $190,000. They wouldn’t be able to bring that employee on board. When the person is in the same state, they can match the wages and compensation for that particular individual.”

4. Geographical knowledge and time zones

Aside from a headache for HR, there are other reasons why a company might exclude candidates from certain states. A part of that might be as simple as not being on the same working hours. If the company largely operates on Eastern Standard Time, it might not help operations to have one person who works on Pacific Standard Time.

Beyond that, though, while the company might be fully remote, an employer might not want to pay for airfare and lodging for the out-of-state employee when there is the occasional get-together. 

And it could even present problems with the kind of work you are doing. Singh explains that she’s heard clients say that they only want to work with people who have knowledge of the area.

“There are various roles in the U.S. where the clients demand the person be from the same state,” said Singh. “It could be because of cultural similarity, legal requirements, or local knowledge of a particular state. They are aware of the local laws that are very state specific.”

5. Candidate consideration

While a job advertisement might clearly state that only candidates from certain states will be considered, it doesn’t necessarily mean that you should shy away entirely. All of the experts that we spoke with said that for the perfect candidate, the aforementioned stresses could be overlooked, however, the instances of that happening will usually be far and few between. 

“I have seen that happen when there is a great match and fit to the business and they decide to pursue it,” said Bussard. 

She says that it’s more common in mid to larger-scale businesses as smaller companies won’t want to add something additional to their compliance checklist. “It’s worth checking out as a candidate, but having realistic expectations since they set their expectations upfront,” added Bussard.