In a remote workforce, the laws that govern employees are based on the state that the employee lives and works in. This is a common misconception. An employee’s state of employment is NOT where your company (the job) is located, but where the employee lives and works from, and those are the laws and expectations you’ll have to follow.
What we’ve done is combined four factors - overtime laws, paid sick leave laws, general cost of living, and unemployment rate - into the Syfter Remote Hiring Index. Our mathematical formula and industry experience will help you to better understand the ease with which you can hire for technology in each state.
First, you’ll get an overview of each of the four factors and where each state falls within them. Then, we’ll tie it all together and reveal to you where each state falls in terms of total ease in completing a hire, or what we at Syfter call Application to Orientation (A2O) - the moment a candidate applies for your job to the moment they are sitting (or standing) in their first day of orientation.
What is the FLSA?
The FLSA, or Fair Labor Standards Act, is a federal law that establishes standards for things such as minimum wage, overtime pay, youth employment, and record keeping. States are allowed to pass their own laws on these topics, but they may only add to what the FLSA already grants to employees. If the FLSA already grants a non-exempt employee overtime at 40 hours, state law cannot make them wait until 50 hours. However, if an employee is not covered for overtime pay under the FLSA and they are covered under the state law, they would be paid in accordance with state law.
In regards to overtime, the FLSA dictates that all non-exempt employees receive overtime pay for any hours worked over 40 hours per workweek. Overtime pay is defined as at least one and a half times the rate of regular pay - you may often hear this referred to as “time and a half.” The FLSA does not regulate how many hours an employee is allowed to work during a week, only that however many they do work over 40 must be paid 1.5x their normal hourly rate.
Employees can be covered by the FLSA via “enterprise coverage” or “individual coverage.” Employees who work for businesses with at least two employees that either have at least $500,000 of annual business done or are hospitals, schools, preschools, government agencies, or provide medical or nursing care. Employees are also covered if their work involves them in “commerce between states” (i.e. producing goods that are sent out of state, making calls between states, traveling to other states, etc.).
Some states have no particular laws regarding overtime.
Since overtime tends to be a fairly straightforward topic, many states choose to use the FLSA as their standard for overtime. Because the FLSA is federal, even if a state passes no laws at all regarding overtime, the FLSA will still cover employees in that state. In these states, overtime pay is based on a 40 hour work week, and every hour that an employee works beyond 40 hours in a period of seven consecutive 24-hour-days must be paid out at a rate of 1.5x their normal hourly rate.
States that default to the FLSA:
Some states have laws based on a 40 hour work week.
As mentioned previously, all states are held to the minimum standard of the FLSA, but many states have chosen to pass their own laws regarding overtime. Most of these states have stayed close to the FLSA in their own legislation. These states may have certain stipulations in their laws - for example, in Washington state, some salaried employees are eligible for overtime - but the basis of the state law is overtime pay for hours worked over 40 a week, based on that same seven consecutive 24-hour days as the FLSA.
States with individual laws based on a 40 hour work week:
Some states have their own laws that offer even more.
This really depends on the state how in-depth the law goes, but some states have created overtime laws based on other factors. Some states base overtime on hours worked in a day or automatically pay overtime for the seventh day worked in a week. These are the ones you’ll want to examine more closely.
Alaska - Alaska’s overtime laws dictate that employees must be paid 1.5x their normal rate for any hours over 40 worked in a week or for any hours over eight worked in a day. However, the Alaska Wage and Hour Act also offers an extensive list of individuals who are exempt from overtime payment (and minimum wage).
California - California state law dictates that employees should be paid 1.5x their normal rate for any hours worked beyond eight, up to and including twelve hours in a single day. They also must be paid for the first eight hours worked on a seventh consecutive day of work in a week. If an employee works in excess of 12 hours in a single workday or more than eight hours on the seventh consecutive day of work, they must be paid double time, or twice their normal hourly wage.
Colorado - Colorado requires employees to be paid overtime pay (1.5x) for any hours worked beyond 40 hours in a week, 12 hours in a day, or 12 consecutive hours without regard to the start or end of the workday. Whichever calculation of hours results in the greater payment of wages is the one required to be used by employers.
Kansas - While federal law says that overtime is due once an employee has worked 40 hours, Kansas state law says that overtime is due once an employee has worked 46 hours. The Kansas Department of Labor states that whether employers must follow state or federal law comes down to the amount of annual revenue and interstate commerce of business.
Minnesota - Again, while federal law states overtime is due for anything worked over 40 hours a week, the Minnesota Fair Labor Standards Act requires overtime pay for all hours worked in excess of 48 hours per work week. Employees covered under the FLSA will be paid overtime for 41+ hours a week, and employees who are exempt from federal law but covered under state law will be paid overtime for 49+ hours a week.
Nevada - For employees who make less than 1-½ times the minimum wage ($12.00 an hour if offered health benefits or $13.50 if not offered health benefits), overtime pay at 1.5x the normal hourly rate kicks in for anything worked over eight hours in a 24 hour period or anything worked over 40 hours in a work week. Employees who make more than those hourly rates are eligible for overtime pay for anything worked beyond 40 hours in a work week.
Kentucky - Kentucky requires employees to be paid overtime for any hours worked over 40 in a week, but they also require in certain instances that any employees who work seven days a week be paid overtime for all hours worked on the seventh day.
One more thing to note about overtime laws:
All laws, whether federal or state, are much more complex than have been broken down here. This is a good starting point, but you should always read further into the laws in your area or in the area of your employee so you have a full understanding of what can be expected of you as the employer.
What is the federal law regarding paid sick leave?
Paid sick leave laws before and during the coronavirus pandemic are two different things. We’ll start with a crash course in the Family Medical Leave Act, or FMLA. While there are no federal laws mandating paid sick leave for employees, FMLA does guarantee up to 12 weeks of unpaid leave for specific medical situations for an employee or a member of the employee’s family (i.e. if an employee needs to act as a caretaker). Employees are eligible for FMLA if they’ve worked for their employer for at least 12 months, have worked at least 1,250 hours over the past 12 months, and if they work at a location where at least 50 employees are employed by the employer within 75 miles.
Early on in the pandemic, the federal government passed the Families First Coronavirus Response Act (FFCRA), which provided paid sick leave and expanded family and medical leave for employees who were actively affected by COVID-19 and a need to quarantine. While the FFCRA did expire on December 31, 2020, it’s important to keep this in mind, as the federal government could choose to extend it or use it as a blueprint for a new relief law.
One more thing to consider -
Certain cities in the U.S. have paid sick leave laws that differ from the states that they reside in. For example, Minnesota has no state paid sick leave laws (see below), but Minneapolis has its own laws that require employers to provide paid sick and safe time. Remember that you as the employer are held to the paid sick leave laws of the city or state that your remote employee resides in, so a bit of research is always a good idea.
States with No Paid Sick Leave Laws
A surprising number of states have no state laws enacted that require employers to provide sick leave to their employees. Of course, many employers choose to do this as part of a benefits package, and it’s definitely worth offering if you’re able to. Happy employees are productive employees.
States with Laws Based on 40 Hours a Year
The most common type of state paid sick leave law is one based on forty hours a year. These states all have various rates of accrual, and all accrual formulas are based on a method of “Employees accrue # hour of paid sick leave for every # of hours worked.” While the specific accrual numbers vary (i.e. one hour for every 40 worked, one hour for every 30 worked, etc.), all of these states allow their employees to accrue a maximum of 40 hours of paid sick leave per calendar year.
Connecticut - Employees accrue one hour for every 40 hours worked for a maximum of 40 hours per year. Employees can carry over up to 40 hours to the next year and can use up to 40 hours in a calendar year.
Maine - Employees accrue one hour for every 40 hours worked for a maximum of 40 hours per year. Employees can carry over up to 40 hours to the next year and can use up to 40 hours in a calendar year.
Massachusetts - Employees accrue one hour for every 30 hours worked for a maximum of 40 hours per year. Employees can use up to 40 hours in a year, and the carryover policy depends on the method by which the employee accrues sick time (see hyperlink).
Michigan - Employees accrue one hour for every 35 hours worked for a maximum of 40 hours per year. Employees can carry over up to 40 hours to the next year and can use up to 40 hours in a calendar year.
New Jersey - Employees accrue one hour for every 30 hours worked for a maximum of 40 hours per year. Employees can carry over up to 40 hours to the next year and can use up to 40 hours in a calendar year.
Oregon - Employees accrue one hour for every 30 hours worked for a maximum of 40 hours per year. Employees can carry over up to 40 hours to the next year and can use up to 40 hours in a calendar year.
Rhode Island - Employees accrue one hour for every 35 hours worked for a maximum of 40 hours per year. Employees can carry over up to 40 hours to the next year and can use up to 40 hours in a calendar year.
Vermont - Employees accrue one hour for every 52 hours worked for a maximum of 40 hours per year. Employees can use up to 40 hours in a calendar year, and the carryover policy depends on the method by which the employee accrues sick time (see hyperlink).
States with Paid Sick Leave Laws Based on Company Size
In some states, the amount of paid sick leave an employee accrues depends on the size of the company that they work for. As a general rule, companies with more employees are generally required to provide employees with more paid sick leave, but specifics for each state can be found in the links below.
Arizona - Employees accrue one hour for every 30 hours worked. At companies with less than 15 employees, employees can accrue a maximum of 24 hours a year. At companies with 15 or more, employees, employees can accrue a maximum of 40 hours a year.
Colorado - Employees accrue one hour for every 30 hours worked. As of January 1, 2021, at companies with 16 or more employees, employees can accrue a maximum of 48 hours a year. As of January 1, 2022, all employees at all companies can accrue a maximum of 48 hours a year, no matter the size of the company.
New York - Employees accrue one hour for every 30 hours worked. At companies with 4 or less employees, employees can accrue a maximum of 40 hours of paid or unpaid leave (which depends on the company’s finances). At companies with between five and 99 employees, employees can accrue a maximum of 40 hours of paid sick leave. At companies with 100 or more employees, employees can accrue a maximum of 56 hours of paid sick leave.
States with Specific Paid Sick Leave Laws
A few states have very specific requirements and language in their laws regarding what employees can accrue, carry over, and use. These three states don’t fall into any particular category and are worth the extra study if you have employees working here.
California - Employees accrue one hour for every 30 hours worked. Employees can accrue and use a maximum of 24 hours per year, but employees can carry over up to 48 hours to the next year. California is also a state with a few cities that have differing paid sick leave laws.
Maryland - Employees accrue one hour for every 30 hours worked. Employees can accrue a maximum of 40 hours a year and can accrue a maximum of 64 hours total overall at any given time.
Washington - Employees accrue one hour for every 40 hours with no yearly maximum. For employees who work full time, 40 hours a week, this averages out to approximately 6-7 days or 50 hours a year. Employees can carry over a maximum of 40 hours to the next year.
Hopefully, you’ve familiarized yourself with the paid sick leave laws in the state or states that you plan to hire in. Even if state law doesn’t require paid sick leave, consider offering it to your employees anyway; the best way to ensure an employee stays with your company is to give them benefits they never want to give up.
What goes into the cost of living and the cost of living index?
Cost of living (COL) is exactly what it sounds like - it’s the average cost of maintaining an average lifestyle in any given area. The factors that make up an area’s cost of living tend to be things like housing, groceries, healthcare, transportation - things that the average person needs to spend money on to live comfortably.
While there’s no official federal cost of living index, the national average is widely accepted as a base of 100. This means that anything indexed above 100 is considered to be more expensive than the national average, while anything below 100 is considered to be cheaper than the national average.
Don’t take a state’s COL index at face value.
It’s important to remember that a state’s cost of living index is only an average. In states with large cities, there may be an extreme difference between two different areas in the same state.
If you’re going to be making an offer to someone in another state, you want to make a fair offer to your company and your prospective employee. Cost of living is a great benchmark to use when making an offer.
For example, Manhattan, New York is famously expensive for those who live there. The cost of living in Manhattan comes in at a whopping 258.3 on the cost of living index. Buffalo, New York comes in on that same index at 79.5. These cities are both in the state of New York (120.5 on the index), but a salary of $100,000 will provide a very different standard of living for individuals in these two places.
For another example of this, you can look to California. Los Altos Hills, California, is indexed at 667.9. Simi Valley, California, is indexed in 149.9. That’s an enormous difference.
Paying the same salary to someone in Manhattan as you would in Buffalo just doesn’t make sense. A three bedroom, two bathroom house right outside of New York City costs significantly more than one in Buffalo does, so unless that changes, you should pay your employees based on the cost of living for where they are.
You can use this calculator here as a guide, but use this as a barometer and not a definitive rule. As an example, this is telling you that $100,000 in New York equals $40,000 in Buffalo, that doesn’t mean you should pay your prospective employee only $40,000 - maybe meet somewhere in the middle, but you be the judge depending on what your overall offer is going to be. Use this as a weighted guide to help you make a more educated decision when putting together offers. Using this as a guide along with overtime and paid sick leave will help you to determine your fiduciary responsibility to your organization while also being fair and true to your prospective employee.
If you’re going to be hiring in a different state, especially in a large city, you should do extra research to figure out what a reasonable rate is for your employees based on where they live. It’s the best way to keep both you and them happy.
States in Order of Cost of Living Index
50. Hawaii - 170.0
49. California - 149.9
48. Massachusetts - 127.2
47. Alaska - 125.8
46. Colorado - 121.1
45. New York - 120.5
44. New Jersey - 120.4
43. Washington - 118.7
42. Oregon - 113.1
41. Maryland - 113.0
40 Utah - 110.8
39. Rhode Island - 110.6
38. Nevada - 110.5
37. Connecticut - 107.8
36. New Hampshire - 105.4