Understanding the Challenges Growing Businesses Face When Hiring Across States
As more roles go partially or totally remote, talent pools have expanded to the point where employers can hire across multiple states to find workers best suited for a given role.
While this trend presents many opportunities to find exceptional talent, it also poses unique challenges for HR, payroll, and even compliance, all of which may slow hiring or reduce candidate access. Employer of Record service: FoxHire’s recent research suggests that these challenges aren’t back-office inconveniences but rather a structural business problem with lasting implications.
Compliance Systems Remain in the Past
Although multi-state hiring is a relatively new phenomenon enabled by recently developed technologies, it has already seen broad acceptance among employers. For example,the employer of record platform FoxHire reports that 78.2% of employers expanded into at least one new state in the past 12 months, and 53.5% expanded into two or more.
At the same time, the report shows that 36% of employers said they need at least one month to feel fully compliant after entering a new state. That gap creates delays between finding talent and actually getting someone onboarded, even though said talent is virtually more accessible than ever.
For many employers, uncertainty regarding compliance requirements has very real outcomes. According to FoxHire’s research, 48% of employers have delayed hiring or expansion due to uncertainty about state employment rules. Meanwhile, 50% have declined to hire a candidate due to compliance concerns related to that person’s state. Another 43.7% said they have informally decided not to hire in a specific state because compliance felt too risky.
Other reports have cited specific laws, such as ban-the-box legislation, as factors in a business’s decision to hire in a certain state. These and other laws may limit an employer’s ability to check an applicant’s criminal background or inquire about their salary history during the hiring process, both limitations of which may discourage employers who prefer more transparency when searching for talent.
Complications Beyond Legality
Part of what makes navigating compliance especially challenging for employers hiring across states is that compliance burdens fall differently across teams. FoxHire’s report shows that while recruiters, benefits administrators, and payroll teams were more likely to rank New York as the most difficult state to work with, HR and legal teams were more likely to rank California first.
As such, it’s reasonable to assume that the burden of managing compliance spans the full hiring lifecycle, from job postings and pay disclosures to payroll administration and classification risk.
It’s also worth noting, however, that New York and California are unique in the challenges they pose to employers, with FoxHire’s survey showing that their respective compliance difficulty levels (32.80% and 36.40%) are outliers compared to other states.
Outcomes of Managing Complex Compliance Rules
Beyond hiring delays and opting not to hire in certain states, employers appear to be managing compliance challenges in other ways. FoxHire found that 79.9% of respondents experienced at least one adverse hiring outcome tied to state-by-state compliance rules in the last year.
In addition to the aforementioned hiring delays and restrictions, these outcomes included requests that candidates relocate and even pay reductions to absorb compliance costs.
These and other compliance-related hiring difficulties suggest that compliance will be a major factor for businesses to consider when deciding where and how to expand. While it will likely still be important to meet talent where it is, doing so must be balanced with how quickly a company can register, set up payroll, align policies, and manage ongoing obligations in a new jurisdiction.
FAQ
Q: What makes multi-state hiring so difficult?
A: Different states have different wage laws, tax requirements, leave rules, notice requirements, and worker classification standards, meaning each new state adds another layer of administrative complexity and risk.
Q: Why are some states seen as harder to hire in than others?
A: States with denser regulatory frameworks or more active enforcement environments tend to create more friction for employers, especially for teams handling classification, payroll, or legal compliance.
Q: How does compliance complexity affect candidates?
A: It may lead employers to delay offers, narrow remote hiring eligibility, or avoid certain states entirely, which can reduce opportunities for otherwise qualified applicants.
