Tax considerations for workforce challenges in the middle market

As companies continue to use remote and hybrid work structures, the complexity of payroll, state and local tax (SALT) obligations, and compliance requirements remains a challenge for many middle market businesses. Navigating this terrain requires an understanding of SALT rules and a proactive approach to risk assessment and resource allocation.

Years after the shift to remote work became widespread, managing remote employees spread across multiple jurisdictions remains a top challenge for some organizations, says Peter Berard, a senior director at RSM US LLP and national leader of the firm’s SALT employment tax practice.

“Many middle market companies still don’t have the best grasp on how they are supposed to handle the multistate compliance aspects associated with remote employees,” he says. Beyond payroll implications, dispersed workforces might also trigger state tax nexus or other obligations.

“Your team might know the rules of one state inside and out. But once you get outside that comfort zone, things can easily slip through the cracks,” says Berard.

Changes in how employers are handling remote work might continue to present new challenges in this area. The RSM US Middle Market Business Index survey in the fourth quarter of 2025 found that 31% of organizations are making it mandatory for employees to return to the office, and 25% are considering doing so.

Turnover in the middle market organizations’ tax, payroll and human resources departments can compound compliance issues, Berard adds, and a lack of consistency could open the door for costly mistakes. That’s where an outside advisor can help with compliance needs and risk mitigation for a host of tax issues.

In the case of transitioning to a new payroll system, for instance, a third-party advisor can help analyze how and where employees are taxed, review payroll system setups, and conduct gap analyses to help ensure accurate reporting and compliance. Failure to properly address these details can result in incorrect tax filings, penalties or missed opportunities for savings.

"Outsourcing can remove some risk from the organization itself," says Anne Bushman, an RSM partner and national leader of the firm’s compensation and benefits advisory team. “Using a specialist can help you through the complexity.”

In addition to compliance and SALT issues, companies should explore workforce-related credits and incentives. Aside from credits, if benefit offerings or other compensation arrangements are changing due to cost, market competitiveness or other reasons, a periodic review of the proper tax treatment of an organization’s arrangements is prudent to minimize the risk of creating unintended costs from penalties and interest. A holistic approach can help organizations determine whether the benefits they provide make them eligible for tax credits that could offset costs. This comprehensive strategy can help businesses optimize tax efficiency.