Full explanation
The HUBZone program, codified at 13 CFR Part 126, requires that at least 35% of a HUBZone-certified firm's employees reside in a HUBZone (13 CFR 126.200(d)). SBA determines residency by an employee's actual place of residence, not by where they happen to work in a given week.
**Remote work raised a real question, and SBA answered it by not changing the rule.** As telework became more common after 2020, SBA proposed that firms where 100% of employees telework meet a higher 51% HUBZone-residency bar, on the theory that a fully remote firm has no true principal office to anchor the program's geographic purpose. Commenters largely opposed the change. In its final rule (89 FR 102448, Dec. 17, 2024, effective Jan. 16, 2025), SBA declined to adopt it. The 35% residency requirement is the same for every certified firm regardless of how much of the workforce works remotely.
**Ongoing compliance runs through recertification and contract performance.** HUBZone firms recertify every 3 years (13 CFR 126.500(a)), set by the same December 2024 final rule, replacing the prior annual cycle. During performance of a HUBZone contract, a certified firm must also attempt to maintain the 35% residency ratio (13 CFR 126.602).
What this means for diverse contractors
**For HUBZone-certified firms with hybrid or remote workforces:** the residency math did not get harder. Track each employee's actual home address against the HUBZone map; that is the entire test, whether the employee works from that address, a company office, or somewhere in between.
**For HUBZone firms hiring:** prefer candidates who reside in a HUBZone when other factors are equal. The SBA HUBZone Map shows which census tracts and counties qualify.
**For HUBZone firms with employees relocating out of HUBZones:** track the change. A certified firm performing a HUBZone contract must attempt to maintain the 35% ratio under 13 CFR 126.602; falling below it is a compliance issue to address promptly, not only a recertification concern.
**For firms considering HUBZone application:** the 35% employee residency test is the hardest ongoing compliance burden in the program. Plan staffing strategy around it, particularly the relationship between principal office location and the labor pool you can recruit from.
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