Looking at the steam client, click Steam > Settings > Controller
Make sure your settings match these ones below

There is another menu in which we have to make some changes. Launch the game, then press SHIFT+TAB to enter the Steam Overlay. Click the controller icon near the bottom right.

The menu should look like this.




Make sure the selected "current button layout" is set to "Gamepad"

Now Steam Remote Play should recognise your friends controllers that are plugged into their PCs. From here, you can assign their controllers to whichever player number you desire using the Remote Play widget (the same widget that allows you to toggle their control of the keyboard/mouse).

To assign a player in the game to a certain controller, enter the controls menu and click the gamepad toggle for that character. Then, on the desired controller, press any button to assign that player to the controller. This allows the proper left joysticks to be used without having to bind movement to any inputs.

Once all the controllers are assigned to a player number, you can now let each player bind their controls by clicking on their rebind button and letting them press whatever input they want to assign it to. Make sure everyone else doesn't press inputs while someone is rebinding.

I know this sucks and is a little confusing, I am looking for ways to make it more user-friendly. If you are having trouble setting up controls or with anything in general, leave a comment and ill try my best to respond quickly and help you out!