More and more older Americans are choosing to live in their homes for as long as possible, or aging in place. The senior who wants to stay in their own home often needs some non-medical assistance to meet this goal, including help with housekeeping, driving, cooking, and even some activities of daily living such as dressing and bathing.
The senior, or their adult children, typically hire caregivers directly, often using the assistance of a registry or placement service to find a caregiver. Others engage a homecare agency to send caregivers to the home. What many seniors don't realize is that these caregivers are employees, and depending on the situation, the senior themself may have just become an employer!
So how do you know who the employer is?
To determine who the employer is, many factors need to be considered, including state law and the facts and circumstances of employment. We encourage you to get competent legal advice for a opinion based on your circumstances and where you live.
IN GENERAL, if the agency pays the caregivers directly and bills the senior by the hour, the agency is the employer. If the senior (or their family member) pays the caregiver directly (or engages a 3rd party to do so), the senior is typically the employer. This is true even if the senior pays the agency a daily or shift fee for their services to locate and schedule the caregiver. Additionally if the senior privately hires the caregiver and pays them directly, without the help of any type of agency, the senior is an employer.
Dad pays his caregiver/housekeeper directly. If he is an employer, what does he need to do?
Dad has payroll, tax, legal and insurance items that must be considered. These include:
- Payroll and taxes: Dad has the legal obligation to pay 'employment taxes' for household workers. The Social Security and Medicare taxes total 15.3% of payroll. Dad can choose to collect the caregiver's portion (7.65%) via payroll deductions, or decide to pay both the employer and employee portions himself. If he does not deduct the employee's tax, he is legally obligated to pay it to the IRS anyway.
- Dad has to pay Unemployment Insurance taxes to the Federal and state unemployment funds.
- Dad has to obtain Workers' Compensation Insurance (where required by state law).
- Dad has to maintain time and attendence recordkeeping.
- When calculating pay, Dad has to adhere to minimum wage and overtime rules, depending on the caregiver's job description.
We invite you to phone the office for a free consultation at 800.626.4829 or download our free tip sheet, Privately Employed Elder Caregivers to receive more information.
Our website has a wealth of information, including an extensive list of Frequently Asked Questions to further assist you.
Why is this so important?
Sadly a failure to deal with household payroll reporting from the start can become a major headache for the senior's children or legal representative later. We have worked with many clients after the senior's caregiver was let go due to a change in the senior's health or circumstances. All too often the caregiver's unemployment claim or application for Social Security benefits brings the situation to the attention of the state or the IRS, triggering the need to recreate the records, make tax filings and payments, and deal with substantial penalties and interest.