When your nanny or other household employee files for unemployment benefits, it can raise a lot of questions: Are they eligible? Will this cost you money? Did you set up your employment properly? Let’s break it all down in plain terms.
Whether you’ve had to let go of your nanny due to a change in schedule, finances, or family needs, understanding how unemployment benefits work can help you respond calmly, confidently, and compliantly.
Yes, Household Employers Pay Unemployment Taxes
Unemployment insurance works much like any other type of insurance — as a household employer, you pay a small tax into the system, and if a former employee files a valid claim, the state (not you directly) pays out the benefits from that pooled fund.
If you pay a household employee like a nanny, senior caregiver, or housekeeper $1,000 or more in a calendar quarter, you’re legally required to pay the taxes below. Some states have even lower thresholds that trip this requirement.
- Federal Unemployment Tax (FUTA) – 0.6% on the first $7,000 in annual wages (rates may be higher in some states temporarily listed as FUTA credit reduction states).
- State Unemployment Insurance (SUI) – Rates vary by state and employer experience (generally 1%-5%) but are typically around 2.7% on a capped wage base set by the state.
These are employer-only taxes — your household worker doesn’t pay a portion of this. It’s your responsibility to report and remit them, usually on a quarterly basis.
What Happens When a Household Worker Files for Unemployment?
When your former employee files for benefits through the state’s unemployment office, the following happens:
- The State Looks Back at their work history — typically covering the past 12–18 months — to determine if they’re eligible.
- You’re Notified by mail (or online) that a claim has been filed listing you as a prior employer.
- You Will Respond to confirm details such as wages, dates of employment, and reason for separation.
- The State Makes the Decision — not the employer. You can protest the claim if necessary, but you cannot approve or deny it.
If your employee was let go through no fault of their own (job ended, family moved, kids started school), they’ll likely be approved.
If they were fired for cause (documented misconduct, repeated tardiness, etc.) or quit voluntarily, they may be denied benefits.
What Are Typical Unemployment Benefits?
Unemployment benefits vary by state, but here’s a general overview:
- Weekly benefit amounts are usually 40–60% of the employee’s average wage, up to a state maximum.
- Benefits typically last up to 26 weeks (though this varies by state)
- The employee must be able and actively looking for work.
Will This Cost Me Money?
Here’s the good news: You don’t pay benefits out-of-pocket. The state pays the benefits using funds collected through employer-paid unemployment taxes.
However, the claim may affect your state unemployment tax rate (SUI) in future years.
- Your SUI rate is based on your history as an employer.
- If a former employee collects unemployment, your rate might go up slightly.
- Most increases are modest and temporary.
Example:
If your original SUI rate was 2.5% and it increases to 3.0% due to one claim, on a $10,000 wage base, your cost would go from $250 to $300 per year. The rate may drop again after a claim-free period.
Documentation Matters
If your employee was let go for performance issues or rule violations, it's important to have:
- Written warnings
- Timecard records
- A signed work agreement
- Termination notes
These documents carry weight if you need to protest a claim. The burden of proof for "fired for cause" rests with the employer — and strong documentation makes your case more credible.
You’re Not Alone — HomeWork Solutions Can Help
Navigating the unemployment process as a household employer doesn’t need to be stressful. If you’ve been handling payroll and taxes correctly, you’re already on solid ground.
At HomeWork Solutions, we’ve helped thousands of families manage household payroll and unemployment tax compliance since 1993. Whether you’re responding to a claim, thinking ahead, or just want peace of mind, we’re here for you.
Have questions? Schedule a free consultation with our team to get personalized guidance.
Final Thoughts
Unemployment benefits are a vital safety net — and part of what makes legal, respectful household employment work for everyone involved. With the right setup and support, handling this process can be straightforward and stress-free.
Let’s keep things legal, kind, and compliant.