It is a common, but ill advised, practice in the household employment field to negotiate wages on a take home pay basis. We have illustrated many times how parents can get themselves into budgetary hot water when they agree to a take home wage without first doing the math to figure out what the out of pocket costs are too. Similarly, a nanny or senior caregiver who simply negotiates her wage on a take home pay basis often works against her best interest.
A nanny we spoke with expressed frustration with her decision to work on a take home pay basis after she filed her 2018 taxes. Why? She compared her 2017 and 2018 W-2 forms and realized that while she still got $750 every week, in 2018 her employer actually paid her $1600 less. The 2018 tax cuts actually put money in her employer's pocket, not hers! Never again she swore.
The 2018 tax cuts actually put money in her employer's pocket, not hers!
Another common problem caregivers face is the calculation of overtime pay when they have agreed on a net take home wage. Generally neither the nanny nor the employer know what the correct hourly wage is, and instead "average" the take home by the number of hours and just tack that amount on for extra time. Some employers (incorrectly) see this take home pay as a salary and figure it covers whatever they need.
And lastly, the term "after tax" is fraught with complications. Did you know a family has no legal obligation to collect or pay in your income taxes? EVERY spring we field calls from distraught household employees who find out that they owe thousands in income taxes because the family paid in the Social Security and unemployment taxes as required, but did not pay in income taxes which they had no obligation to do.
We get it - its complicated!
At HWS we speak to families AND caregivers alike. If you are trying to target a specific amount after taxes, we have online tools you can use to calculate take home pay in various scenarios. Once you have a gross, before taxes, amount that generates the correct take home amount, hop over to our hourly rate calculator and use it to compute hourly and overtime rates of pay, and contract language for you.
Recommended practices:
- Always negotiate on a GROSS HOURLY WAGE BASIS. Do your homework before you start talking wages to be sure you understand what this means to you.
- Always require a CONTRACT (or work agreement) that states hourly and overtime pay and GUARANTEED pay.
- Always require a PAY STUB (its the law in 39 states!) and look at it carefully. You will want to insure your Federal Income tax is being deducted, and state and local as required.