Senior home care is a hot topic these days with aging Baby Boomers and the challenges of finding appropriate care for loved ones. More and more families today are looking to hire in-home health care workers to assist with aging parents that are living with ailments or facing serious mental declines including dementia or Alzheimer’s disease. However, the cost of hiring in-home caregivers has been on the rise for several years, with the average cost of a home health aide being over $$75,504 per year according to the Genworth Cost of Care Survey in December, 2023, an increase of 10% over 2022. (1) Many families choose to privately hire, as an agency employed caregiver can cost $25 – 40 per hour while a privately hired caregiver can be significantly lower.
While the cost savings can be substantial, families are often confused by their role as employer. Understanding state labor laws, payroll taxes, and IRS withholding requirements that household employers are required to pay when they hire a personal caregiver to come into a home can be overwhelming. For many families, they simply are not aware that they need to pay these for a caregiver, so they just pay them under the table. However, when a family does this, they are failing to withhold payroll taxes, medicare, and social security on behalf of the worker, and fund unemployment benefits which is something that’s required. There are also a variety of labor law requirements that should be adhered to, including worker’s comp, paid sick leave, and overtime.
As families increasingly choose to privately hire senior caregivers, financial professionals are challenged to provide guidance and solutions for household employment taxes.
When your client directly hires a senior home care giver to work in the home on a regular basis, you should make them aware of the requirements that come with being an employer. Not only is this the right thing to do, you also are adding value to your client relationship. It can be complicated to understand everything that one needs to do, especially if they haven’t hired someone to work in the home before. If they don’t follow tax laws and regulations that are set, your client could face big fines.
Working with a household payroll specialist can help you and your client significantly and it will help ensure that you have all of the right information you need from the get go. It will also help you avoid expensive errors and will help you better understand how the whole process works as an employer.
HWS is a tremendous resource for me and my firm to outsource the complexities of household payroll. As the population ages, we find it becoming a bigger issue to help clients manage the taxes for their in home caregivers, but also want to manage our profitability and reduce administrative burden.
Next, create a solid work agreement that you can go over with the caregiver to establish professional ground rules, outline hourly pay rate and payment schedules, overtime policies, and more. A clear, easy to understand work agreement will help avoid misunderstandings in the future. Not sure where to begin? Our team of specialists is ready help you answer all the questions you need about paying your senior caregiver and how to write an effective work agreement. Contact us today!
