Posted on October 7, 2011
During these tough economic times it is more tempting than ever to hire caregivers privately, bypassing any placement service or home care agency. However, after reviewing the following information, we hope that you will see the benefit in contracting with a home care agency when looking to bring help into your home.
There are TRUE benefits of working with an agency. Agencies can save you and your family long-term consequences, both financial and legal.
When you hire a caregiver, the going rate is approximately $15 per hour. When you hire an agency such as ours the going rate is $20+. For this additional $5 per hour you receive the following benefits and protections.
- The workers are covered by Worker’s Compensation, paid by the agency
- The workers are covered by Unemployment Insurance, paid by the agency.
- Employment taxes are split and submitted each payroll, half by the caregiver and half by the agency.
- The worker’s taxes are pulled and sent immediately to the IRS and CA Employment Development Department (EDD). These taxes cover State, Federal, Liability, Employment Tax and California State Training Tax.
These taxes and insurances must be paid by ANY and ALL employers. The state of California is currently in desperate need of revenue and is targeting individuals that consider themselves, “self-employed” or “contractors”.
If a worker is cross-referenced with an individual employer, the employer can always be held liable for back taxes. The reason for this is that the state claims that many of these individuals do not pay or file their taxes, so they are placing the burden on the employers to collect it and submit it.
In regards to Worker’s Compensation, consider this; your private caregiver is injured on the job. If the Labor Board determines that they are your direct hire, and they WILL, you will be responsible for the cost of their injuries and will be fined $1,000 per caregiver for not carrying Worker’s Compensation on that employee. Additionally, in order to continue to hire that employee, you will be required to take out a Worker’s Compensation policy for them to the tune of 7-9% or higher (through State Fund) of their gross pay, each pay period. You will be audited and you will have to show documentation that you are in compliance. Additionally, your homeowner’s insurance may require an additional premium for having a domestic worker employed.
Next scenario; the caregiver you hire just isn’t working out for you. You manage to dismiss their services (not always an easy thing to do). 2-3 weeks later, you receive a notice from the EDD, an unemployment claim. If your caregiver chooses this route, to recover unemployment payments, they WILL win. The EDD will consider that in any direct hire arrangements that you are the employer and they are the employee, regardless of any contracts, business licenses, etc.
Aside from the legal/tax benefits discussed above, agencies are simply a better choice for the following reasons.
- You can switch out a caregiver that isn’t working out for you.
- The agency carries liability insurance, both professional and general for all workers.
- The agency can supervise and direct the worker.
- Of course, all of our caregivers are screened. I would hope all agencies do the same.
This is the down-side of private hire. This is not to say that there are not some wonderful set-ups that work out well for all. However, one must consider the possibility that if a person is left without income for any reason, they have a wide variety of available options from which to recover what they may feel they are entitled to. It is always important to remember that it is in the best interest of state-run agencies to find in the worker’s favor. Not only will they assure revenue/justification for their agency, but this caregiver will now be in the “system” and they are better able to pursue them and you if the caregiver has not filed/paid taxes.
There will always be those who will continue to hire privately. However, I believe it is because many are not aware of the serious implications of doing so. I hope this article helps those individuals to at least make an informed decision when hiring outside help for the home.
For further information regarding Employment of Domestic workers, please refer to California Civil Code Section 1812.501 and Unemployment Insurance Code Section 687.2.by