Recently, a friend asked some questions about employing in-home help for her elderly parents. The family wanted to do everything in compliance with state and federal tax and employment laws, and she asked me to look over her questions. Little did I suspect that finding the answers the question “How to employ help for your aging parents?” would be so difficult to disentangle.
This article will answer the basic questions that should be asked when arranging homecare for aging parents.
Do you have a household employee?
If you are hiring a homecare agency, you do not have employees, the homecare agency does. This is one of the major conveniences, along with scheduling, that causes many people to work with homecare agencies. On the other hand, if you have individuals with whom you directly contract, you must determine whether they are your employees. Both state and federal laws provide guidance on this. Some individuals who come and perform work at a residence can be treated as independent contractors. For instance, someone who operates a lawn-care business, brings their own equipment and chooses the best manner in which to perform a job will be an independent contractor. However, someone like a companion or nurse—who comes and follows your specific instructions about duties expected, and where you supply the equipment and supplies that the person needs to do their work—is likely a household employee.
Is your household employee subject to the minimum wage?
Most household employees will meet the requirement that they be paid the minimum wage. The primary exemption to the minimum wage laws is for individuals employed directly providing “companionship services.” According to the U.S. Department of Labor, the term “companionship services” means the provision of fellowship and protection for an elderly person or person with an illness, injury or disability who requires assistance in caring for themselves. Companionship services may also include the provision of care, if the care is provided attendant to and in conjunction with the provision of fellowship and protection, and if it does not exceed 20 percent of the total hours worked per person per workweek. Examples of fellowship and protection may include conversation, reading, games, crafts, accompanying the person on walks, going on errands, to appointments or to social events with the person. Care is defined as assistance with the activities of daily living and tasks that enable a person to live independently at home, such as meal preparation, driving, light housework, managing finances, taking medications, and arranging medical care. While limited household work may be permitted if it benefits the elderly person, household work that benefits other members of the household such as preparing meals or doing laundry for everyone in the household will mean the companionship exemption will not apply. Domestic service workers employed to provide “companionship services” are not required to be paid the minimum wage or overtime pay. Similarly, the New York Department of Labor exempts companions from the minimum wage. Conversely, anyone who does not fit within the definition of companion, and who meets the definition of employee will be subject to the minimum wage, which, as of December 31, 2017, will be $10.40 in Upstate New York. For hours worked over 40 (44 for live-in employees), time and a half must be paid.
What benefits must you provide?
Both the state and federal laws provide thresholds for when you must register as an employer and pay taxes. In New York, you must register as an employer with New York State if you pay cash wages totaling $500 or more in a calendar quarter (as opposed to $1,000 in any calendar quarter, or $2,000 per year under federal guidelines).
If any of your household employees worked 40 or more hours per week for you, you must provide Workers’ Compensation and Disability Insurance (and Paid Family Leave). Such coverage may also be available on a voluntary basis for employees working less than 40 hours per week. In calculating whether 40 hours has been worked, you must include time spent at your residence, including sleeping or eating, and time spent off the premises running errands or performing other duties. Once you reach the federal threshold, you will also be required to pay the employer portion and withhold taxes relating to Federal Social Security and Medicare. The withholding of wage income is not necessarily required, but you will be required to provide a W2 form to the employee at year end.
What should you do?
First, you should consider whether directly hiring household help is the best model for you. If so, you will need to determine what type of employees you will need. You may decide to directly hire one or more individuals to provide companion services, but rely on a home healthcare agency to provide more skilled services in your home. In this case, not everyone coming into the home would be your employee. In addition, you should work with an accountant with experience in these areas, or even a payroll company that will ensure that the proper withholding and reporting is being done on your behalf. Both the state and federal guidance recommend ensuring that your employee is eligible to work in the United States, and obtain the U.S. form I-9 Employment Eligibility Verification. When trying to care for an ill and elderly family member, it is easy to overlook deadlines and reporting requirements that even this employment attorney find confusing and onerous.
If you do decide to turn your parents’ home into a small business, the following reference materials are recommended: Hiring Household Help – NY Tax Bulletin MU-350 New York Wage Order for Miscellaneous Industries and Occupations (12 NYCRR 142) Federal: IRS Publication 926 Household Employers Tax Guide U.S. Dept. of Labor Wage and Hour Division Fact Sheet RE: Application of Fair Labor Standards Act to Domestic Service, Final Rule This article is intended to provide an overview of factors common in providing in-home care through private employment. This article is not intended to provide legal or tax advice. For advice on any specific situation, please contact your attorney and/or your accountant. Jacqueline Kelleher is an attorney with the law firm of Stafford, Owens, Piller, Murnane, Kelleher & Trombley, PLLC, who represents employers before administrative agencies and advises on day-to-day questions.