Common Legal Mistakes When Hiring and Managing Household Workers

Hiring a household worker may represent a big problem for the unwary. It is important for us to know about traps and pitfalls related to the recruiting and managing household employees. As an example, we should avoid misclassifying household workers as independent contractors. If we hire someone inside our house, then IRS and other agencies will consider the person as our own employee. If we classify household workers as contractors, tax agencies may consider this as a tax evasion attempt. Some homeowners may also fail to address overtime properly. Under state labor law, household employees, such as nannies, gardener, driver and maids could be seen as non-exempt workers. It means that as employees, these household workers should also get overtime payments. There are differences in the actual amount, but the rate can be about 1.5 times of the regular hourly payment. Unfortunately, many homeowners try to side-step this by offering slightly higher salary than the market standard and these employees are asked to be ready to work whenever they are needed.

In a professional sense, these employees should be seen as white collar workers and they need to be highly compensated for their professions. Unfortunately, due to their status as household workers, it is quite easy for them to be abused. Employers should address overtime pay properly and this can be achieved if there’s a clear schedule and a time limit. As an example, workers shouldn’t work for more than 40 hours a week and if they work one hour extra, it is important that they get proper compensations for that. As an example, household employees may agree to obtain $500 of weekly pay for 40-hour per week of work duration. It means that these workers are paid $12 per hour and based on many employment laws, overtime pay should be higher than regular pays. Again, this could mean that for each overtime hour, household workers can be paid between $15 to $20, depending on the position and type of jobs.

It can also be considered as a mistake if we put household employees on a company payroll. A homeowner who hire household workers often have a functioning company. It should be known that nannies, gardeners and maids don’t have direct contributions to your business and when we do this, tax agencies may accuse of doing illegal tax deduction attempts. Household workers should be handled differently and they need to be paid and compensated directly by the homeowner, not through a company. It can also be considered as an insurance fraud if we put household employees on the group health plan. Homeowners should be able to file proper reports about their composition of employees. As an example, there are workers who are under a company and workers who are directly hired by the homeowner. There are medical costs and lost wages that we should consider, because each category of employee has different characteristics that we need to be aware of. We should always be careful in this matter.

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