Why use a home care agency instead of hiring a caregiver privately?
For many years, home care services for the elderly have been provided by caregivers who are privately hired directly by consumers. Unfortunately, most consumers who use the services offered by these independent caregivers never realize that there are potential liabilities and tax consequences of such an arrangement. These liabilities can be substantial and could have a serious impact on the consumer. This article outlines the challenges associated with using ‘private hires’ for home care. It also provides important reasons and recommendations as to why it may be in the client’s best interest to use a full service home care agency.
1) The Risks Associated with Hiring a Private Caregiver
Many families pay for home care services privately out of their own pockets. This being the case many consumers are lured to the cheapest price for care, without understanding the implications of selecting a provider based on price alone as the deciding factor.
There are a host of issues that consumers and private caregivers face when establishing a private home care relationship versus using a worker from a full service agency. One very important issue is that there is an ‘employer-employee relationship’ created in most private hire situations. The consumer becomes an employer and the caregiver becomes an employee of the consumer. Most consumers are not aware of their employer obligations as set forth by the New York State Department of Labor. Both consumer and worker could suffer substantial financial liabilities.
2) Payroll Taxes, Employee Withholdings and New Hire Reporting
As an employer, the consumer is responsible for ALL employee taxes and withholdings. This includes state and federal payroll taxes, social security, Medicare, federal and state unemployment. A breakdown of employer tax obligations as well as the worker’s tax obligations is below:
Taxes paid by Employer
Social Security and Medicare Taxes (7.65% of Gross Wages)
Federal Unemployment Taxes (FUTA) (0.8% of Gross Wages or less in most cases)
State Unemployment and disability insurance taxes levied on employer
Advance payment of the earned income credit for eligible employees
Taxes paid by Worker (withheld and remitted by employer)
Social Security and Medicare (7.65% of Gross Wages withheld and remitted by employer)
Employee Disability/Unemployment Taxes
Federal and State Income Taxes
When the consumer is the employer and these taxes are not being withheld/paid, the consumer runs the risk of being sued by the government for back taxes. A consumer’s estate can also be liened for back taxes, interest and penalties. If many days/hours of care have been delivered over time, this tax responsibility can be substantial. Authorities may also levy civil fines and pursue criminal charges for non-payment of taxes.
There are also potential issues for workers, such as minimum wage and overtime protection. Additionally, the non-payment of social security leaves workers no income in their old age.
New Hire Reporting by Employer
Effective January 1998, the Personal Responsibility and Work Opportunity Act of 1996 requires all employers to report information on all newly hired workers within a specific time period or incur a penalty. Each state has a designated agency that is responsible for data collection and enforcement of the requirement.
3) Caregiver Injuries, Workers’ Compensation
As an employer in New York State, it is mandatory for consumers to have Workers’ Compensation Insurance. If no workers’ compensation insurance is in place and a worker sustains an injury on-the-job, the liabilities can be significant. Medical costs and disability payments for workers could cause financial hardship for even a wealthy client. For clients who cannot afford to pay, a caregiver could be left with no help for a work-related injury. Many clients assume that homeowner’s insurance will cover a domestic worker injury, but in most cases, homeowner’s insurance usually excludes coverage for this.
4) Greater Potential for Abuse and Exploitation
Because most consumers are not prepared or skilled in hiring and managing caregivers, the potential for client abuse and exploitation is increased. Most consumers will not or do not know how to perform background investigations, driving record checks, skill assessments as well as the work necessary to obtain worker job references. This can leave a loved one in the trust of a caregiver who has not been fully screened. It is very easy to take advantage of frail, aging and impaired clients. Inadequate or no screening could subject clients to many abuses including financial, physical and psychological.
5) Case Supervision, Caregiver Supervision and Turnover
Most consumers are not skilled or experienced in providing worker supervision or case supervision. Worker supervision, worker coaching/counseling, scheduling, coordination and worker training are important benefits to both consumers and workers. These value-added services are provided only by home care agencies that hire their workers. For example, it is important to review the changing care needs of a client. A full service home care agency provides regular “care assessments” and also provides competent supervision of both the worker and the case. These are valuable services that can potentially stave off or allow for the efficient handling of issues or problems that can occur between client and caregiver.
For example, in many private care arrangements the caregiver is not experienced with the business matters associated with providing home care services, such as caregiver replacement scheduling, coordination and ongoing care assessments. If a caregiver needs a break or time off, who will search for a replacement? Who shows up when your private caregiver is sick? What happens if your caregiver quits? Do you have the resources to replace her immediately? Most private caregivers are wonderful people, but they are not experts at handling the administrative and management tasks associated with providing home care services. It is the consumer’s responsibility to coach, counsel and manage their worker.
Lastly, there is a lot of turn-over (quits) and frequent call-offs or no-shows by workers in the home care field. If a consumer decides to hire someone privately instead of using a full service agency, he or she must be prepared to manage these issues. What will you do if your ‘private hire’ decides to quit without notice? It can take many days or even weeks to find a replacement if you are not prepared. A full service agency has many resources and skills that they can turn to if turnover, no-call or no-show situations occur with their client accounts.
Conclusions
Consumers need to be aware of the risks, responsibilities and liabilities faced when they become employers.
Full service agency home care is typically and justifiably more expensive than care from an independent caregiver because the agency provides all of the value-added services that ensure your loved one receives the safest, most reliable and best care possible.
