The Pitfalls of Hiring a Private Caregiver

In an attempt to help seniors remain independent and in their own homes longer, many families opt to hire private caregivers for their loved ones. The rationale for this decision is usually driven by cost. Typically, “cutting out the middle-man” is a savings but the pitfalls of making this decision are numerous. There are many aspects to consider if you are the “boss” of a caregiver and families need to be aware of the ramifications.

To start, many families think that the neighbor across the street would be a perfect caregiver for their loved one. While this may be true, what back-up plan is in place if the neighbor becomes ill, gets into an automobile accident, or goes out of town to visit family? Or better yet, using a relative as a caregiver is a win-win situation for both the senior and the relative. The relative gets paid to take care of one of her own / his own loved ones. Again, when an emergent situation arises, who will step in? This does not happen when a home care agency is in place, as they have a pool of caregivers ready to send when needed.

Perhaps the most important aspects to consider when hiring a private caregiver are the tax obligations, legal issues and required insurance coverage. Whether the household help is a part-time or full-time employee, as an employer one is obligated to withhold and pay Social Security and Medicare taxes. The amount withheld would be based on the current IRS tax code. Employers of caregivers in Indiana are required to withhold State income taxes on any compensation paid and are required to pay Federal and State unemployment taxes for caregivers earning $1000 per quarter.

Employers of private duty caregivers are also responsible for verifying that their employee is legally entitled to work in the United States. A thorough employer should perform drug testing and background checks, both local and national. In addition, checking references is a good source for first-hand information about the proposed caregiver.

One aspect that many “bosses” fail to consider is Workers’ Compensation Insurance. Injuries while on the job pose one of the greatest financial risks. If there is no Workers’ Compensation Insurance and a caregiver is hurt while caring for the families’ loved one, the family who hires a private caregiver is responsible for medical expenses and disability. One should not assume that Homeowner’s Insurance alone will cover this, as many policies exclude help in the home. Another risk arises if a discrimination or harassment suit would be filed. Purchasing an umbrella policy with a discrimination rider can be expensive but will provide added protection should the need arise.

One would think that the solution to the problem would be to hire caregivers through a home care agency. While many times this is the case, there are unfortunately some agencies who hire private contractors thus skirting the responsibility of being the “employer”. These types of agencies generally find the caregiver and place them in a home setting, leaving the family vulnerable to all of the aspects discussed above. This situation can be avoided by hiring caregivers who are employed by an agency and pay the agency directly. Home care agencies who are members of the National Private Duty Association (NPDA) www.privatedutyhomecare.org/ fall into this category.

If a family is willing and prepared to take on the role of “boss” then a private caregiver may be a good fit for them, providing they have a contingency plan in place in the event of an emergency. Proactive planning is the hallmark in dealing with many of the issues that seniors and their loved ones face. Today more and more baby boomers are seeking help for their aging parents. It is a wise decision to consult with an attorney or accountant before becoming the employer of household help to insure that all aspects of legal and tax responsibilities are realized.

By Nancy Hanley, RN
Geriatric Care Manager

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