The Pitfalls of Hiring a Caregiver Directly (Private Pay)

Why We Decided to Use an Agency

Keeping mom at home is the core of our care plan. After dad died, I struggled with how to make that happen safely and affordably. Mom needs 24/7 live in help, but I needed to keep working. (Jump to Lessons Learned)

Concerned about finances, I figured hiring someone directly (private pay) would be less expensive. And it can be. What I didn’t understand was the pitfalls of this route: finding, vetting, hiring and paying for someone you hire directly.

Finding
Early on, someone told us about Care.com. This website connects people looking for child care, adult and senior care, pet care and home care with people who offer these services. I know of people who successfully found senior care from this site and young adults who found babysitting jobs here as well.

I wound up not using them, and honestly, I don’t remember why. Instead I started asking family, friends, complete strangers, ”do you know someone, who knows someone, that does live in care for seniors?” Once you start tugging those strings, it’s amazing the amount of contacts you make. But it required interviewing each contact by phone. Then if it made sense, I had them come and meet mom.

You quickly learn getting names is not the problem. The problems are in vetting, hiring and paying this employee. Yes, according to the IRS, an individual who is paid to provide a service within a residence (which includes home health aides), is considered a household employee. I found the entire process overwhelming.

Finding someone was a long process for us, fraught with emotion and what are now funny stories, not so much at the time. There was one woman who looked good on paper so we brought her in for an interview. Things took a downward spiral when I mentioned mom loved to play cards to which she responded: “Cards, the only people who play cards in my country are criminals in jail.” It quickly ended when she discovered that mom went to bed around midnight. “Oh no, I need to be in bed by 9:00, you can take me back to the train station now.”

Vetting
I could not bring a total stranger into mom’s home without doing reference and background checks. What I didn’t anticipate was the amount of time it would take for this due diligence. I wound up using an internet based company and it wasn’t cheap. I paid 49.95 per person for the background and criminal record check. It was interesting how often folks I researched came up with a first name from their native country and a different Americanized first name. This discrepancy made the reference check even more important to me.

Reference checks, guess what? Just because someone works out in one situation doesn’t mean they will be the best person in your situation. We hired one woman after her reference and background check looked good. She was nuts. I fired her after three days.

This miss-adventure will never be funny, it still makes me furious. Dad (aka McGuyver) had put a piece of wood behind the bedroom door to act as a stopper. When mom goes into the room, she holds onto the door. The wood stops the door from opening all the way and throwing her off balance. For some reason, this woman took it upon herself to remove the wood. Did I say remove it? She had to UNSCREW IT FROM THE WALL. Mom nearly fell and I fired her the next day.

Hiring
It’s a good idea to have a contract that clearly states: job description, tasks that are off limits (e.g. mowing the lawn), weekly wages, when they will be paid, hours off duty within a 24-hour period and how vacation will work (e.g. paid or unpaid, amount of lead time before taking vacation etc.)

We found someone mom and I both liked and hired her. The day before she was to start, I got a phone call: “My daughter in Poland is pregnant and it is not going well. I leave for Poland in two days and expect to be back in August. If you still need me call me.” Seriously? I was now back to square one.

Paying
Because I worried we would need to apply for Medicaid and I didn’t want to risk being denied or a hefty penalty, I started researching taxes, insurance and what was required to employ a caregiver in your home. Before making this decision, talk to an accountant and attorney to ensure you’re doing everything required by the federal government, and your state government, to treat this person as a household employee.

Setting someone up as a household employee requires getting the proper registrations from the federal government by applying for an Employee Identification Number (EIN). This EIN number allows you to withhold taxes for your caregiver. Forms are also needed to remit the monies withheld and there are heavy penalties for paying late. State forms are needed to withhold unemployment, disability, and federal leave taxes. And insurance needs to be in place. (See Lessons Learned)

I must admit it was difficult to find folks who were willing for me to withhold taxes. Even those willing required an increase in the hourly rate to ensure take-home pay stayed consistent. This made the cost of private pay close to agency rates.

Why we went with an agency
Finding – Agencies employee people with Home Health Aide (HHA) and Certified Nurse Aide (CNA) certifications, and often have additional training programs for employees. Agencies with good reputations have people applying for work with them all the time.
Vetting – The agency does background and reference checks.
Hiring – Agency contracts clearly state what the aide can and cannot do and you have recourse with the agency. PLUS, if the aide goes on vacation or leaves your employment unexpectedly, they will backfill the position.
Paying – You do not have to set yourself up as an employer by applying for an EIN and withhold taxes or worry about unemployment insurance.

Lessons Learned:

• Medicaid requires certain documentation when you employ a caregiver in your home. The absence of this documentation means that Medicaid is going to consider those payments as gifts, which is a bad thing.
• Payments to a home care attendant (e.g. unrelated household employee) must be properly documented with a check, not cash and show withholding.
• Workers compensation is required for household workers and sometimes not included in homeowner’s insurance. And in New Jersey, you must withhold to pay into unemployment and family leave insurance.
• If you want to have a family member do the work – Medicaid in NJ takes the position that family provides all services “for love and affection” without financial consideration in the absence of very specific written language.
• Even though we are using an agency, NJ allows you to add a rider to your homeowners policy. For $60.00 a year, we have workers compensation as additional coverage for our “full time in-servant residence employee.”

Additional resources:

For a complete list of with holdings: What you should know when employing household workers.

Family caregivers and self employment tax

What to expect when you hire a caregiver agency

 
My thanks to Carl G. Archer, Esq., CELA of Archer Law Office, LLC and Donald McClean, CPA for fact checking and contributing to this article.

Disclaimer: The material in this blog is for educational purposes only. It is not intended to replace, nor does it replace, consulting with a physician, lawyer, accountant, financial planner or other qualified professional.

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