Legal Responsibilities of Household Employers

Legal Responsibility of Household Employers

Do you pay someone to work in your home such as a home aide, caregiver, household manager, housekeeper or cook? Will they earn $1,500 or more this year? If you answered yes to both questions, then congratulations; you just passed the test for being a household employer.

As a household employer, you are responsible for paying half of Social Security and Medicare taxes. Federal and state unemployment insurance taxes are also paid by you, the employer. These taxes guarantee that your employee will receive unemployment benefits if needed in the future (if qualifications are met). There are also state specific taxes in a few states, such as disability insurance and city taxes (such as New York City). Employer federal and state employment taxes are approximately 10% of gross wages, and are paid either monthly or quarterly, depending upon specific calculations.

Your employee is also responsible for certain federal and state taxes. She/he must pay half of Social Security and Medicare, as well as federal and state income taxes. The amount of your household employee’s taxes will vary depending on her/his marital status and allowances claimed on Form W-4. These taxes are withheld from gross wages each pay period and remitted to the tax agencies along with your employer taxes.

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What Are the Employer's Cost?

Let's illustrate this with a simple example. A family and a home aide in New York agree to $400 gross wages per week. The home aide is single and claims two allowances on her W-4. What is the total tax bill and what does the home aide take home? Please note that for illustration purposes, this example does not include the actual cost of running or initiating payroll (using our service), just the cost associated with the home aide.

Employer Costs

Employee Costs

Gross Wages

$400.00

Gross Wages

$400.00

SS & Medicare

30.60

SS & Medicare

-30.60

Fed/State Unemployment*

7.78

Fed. Income Tax

-26.25

State Income Tax

-9.58

Family's Total Weekly Bill

$436.39

Home aide's take-home pay

$333.57

*Calculated on full-year basis, reflecting the appropriate annual taxable wage limits for federal and state unemployment insurance.

Note: If the employee is a New York City Resident, there is an additional New York City Tax that must be withheld from the paycheck

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Household employers are only required to withhold Social Security and Medicare taxes from their employee’s pay. If both parties agree, employers can also withhold federal and state income taxes. It is important to note that if you fail to withhold Social Security and Medicare from your employee’s pay; you are required to pay these taxes for her/him, in addition to your half of Social Security and Medicare. It is recommended that you withhold all federal and state taxes from your employee’s pay. It is easier to administer the process if you withhold all taxes for your employee. In addition, it may be difficult for your employee to come up with a large income tax payment at the end of the year.

Every state has a workers' compensation system. Under these systems, workers injured on the job are entitled to prompt payment of certain medical and wage-loss benefits with a minimum of legal formality and expense. The systems are based on the idea that the employee gives up the right to sue for any injuries from work-related accidents, in exchange for receiving benefits regardless of fault.
New York State mandates that employees in the home must be covered with a Workers Compensation policy. And why not, this is for your own protection. We can help you navigate down this path so that this low cost policy can be initiated with minimal effort.

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