BY: DAVID RUSSELL, CFP®, CSA® – Vice President & Trust Officer
(6115) 385-2345 firstname.lastname@example.org
According to research from the AARP, a clear majority of people would like to stay in their own home as they age – even if they require day-to-day assistance with activities of daily living. With a rapidly increasing senior population, demand for quality in-home care is beginning to skyrocket.
Most at-home care has traditionally been provided by care agencies that provide basic custodial care to individuals needing assistance with activities of daily living or who have cognitive impairment. However, recent regulations are changing the cost structure for home care agencies, especially for certain types of cases where care is needed full-time such as with Alzheimer’s disease and other conditions involving cognitive decline.
It is not unusual for care to be provided 24/7 to people with these conditions and the expenses can quickly become unmanageable, especially due to new regulations that can trigger overtime pay requirements for home care agencies who employ the same caregiver for more than 40 hours a week.
At the end of 2015, the Department of Labor repealed two Wage & Hour Law exemptions that had been in place since 1974 – the Companion Care exemption and the Live-In exemption. The repeals impacted only third-party employers of direct care workers (i.e. staffing agencies), no longer allowing them to pay workers less than minimum wage and forcing them to adhere to overtime standards.
As a result, many home care agencies now handle high-hour cases differently. They either get the family to accept a rotation of many different caregivers or pay for the associated overtime with a major increase in their hourly rate.
In most states, families are exempt from overtime requirements if the caregiver is a live-in employee or qualifies as a companion. This allows care recipients to get the care continuity they need without the additional cost. For 24/7 type care, this overtime exemption can reduce the cost by as much as 50%, or tens of thousands of dollars per year.
Household Employment Basics
Hiring a senior caregiver privately means the worker is now a household employee. And just like any other employment situation, payroll, tax and labor laws must be followed. There are three primary wage reporting responsibilities families have for their caregiver:
- Withhold payroll taxes from the caregiver each pay period. Normally, this includes Social Security & Medicare (FICA) taxes, as well as federal and state income taxes. Some states are different and you can consult this state-by-state guide for more information.
- Remit household employment taxes. These generally consist of FICA taxes as well as federal and state unemployment insurance taxes. Again, some states have additional taxes, so it’s important to consult the state-by-state guide beforehand.
- File federal and state employment tax returns. These are due throughout the year – rather than just at tax time – and go to the IRS and state tax agencies.
In addition, there are several employment law matters that need to be considered at the time of hire. Depending on the state, a family may be responsible for providing things like a written employment agreement/contract, detailed pay stubs, paid time off/paid sick leave, workers’ comp insurance, etc. Be sure to consult with an employment law attorney in your state to learn what your state requires.
Even after adding in payroll taxes, insurance and all other employer-related expenses, the savings can be staggering. The figure  to the right compares the cost of Agency Care vs Private Employment. Hourly agency costs start at $20/hour for less than full time but increase to $22/hour for full-time and $25/hour for high-hour care (80 hours or more per week) due to the pass-through of overtime wage costs.
The good news is there are household employment specialists that take full accountability for all or most of the employer responsibilities so families are free of paperwork and risk – enabling them to focus on caring for their loved one. If funds for the care of a loved one are held in a trust, Argent can serve as trustee and handle these requirements as part of its role as trustee.
There is no one size fits all solution to caring for our older adult population. Home care agencies, assisted living facilities, independent living facilities and skilled nursing facilities all have a role to play. And, now with the recent regulatory changes, so does privately-employed in-home care – especially for those patients suffering from cognitive conditions who need many hours of consistent care.
Thanks to Tom Breedlove, Director of Care.com HomePay for this information. Tom brings more than 30 years of business experience, including more than a decade as Director at Breedlove & Associates – now known as Care.com HomePay – the nation’s leading household employment specialist. Co-author of The Household Employer’s Financial, Legal & HR Guide, Tom has led the firm’s education and outreach efforts on this complex topic. His work has helped HomePay become the featured expert on dozens of TV and radio shows as well as countless business, consumer and trade publications. Learn more at www.care.com/homepay. Source: “Cost of Care Survey 2016”
In 2012, David authored his first book titled What You Need to Know: The Adult Child’s Guide to Being a Financial Caregiver. The book is aimed at the growing numbers of people in the “sandwich generation” who are providing emotional, physical, or financial support to aging parents, while balancing the demands of their own career and family.