Many JDJ clients hire staff to help manage their busy lives, including caregivers for young children, aging parents or spouses, personal assistants, estate managers, housekeepers, drivers, chefs and even boat captains. Employing domestic staff has an inherent risk because of their involvement in all aspects of family life and their exposure to the family’s personal information.
As an “employer,” families are obligated to fulfill many of the same requirements as businesses. To minimize both the tax and legal risks of domestic employment, JDJ helps clients ensure they are in compliance. The list of considerations is long, and can be complex and time-consuming to manage: following hiring guidelines, filing the correct forms and disclosures, paying all applicable taxes, and ensuring an appropriate insurance program is in place. Here are the major areas to consider when hiring staff to support your family.
Hiring (In General)
While a family may not be a “business,” using business best practices when hiring can reduce risk, streamline the process, and promote long-term performance and loyalty. Start with a detailed job description that specifies duties and responsibilities. Establish an employment agreement outlining salary, hours, overtime, paid time off, and other benefits. Create a household employment manual that further details house rules and acceptable practices and policies for all staff to reference. Before employing anyone in your home, perform a background and credit check and have all employees sign a non-disclosure and confidentiality agreement to help protect the family’s privacy.
When meeting with a prospective employee, avoid the following interview topics:
- Salary history
- Marital status/Sexual orientation
- Pregnancy-related questions
- Criminal history (although make it clear that a job offer is contingent on a satisfactory background screening)
Hiring In Massachusetts
Massachusetts has some of the strictest legislation in the country related to domestic employees. Be aware of the regulations included in the MA Domestic Worker Bill of Rights, and adhere to them. Note that all Massachusetts-based domestic employees are covered by this bill of rights, regardless of their immigration status. Areas covered include:
- Minimum wage and overtime
- Expense coverage and reimbursement
- Sick leave
- Access to records
- Employment agreements
- Termination for live-in employees
In addition, the Paid Family and Medical Leave (PFML) took effect on January 1, 2021, and all Massachusetts employers must comply with these regulations. More information about the program is available here.
Contractor vs. Employee
It is extremely important that people working in your home are classified correctly as either contractors or employees. Don’t make the mistake of putting household employees on your company payroll. Be sure the classification is correct, or you may be subject to prosecution and fines. Each designation has different requirements for tax withholdings and payments. Your JDJ team or your CPA can assist you with proper classifications, withholdings and required forms.
Forms and Paperwork
Depending on classification, as described above, the appropriate documentation must be submitted for each member of your staff. These forms include:
- I-9 – Employment Eligibility Verification
- Federal W-4, Federal Withholding Allowance Certificate
- Applicable state withholding election forms
- Work agreement
- Applicable notices of rights
We strongly recommend working with a payroll provider to ensure taxes are withheld and remitted correctly, overtime is paid according to state and/or federal law, and the required forms are generated for tax purposes. JDJ can refer you to providers and help with the implementation and ongoing payroll administration.
When employing domestic staff, you will need an appropriate insurance program to mitigate your risks. Two important examples are workers’ compensation and Employment Practices Liability Insurance (EPLI). A workers’ compensation policy is required for Massachusetts household employers if they have an employee working 16 hours or more per week. Workers’ compensation provides coverage for medical expenses and lost wages in case of employee injury on the job (including if the employee is in a car accident while working). EPLI helps protect your family against employment-related claims such as discrimination, wrongful termination, and harassment. If employees will be driving your vehicles regularly, be sure to add them to your auto insurance policy as well as your excess liability policy.
Working with a knowledgeable payroll provider will allow you to take advantage of certain tax breaks associated with employing domestic employees. These include:
- Dependent Care Flexible Spending Accounts (FSA)
- State & Federal Child and Dependent Care Tax Credits
- Medical Expense Deductions
It can take considerable time and effort to manage all the details connected with hiring and managing domestic employees. JDJ can act as an outsourced human resources department to relieve families of this administrative burden. We recommend that clients seek the expertise of a qualified employment attorney for all employment-related matters. Please contact me or a member of your client team for more information and assistance.