How to manage a pay raise or bonus for your household employee

Know when your caregiver should receive a bonus or raise

Updated

When your nanny or senior caregiver exceeds your expectations, you should reward them. That means, among other things, offering a formal approach to bonuses and raises. Just like other working professionals, your household employee should receive an annual review, which results in the possibility of a raise — even if it’s just a cost-of-living adjustment to keep up with inflation. 

 

“If you really like your caregiver, a one-time bonus or a raise lets them know how much you respect and value the work they do,” says Eva MacCleery, Director of Care.com HomePay. “In our experience, families that treat their household employees with this kind of professional respect enjoy much longer and happier employer-employee relationships.”

 

Handling payroll for a one-time bonus

According to the latest International Nanny Association survey, about 60% of families give their caregiver a holiday or year-end bonus with a median value of approximately $600. It’s important to remember that any kind of bonus (holiday bonus, anniversary bonus, performance bonus, etc.) is considered part of your caregiver’s compensation and is subject to taxes. The easiest way to manage a bonus payment is to simply add the bonus amount to your caregiver’s upcoming paycheck and then calculate the appropriate taxes based on the new total.

 

One question we’re often asked by clients is whether or not it is legal for a family to give an employee a bonus and avoid taxes by calling it a gift. Anyone can gift money or other items of value to another individual and have it be non-taxable, up to an annual limit. However, the gift law does not apply to employment situations. Any item of value if given to an employee is considered taxable compensation and must be reported as such.

 

How to prepare for giving your caregiver a raise

If your caregiver has exceeded expectations and deserves a bump in their annual pay, it’s important to understand how that will affect your care budget. As a general approximation, the household employment taxes you will pay is around 10 percent of your caregiver’s gross (before tax withholdings) wages. That means you need to be prepared to re-calculate how much your caregiver will ultimately be paid and the additional taxes you’ll accrue each week. Give HomePay a call and we can do this work for you — or you can use our calculators to crunch the numbers yourself.

 

Next Steps:

 

First things first—have you hired a caregiver?

If you're seeking a caregiver or a care job, visit Care.com

What type of caregiver have you hired?

Have you already made any payments to your caregiver?

Yes
No

If you've made payments, we'll help you track them and we'll provide your employee with pay stubs.

We'll help calculate the taxes in your state.

Enter your ZIP

What type of caregiver are you planning to hire?

When do you expect to hire someone?

How many hours do you estimate your caregiver will work?

0 - 15 hours / week
15 - 40 hours / week
40+ hours / week
24 / 7

We'll help calculate the taxes in your state.

Enter your ZIP

Great! Now set up your log in to get things going.

By clicking "Create account", you agree to our Terms of Use and Privacy Policy.