Let’s address the elephant in the room right away — the vast majority of families that hire a nanny, senior caregiver, personal assistant, or other household employee pay them under the table. There are a myriad of reasons for why this occurs, but let’s also be honest with ourselves, the vast majority of families and household employees also know this is not legal. Watch the video below to see one example of why legal pay is so important, but please also begin to understand that this needs to be the new norm in our industry.
Over the past few years, we’ve seen amazing pushes for new legislation on the state and local level to bring household employment closer to the standard of the average American business. Things like paid time off, paid sick leave and employment contracts are now required in many areas of the country. This professionalizes the workforce, and there is no doubt that it takes a true professional to care for children or aging loved ones or provide personal household services. Yet so many families and household workers still choose to not set up payroll like the rest of the professional workforce.
The professional working world model we should strive for
When those of us working a standard job begin our first day at a new company, there is never a question of how payroll is handled. Someone simply asks us to fill out a W-4 form so the accounting or payroll team can know how much in taxes to deduct each pay period. The CEO of the company doesn’t introduce themselves and mention that taxes aren’t deducted, and no employee gets to tell HR that they don’t want taxes withheld. This is because that’s not how the working world functions and not how the IRS tax code is written.
The importance of legal pay in the household employment industry
No one likes to see a percentage of their pay end up with Uncle Sam, but those taxes go toward our short- and long-term future. As COVID-19 unfortunately demonstrated, household employees paid under the table are extremely vulnerable to sudden change. These employees did nothing wrong in their line of work, but because they either were not allowed to work due to stay-at-home mandates or were laid off completely by the families they work for, they were not immediately eligible for unemployment benefits. Most employees paid under the table were also unable to benefit from the $1,200 stimulus payment because they had no record of tax returns filed in either 2018 or 2019.
At HomePay, many generous families kept their household worker on payroll during the shutdown, but not everyone can do that. The household employment industry continues to push for federal, state and local legislation that will protect workers, help families and professionalize the industry. But if legal pay was the norm, it would solve some of these issues immediately.
The impact of a legal pay default for families and caregivers
Budget-conscious families would be eligible for tax breaks to offset a substantial part of the taxes they would be responsible for. Workers would have the safety net of unemployment insurance if their world suddenly free-falls. Caregivers who have spent their adult life nurturing children’s development and helping seniors make their golden years more enjoyable would have credit built up with the Social Security Administration so they could have financial and medical assistance upon retirement. These are benefits that federal and state governments designed into our payroll and tax system so we don’t have to worry about them.
Changing our mindset moving forward
The lessons from Zoe Baird and Kimba Wood are nearly 30-year-old distant memories of why legal pay is so important. COVID-19 should be this generation’s wake-up call. We’re extremely proud of the thousands of families who utilize HomePay because they recognize that legal pay is the right thing to do for them and their household employees. But let’s make this the nationwide norm moving forward. Don’t be the family who ends up with a tax headache because a recently laid-off nanny filed for unemployment benefits and the state now knows they were paid under the table. Don’t be the caregiver who can’t get an auto loan because there is no provable income to show to the lender.
This movement takes all of us — both families and employees. We can’t keep demanding benefits, tax breaks, living wages and subsidies if we’re not willing to follow the basic guidelines set forth by the IRS and our state and local governments. So the next time you’re looking for care or apply for a job as a caregiver, make sure you’re crystal clear that the job must be paid on the books. And if you need an ally, reach out to us. We’ve been an advocate for legal pay in the household employment industry since our founders began the company in 1992. We’re passionate about doing things the right way and will gladly help you out — just like we’ve done for tens of thousands of families for nearly 30 years.