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New Mexico tax and labor law guide

Household employment requirements for families hiring a caregiver in New Mexico

Families in New Mexico have a unique set of tax, payroll and HR-related rules to follow when they hire a household employee. That’s why we’ve combined all the state and federal tax and labor law information you’ll need! Check out the information below that HomePay is here to help with.

Checklist for New Mexico household employers

We know you’re busy so here’s a quick “to-do” list with links to extra details below.

Beginning of employment 

During employment 

Optional benefits for your employee

Ending employment

Beginning of employment 

Workers’ compensation

Household employers in New Mexico are not required to get coverage for workers’ compensation insurance, however we recommend obtaining coverage. These policies pay for medical expenses and lost wages if an employee has a work-related injury or illness. Obtain an instant quote and purchase a policy online, or contact our partner, Clarke White, at 804-267-1210 or wcnanny@allrisks.com.

Employment posters 

Families in New Mexico are required to notify their employee of their rights by sharing these posters.

During employment 

Minimum wage rates

  • New Mexico state: $7.25/hour
  • Las Cruces city rate: $10.50/hour

Note: Whenever more than one rate applies, employers are required to pay the higher rate.

New Mexico overtime requirements

  • Live-out employees must be paid 1.5x their hourly rate for all hours worked over 40 in a workweek.
  • Live-in employees are not required to be paid overtime. 
  • Overtime is not required to be paid when work is performed on a holiday. 

Paid sick leave

Household employers in Bernalillo County are required to provide at least 24 hours of paid time off to employees that work more than 56 hours per year. Other details of the law families should know are:

  • Paid time off accrues at 1 hour for every 32 hours worked.
  • Employers may cap the total paid time off usage to 24 hours per year.
  • Employers may offer the total amount of paid time off to their employee at the beginning of the year if they wish to not accrue it.
  • Unused paid time off is required to be rolled over to the following year, but employees cannot roll over more than 24 hours.
  • Employers are not required to pay out unused paid time off if their employee is terminated. However, if the employee comes back to work within a 12 month period, any unused paid time off must be reinstated unless the employer chose to pay it at the time of termination.
  • Employers should keep paid time off records for 4 years.

Optional benefits for your employee 

Health insurance

Families with only 1 employee can make contributions toward their employee’s health insurance premiums and treat the amount as non-taxable compensation. In this scenario, neither the employee nor the employer are required to pay any taxes on that portion of the compensation.

Families with 2 or more employees have 3 options:

  1. Set up an Individual Coverage Health Reimbursement Arrangement (ICHRA).
  2. Set up a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA).
  3. Purchase a policy through SHOP (Small Business Health Options Program). 

Visit our health insurance page for more information about these options.  

Mileage reimbursements

The current federal mileage reimbursement rate is $0.56 per mile and only covers miles driven by your employee while on the job. Miles driven commuting are not eligible for reimbursement.

Ending employment 

Termination notice requirement

Household employers in New Mexico are required to provide their employee with a termination notice that explains their right to unemployment benefits. The notice should be provided when the employee is let go.

Managing unused PTO 

New Mexico household employers do not need to pay their employees for unused sick and/or vacation time.

The information contained in this article is general in nature, may not be applicable to your specific circumstances, and is not intended to be a substitute for or relied upon as personalized tax or legal advice.

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