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How hiring a senior caregiver on your own can be cheaper than using an agency

Learn why changes to federal law have made private employment more cost-effective for many families

Save money hiring a senior caregiver privately

Families that need in-home care for their loved ones typically have two choices for hiring a caregiver – enlist the help of a home care agency or hire and manage a caregiver privately on their own.

Over the past several years, changes to federal law have driven up the operating cost for home care agencies. This is especially true in cases that require high hours and care continuity, such as Alzheimer’s disease or dementia. In these kinds of cases, hiring a caregiver privately (also called consumer-directed care) can now be significantly more cost-effective.

How federal law drove up the cost of hiring with an agency

The Department of Labor implemented a law in 2015 that disallowed third-party employers, such as home care agencies, from excluding overtime from the wages of their caregivers hired to provide companionship services. These services include providing protection and fellowship to care recipients, such as reading to the elderly individual, taking walks with them, playing games, etc.

For families who hire companion caregivers through an agency, this law means they absorb those extra overtime costs, but families who hire independently can set more appropriate rates for the tasks taking place. It’s important to note that if the caregiver spends more than 20% of his/her time on Activities of Daily Living (ADLs), such as helping with bathing, dressing and movement assistance, the family cannot classify the worker as a companion.

“Another difference in cost can come from families in most states being able to exempt overtime for senior caregivers that are live-in employees,” says Eva MacCleery, Director of Care.com HomePay. “This exemption is not available to staffing agencies because the caregiver would be an employee of the agency, not the family.”

A family that is eligible to take either of these overtime exemptions may see a difference of tens of thousands of dollars annually between hiring a senior caregiver on their own instead of through an agency.

When considering private employment, families need to take into account the cost of taxes, workers’ compensation insurance, using a tax and payroll service like HomePay, and the potential savings from various tax breaks. We’re happy to help you with a free budgeting consultation so you can easily compare the total cost of private employment versus the agency option and make an informed decision.

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