May 28, 2012

Household Employees: What You Need To Consider

Household Employees: What You Need To Consider Tax & Business

Many families hire household help, either of house work or for childcare. There are many issues to consider when deciding to hire an individual to work in your home.

The responsibility of an employer does not start with the first paycheck. It’s a daunting and grueling process which will require the assistance of a professional. In addition, if you have ever questioned whether you are following the right procedures when it comes to the hiring and firing employees, consider allowing Marcum Family Office to be a resource center.

When it comes to your employees there are numerous issues to be addressed. With the proper planning and preparation, you, as the employer should start protecting your family even before allowing the help into your home. This does not only apply to domestic help, but also the hiring of independent contractors. Procedures and practices for employees who operate in your home should be established to maintain your safety and security.

There is a long list of responsibilities associated with being a household employer, as well as the fear of subjecting the family to personal and financial risk. Employers need to educate themselves on the process for hiring, maintaining and firing employees.

When hiring an employee it is very important the position be clearly outlined and detailed expectations provided. In order to make the work arrangement effective, a written and agreed upon job description should be signed by the employee.

Another important document to consider would be a confidentiality agreement. Each employee should be asked to sign one. Signing of a confidentiality agreement prevents the employee from using the family’s personal and financial information for profit.

In addition to the written job description, the employer should identify and confirm the qualifications of the employee. The hiring process should include a comprehensive background check performed by a professional. This should be done even though the employee has provided documents that prove they are a US citizen, etc. This investigation process will help verify references, previous employment records, education, criminal records, credit, etc, in order to alleviate the concerns of the employer and help ensure your family’s safety.

Many families, especially those with more than one home in more than one location and extremely busy lifestyles, have turned over the management of their household to a professional search firm. As with the hiring of an employee, the client needs to do an equal amount of due diligence in order to make sure that their personal information is not exposed. The family’s privacy must be protected until the employee is hired. The client should review all of the new hire’s documents that the search firm has compiled before the interview. If this route is taken, the staffing service acts like the employer and is responsible for the payment of taxes and processing of payroll.

Once the employee is hired there is also the need to make sure that your “home” is secure. Valuable personal and financial information could very easily be stolen off your own computer. Allowing your employee to have online access could also lead to identity theft. It would be wise to speak with a security/risk consultant to make sure that your computer systems have the highest level of encryption to protect the family’s personal information.

Now that the employee has been hired, the employer has to consider the paying of payroll taxes, of which there are various types which the employer is directly responsible for remitting. The employer is responsible for various types of payroll taxes. There are required Federal withholdings from the employee and taxes to be paid by the employer. Depending on the state in which you employ, there may be state and local payment and filing requirements.

In addition to the Federal and State withholdings, an employer also has to consider Worker’s Compensation and Disability Insurance. Worker’s compensation is a form of insurance that provides compensation medical care for employees who are injured in the course of employment. It is required by law for employers to have in place for employees. Disability insurance is also a form of insurance that provides policyholders with coverage that replaces a portion of an employee’s income if he or she becomes too sick or disabled to return to the job. Each state has its own Disability insurance requirements and should be reviewed when hiring.

If you need assistance with matters relating to payroll please contact Rosanne Migliorino at 212-485-5792 or [email protected].

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Tax & Business