You have weighed the choice of how to hire a caregiver – private vs. agency and have decided you want to hire your own private independent caregiver. Now, how do you determine what the going home caregiver pay rate is? Before we look at that, it’s important to understand what the definition of an independent caregiver is according to the Internal Revenue Service. There are some things you need to consider.
Independent Caregivers are Household Employees
The term independent caregiver is typically used to describe a caregiver or home care professional who does not work for an in-home care agency but rather engages directly with you (the client).
The Internal Revenue Service (IRS) states that an independent caregiver who is privately hired and makes more than $2,100 per year (in 2019), is considered to be a household employee, not an independent contractor.
In this case, the family hiring the independent caregiver assumes all the responsibilities of an employer including payroll taxes and other liability.
The reason is that the IRS has strict criteria in place for what determines if someone is an employee or an independent contractor. For example, if you were to hire a caregiver you would typically have control over what time they arrive to work, what they do while they are there, and what time they would leave. An independent contractor, on the other hand, would have the freedom of choosing what days they would work, what time they came in and what they did while they were in your home.
How to Determine Pay Rate
There are two main factors to consider when determining the pay rate for an independent caregiver (household employee). The first is federal law and the second is local market pricing.
Federal Law
As discussed above, independent caregivers are considered household employees. Under the Fair Labor Standards Act (FLSA), household employees are considered non-exempt employees. This means that you would need to pay them an hourly wage for all hours worked.
It also means that they are subject to the minimum wage and overtime requirements outlined under the FLSA. Keep in mind that some states have different minimum wage and overtime requirements that are more generous than the federal requirements. Also, family members and related caregivers are not exempt from the law.
As of 2024, the federal minimum wage is $7.25 / hour. However, some states and cities have established a higher minimum wage which we will discuss next.
Local Market Pricing
Local and regional economic factors also have a significant impact on what independent caregivers are paid. There are a few isolated areas where caregivers are paid the minimum wage. In most areas caregivers will earn between $10 – $20 / hour but much of it depends on local or regional factors.
For instance, the minimum wage in California in 2024 is $16.00 / hour. In some cities, like San Francisco, the minimum wage is already over $18.67 / hour. You can find the minimum wage by state or region by clicking here.
Home care agencies will typically pay their caregivers minimum wage or higher plus add on a percentage above that (to cover taxes, expenses, and profit) which they will charge their client. The median rate that home care agencies charge in California in 2024 is $32.00 according to the Genworth Cost of Care Survey. You can find the median rate home care agencies charge in your area by clicking here.
You can expect to pay an independent caregiver between 30 – 40% below what an agency charges as a rule of thumb.
To Conclude
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