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Types of In-Home Care Companies

Maybe you’ve seen the newspaper headlines about high-level politicians who didn’t withhold taxes, pay liability and workers’ compensation insurance, and follow state labor laws when employing nannies and other in-home assistance. But it doesn’t just happen to politicians and the wealthy.

More and more, individual families have had to make the choice to employ in-home care aides to provide assistance in caring for aging loved ones. When you do this, the government often expects you to behave as a corporate employer would—by withholding taxes, buying liability and workers’ compensation insurance, and complying with labor laws. And if you don’t—because you aren’t well informed on the requirements—there could be serious consequences.

Your obligations as an employer of an in-home care aide depend on the type of in-home care company you’re working with. Here’s an overview of the different types out there—and your obligations in working with each.

Nurse Sitting With Elderly Woman

Before hiring an in-home care company, know what type of employer they are—and what your responsibilities will be toward the person working in your home.

Direct employers

If your company is a direct employer, it will hire and pay all of its employees on its own. It will cover its employees with workers compensation and liability insurance in compliance with your state’s laws. You won’t be liable to purchase insurance or follow government labor laws—that will be the company’s responsibility. But you will pay more—many companies shift those burdens to clients and their families in order to keep costs down.


If your in-home care company defines itself as a registry, the company will treat its employees as independent contractors. The employer handles scheduling, but the caregiver herself pays her own taxes and insurance. Some registries charge clients and then pay caregivers afterward, but others will ask you to write two checks—one to the registry itself and one to the caregiver.

Registries are ideally designed to reduce overall expenses by reducing the amount the client pays to cover benefits, workers’ compensation and liability insurance—shifting the cost to the caregiver. But this model may increase your exposure to liability lawsuits if the caregiver doesn’t have adequate coverage. In addition, in some areas you may be considered the caregiver’s direct employer anyway—which means you’ll have to withhold taxes from their checks.

Referral services

If the company you hire is a referral service, it will only provide background screenings and referrals. Home care registries recruit caregivers, screen them, and place them with clients. You pay them a one-time fee, and then you become the direct employer of the caregiver. This means you’ll have to get a federal employer identification number (EIN) and withhold all federal, state and local taxes for the caregiver. You may also have to provide family medical leave, workers’ compensation insurance, and other insurance to meet the labor requirements in your state.

These arrangements do tend to be much less expensive for clients—but you’ll have a lot of additional paperwork, tax obligations, and legal obligations. You may also need to hire an attorney or an accountant, which could cut into the savings.

Independent caregivers

It’s also possible to hire an independent caregiver at a independent living community who is not working for a registry, referral service, or direct employer—and make arrangements directly with this individual. This has its pluses and drawbacks. This often tends to be the most affordable option, as you’re not paying overhead and administrative costs for an entire company. But you may also have to deal with tax withholding liabilities, workers compensation and liability insurance, and complying with your state’s labor laws. In addition, some types of care require licensure—and you’ll need to be sure the individual you hire is licensed to deliver the type of care your loved one needs.

Choosing an in-home care company isn’t easy—and it’s often difficult to afford. To reduce costs for clients, many in-home care companies reduce their involvement as direct employers—but that often shifts the burden of paperwork, tax and legal compliance to families who aren’t prepared for the responsibility. Before hiring an in-home care company, know what type of employer they are—and what your responsibilities will be toward the person working in your home.

Choosing a Home Health Care Aide – YouTube.com