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How to advise clients with household help during the coronavirus pandemic

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This is an unsettled and unprecedented time for many American families. Jobs are being shed by the millions, schools and daycare centers are closed, and most are living under some sort of stay-at-home order. For families who employ a nanny to care for their children in the home, there is the extra concern of what to do with their employee.

With the federal government requiring paid sick and family leave under the Families First Coronavirus Response Act (FFCRA) and expanding unemployment benefits under the Coronavirus Aid, Relief and Economic Security Act (CARES Act), household employers have a lot to consider.

We will walk through some different scenarios and how your client can handle these situations.

First, a quick rundown on what may be available to a client’s employee:

  • FFCRA: The first major legislation in response to the pandemic requires paid sick and family leave for certain COVID-19-related circumstances. Your clients would be eligible for a dollar-for-dollar tax credit for any FFCRA paid leave provided to their employees.
  • The CARES Act: The next big law to help those out of work because of the health crises expanded the availability of unemployment insurance to those who may not normally be eligible for benefits, extended the number of weeks someone can receive unemployment payments, and added $600 per week in benefits.
  • State and local paid sick leave laws: Several states and cities require paid leave benefits for household employees. These laws may cover time missed because of COVID-19.
  • Workers’ compensation insurance: This may cover lost wages and medical bills if an employee gets sick or injured while at work. Coverage is required for household employers in many states.
  • Temporary disability insurance: It provides benefits to employees who suffer from non-work-related illnesses and is required for household employees in five states: California, Hawaii, New Jersey, New York and Rhode Island.

Household employees need to be paid legally to receive any of these benefits. Workers paid under the table will be left with little to no protection if they can’t work because they got sick or were laid off by your client. In fact, an out-of-work household employee could expose your client for non-compliance if they filed for unemployment benefits.
Now is the time to make sure your clients with household help are paying on the books and caught up with their household employment taxes.

Here is how you can advise your clients under these scenarios:

Employee is sick, has COVID-19 symptoms, or may have been exposed to the virus

If your client’s employee is subject to a government quarantine or isolation order, seeking a medical diagnosis or advised by a health care provider to self-quarantine, they would be eligible for up to 80 hours of paid sick leave at their full rate of pay through the FFCRA. Your client would receive a tax credit for any paid leave provided.

Paid leave under these scenarios is capped at $511 per day and $5,110 total. State or local paid sick leave and/or temporary disability insurance may also apply.

Employee is caring for a sick family member

If your client’s employee has a family member who is subject to a government quarantine or isolation order, or is advised by a health care provider to self-quarantine and they need to provide care, they would be eligible for up to 80 hours of paid sick leave at two-thirds of their regular rate of pay through the FFCRA.

Paid leave is capped at $200 per day and $2,000 total when caring for a family member. Some states like New York have paid family leave laws that could apply to household employers and their workers.

Employee can’t work because their child’s school is closed, or childcare is unavailable due to COVID-19

If no other suitable person is available to care for their child, the employee can take up to 80 hours of paid sick leave at two-thirds their regular rate of pay through the FFCRA. Then, through the expansion of family and medical leave under FFCRA, they can take an additional 12 weeks of paid leave at two-thirds of their regular rate of pay. The first 10 days of expanded leave can be unpaid.

Paid leave is capped at $200 per day and $2,000 total when providing care for their child. If they are taking the additional leave, pay is capped at $200 per day and or $10,000 total.

Employee is immunocompromised and advised to self-quarantine

They would be eligible for up to 80 hours of paid sick leave through the FFCRA. Paid leave would be capped at $511 per day and $5,110 total. State or local paid sick leave and/or temporary disability insurance may also apply.

Your client is under quarantine because someone in their home is ill or was exposed to COVID-19

Your client’s employee would not be eligible for FFCRA paid sick or family leave. They may be able to receive unemployment benefits under the CARES Act if your client stops paying them during this time and they take no other paid leave such as employer-provided paid time off or vacation time.

Your client no longer needs a nanny as they are working from home or made other temporary childcare arrangements due to COVID-19

Your client may be working from home or made other temporary childcare arrangements and no longer needs their nanny to come to work. In this case, the employee would not be eligible for FFCRA paid sick leave. They may be able to receive unemployment benefits under the CARES Act even if your client plans to re-hire the employee after the health crisis.

Your client reduces their nanny’s hours due to COVID-19

If your client cuts back on the hours their employee works, they would not be eligible for paid sick leave. However, they may be able to receive partial unemployment benefits under the CARES Act for the reduction in hours.

FFCRA tax credits

To help cover the costs of FFCRA-mandated sick and family leave, employers can take a dollar-for-dollar payroll tax credit. Household employers can retain the amount they pay in leave when they remit their household employment taxes, which can include both the employee and employer shares of Social Security and Medicare as well as federal income taxes. Household employers typically remit employment taxes on a quarterly basis using Form 1040-ES.

Your client can pay their employee more in FFCRA leave than the law’s limit, but they can only retain an amount up to the capped number.

If your client intends to claim a tax credit, they must have specific documentation from employees supporting their eligibility for paid sick and/or family leave.

CARES Act unemployment benefits

If your client’s employee is out of work for reasons related to COVID-19, they can apply for unemployment benefits through their state labor agency. States are also handling the extra funds available for expanded unemployment benefits from the federal government.

The importance of legal pay

Now more than ever, it is important that your client’s employees are being paid legally and that your client is caught up on their “nanny taxes.” With limited job availability and extra benefits provided by the CARES Act, nannies and other household workers are joining the millions of Americans applying for unemployment. If your client is not compliant with the law, they could easily be caught for avoiding their tax obligations and face fines, penalties and full payment of back taxes.

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