This an unsettled time for many parents who are likely dealing with a lot of stress in their professional and personal lives. They may be working from home while caring for children who aren’t in school or without childcare. Or they are essential employees leaving home for their jobs but their daycare facility has closed or their nanny can’t come into work. It has been challenging to say the least.
On top of everything else, families that employ a nanny for in-home childcare have a household employee to worry about as well.
We’ll answer some of the popular household employer questions we get at GTM Payroll Solutions to provide insights and guidance on tax credits available to you, paid benefits for your nanny, and how to manage your employee during this time.
We hope to bring some clarity around household employment, give you some confidence, and help you make smart decisions.
1. Are my household employee and I considered essential?
Essential workers are defined by your state and sometimes by a local authority. Some typical examples include employees in industries like healthcare, public safety, utility, food and agriculture, and the financial sector.
As for household employees, home health care workers or aides for the elderly may also be considered essential. You’ll need to check any executive order in your state to see if your employee can still report to work if they are a home health care worker or senior caregiver.
The continued employment of a nanny will also vary by state. They may be considered essential workers, or they could only be deemed essential if they are caring for children of essential workers.
See if your state considers in-home childcare to be essential
2. Can my employee file for unemployment?
Your employee can file a claim for any week when they perform no work and are not paid and/or claim partial benefits for any week where they work for you but at a reduced number of hours.
While each state administers their own separate unemployment insurance program, many states have relaxed their eligibility rules and may allow expanded coronavirus-expanded unemployment claims.
You need to have been paying your employee legally for them to receive unemployment benefits. If you have been paying them off the books, and they file for unemployment, they may not get full benefits or even be denied benefits. In either case, you will likely get a call from your state’s labor agency.
For clients of GTM Payroll Services, remitting your state and federal unemployment taxes is part of your service so you and your employee are all set.
Your employee will file for unemployment through your state’s labor agency. They can do it online or by phone.
Learn about expanded unemployment benefits under the CARES Act.
3. What is the Families First Coronavirus Response Act (FFCRA)?
The FFCRA was the first big federal legislation that addressed the COVID-19 pandemic. It took effect on April 1. This law provides employees – including household workers – with paid sick and family leave beginning April 1 for certain circumstances related to COVID-19.
The Family and Medical Leave Act (FMLA), which typically doesn’t apply to small employers is now in effect for employers with fewer than 500 workers.
Employees can take paid sick leave if they are:
- Quarantined or isolated subject to federal, state, or local quarantine/isolation order
- Advised by a health care provider to self-quarantine (due to COVID-19 concerns)
- Experiencing symptoms of COVID-19 and seeking a medical diagnosis
- Caring for a quarantined individual
- Caring for a child whose school or place of care is closed due to COVID-19
- Experiencing any other substantially similar condition
They can take expanded paid family leave if unable to work due to care of a child under the age of 18 because of a school or childcare facility closure due to the public health emergency.
4. Does my employee qualify for benefits under the FFCRA?
Household employees are eligible for paid sick leave. If they have worked for you for 30 days, they may also take extended paid family leave.
They are eligible for:
- 80 hours of paid sick leave
- 12 weeks of paid family leave under the FMLA expansion (two weeks unpaid; 10 weeks paid)
Paid leave benefits run from April 1 – December 31, 2020.
Employees can’t collect unemployment if they are receiving paid leave benefits under the FFCRA.
You’ll be fully reimbursed for paid sick and family leave through payroll tax credits.
5. What are the benefits under the FFCRA?
If your employee needs to take paid sick leave to care for themselves, they’ll be paid their regular rate of pay at a maximum of $511/day (or a total of $5,110 over 10 days).
If they take paid sick leave to care for a quarantined or ill individual, they can be paid at 2/3rds of their regular rate of pay at a maximum of $200/day (or $2,000 total over 10 days).
For the paid family leave under the expansion of FMLA, they can be paid at 2/3rds of their regular rate of pay at a maximum of $200/day (or $12,000 total over 12 weeks).
6. How do I get the tax credits for paid leave under FFCRA?
Paid leave is refunded to you through a dollar-for-dollar tax credit. Whatever you pay your employee for paid sick or family leave, you can reduce from your employer taxes. This applies to qualifying leave provided between April 1 and December 31, 2020.
Typically, household employers remit taxes every quarter to the IRS. If you provided paid leave on or after April 1 (start of the second quarter), you can retain the funds that you would otherwise pay to the IRS in payroll taxes at the end of the second quarter to cover the paid leave.
These payroll taxes include what you withhold from your employee’s pay including federal income taxes and FICA taxes – Social Security and Medicare as well as what you’re contributing in FICA taxes. From the tax amount that should go to the IRS, you’ll deduct the amount you paid your employee for qualified paid sick and family leave.
If your total payroll tax amount is not enough to cover the cost of paid leave, you can seek an expedited advance from the IRS.
7. Can I deduct the benefits provided by FFCRA from my employee’s paid sick balance?
The benefits provided under FFCRA are in addition to the paid leave your employee already is entitled to under any type of work agreement or nanny contract.
Your employee could take two weeks of paid leave under FFCRA and, if they still need time, they can use the sick time or other PTO provided under your work agreement.
Also, your employee could be eligible for paid sick leave under state law. Again, FFCRA benefits would be in addition to any state-mandated paid sick leave.
8. Do I continue paying taxes during this time?
If you are paying your employee as usual, you will continue to withhold payroll taxes like FICA taxes, pay FICA and unemployment taxes, and remit those taxes on a quarterly basis as you would under normal circumstances.
If your employee is on paid sick/family leave, you’ll continue to withhold FICA taxes from your employee’s pay (and federal income taxes if you’ve agreed to) and set aside your contributions to FICA and unemployment. However, instead of remitting those taxes to the IRS, you’ll retain those funds to cover what you paid your employee for qualified leave under FFCRA.
9. Do states with paid sick leave cover for COVID-19?
Several states like New York, Massachusetts, New Jersey, Washington, and others have paid sick leave for employees including household workers.
State-mandated paid sick leave should cover COVID-19 as an illness. Check with your state labor agency for specific guidance. A paid family leave law may cover an employee who needs to care for a family member who has been ordered or advised by a doctor to self-quarantine.
However, a paid sick or family leave law may not cover your employee if they can’t work because you are quarantined.
10. Is it okay to let my employee go because of the COVID-19 pandemic?
Household workers are employed at-will (Montana is an exception), which means they can be terminated at any time for any reason, as long as the reason is not discriminatory.
If you are considering termination, you will need to review your work agreement and follow any terms you agreed to with your employee as far as ending their employment.
If you guarantee hours for your employee and tell them not to come to work, you may still need to pay them since they’re available to work and you’re telling them to stay home.
If you don’t want to pay guaranteed hours, you may need to end their employment. Terminating employment because you no longer want your employee or anyone else for that matter working in your home due to a fear of spreading the coronavirus is compliant with termination law.
However, you would be discriminating against your employee if you terminated them because they have been diagnosed with COVID-19. That’s because an illness is considered a disability so you can’t fire them just because they got sick. Your employee’s job may also be protected because they are diagnosed with COVID-19, are showing symptoms or the virus, or are under an order to quarantine or self-isolate.
While you may have a legal reason to terminate your employee, there is also the human element. This is a challenging time for everyone including your employee. They may be concerned about job security and their finances.
Remember you hired this person to care for your children or an elderly loved one. You have trust in them. We often hear about how a nanny or senior caregiver becomes part of the family. There is a personal relationship that develops between employer and employee that you may not find in the traditional workforce.
Keep all of that in mind when you are deciding how to proceed. Communication is important to remove any fear or confusion about losing their job. If it’s financially feasible for you, you may want to continue paying your employee even if they aren’t working you. If you can’t, then consider the paid leave or unemployment options.
GTM can help
If you need to get caught up on back taxes so your nanny is eligible for full unemployment benefits and paid leave, give us a call at (800) 929-9213 for a complimentary, no-obligation consultation with a household employment expert. We can help get you current on your taxes but you’ll need to act soon. Quarter 1 tax filings are due April 30, 2020.
For GTM clients, our client support team is ready to help you any way we can. If you have any questions about paid benefits, tax credits or anything else related to household employment, call us at (800) 929-9213.
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