Nanny Taxes in California
Household employers need to comply with tax, wage, and labor laws that affect nannies, in-home senior caregivers, and other household employees. While federal laws cover employers in all states, there are also state- and city-specific regulations that employers must follow. Here’s what you need to know about nanny taxes in California.
California Minimum Wage
Household employees must be paid at least the highest of federal, state, or applicable local minimum wage rates.
California has various minimum wage rates depending on the location of work.
State Minimum Wage Rates
The 2023 state minimum wage rate in California is $15.50/hour for employers with 25 or fewer employees. The state rate was scheduled to increase to $15/hour for employers who employ 25 or fewer workers. The accelerated increase is required by a provision in the state’s minimum wage law when inflation exceeds 7 percent.
California Local Minimum Wage Rates for Household Employees
These California cities have a local minimum wage rate that is higher than the state’s rate and supersedes the state’s minimum wage requirement.
|City||2023 Minimum Wage Rate (Hourly)|
|East Palo Alto||$16.50|
|Half Moon Bay||$16.45|
|Los Angeles (city)||$16.04 for small employers|
|Los Angeles (county)||$15.96|
|Novato||$15.53 for small employers|
|San Francisco (city and county)||$16.99|
|San Mateo County||$16.50 (effective April 1, 2023)|
|Sonoma||$16 for small employers|
|South San Francisco||$16.70|
|West Hollywood||$17 for small employers|
Exempt v. Non-Exempt
For an employer with less than 26 employees, an employee must earn at least $64,480 to be considered exempt from overtime rules. While an employee’s title is not determinative of exempt status, these workers typically are not exempt:
- Baby nurses
- Executive assistants
- Personal assistants
- Personal chefs
- Personal drivers
- Senior caregivers
Within the non-exempt classifications, a household employee could be considered a personal attendant. To be a personal attendant, an employee must work in a private household and spend at least 80 percent of their working time supervising, feeding, or dressing a child or person who by reason of advanced age, physical disability, or mental deficiency needs supervision.
Some workers who could be considered exempt depending on the circumstances of their employment include:
- Chiefs of staff
- Estate managers
- House managers
Exempt workers typically manage staff for the majority of their time as an employee.
Overtime Laws for California Nannies
An overtime rate of time and a half applies when a non-exempt household employee works:
- more than eight hours in a day
- more than 40 hours in a workweek
- eight hours on the seventh consecutive day of work in a Monday-Sunday workweek.
An overtime rate of double time applies:
- after 12 hours in a day
- all hours worked after eight on the seventh consecutive day of work in a Monday-Sunday workweek if the total hours worked exceeds 30 hours and the total hours in any one workday is more than six hours.
For personal attendants, an overtime rate of time and a half applies:
- after nine hours in a day or 40 hours in a week (live-out)
- after nine hours in a day or 45 hours in a week (live-in)
There is no double-time rate for personal attendants.
For live-in household employees who are not personal attendants, an overtime rate of time and a half applies:
- after nine hours in a day
- after working five workdays in a workweek up to and including nine hours on the sixth and seventh workdays
A double-time rate applies for all hours worked in excess of nine hours on the sixth and seventh workdays.
Keep in mind that midnight starts a new day and the eighth day of work starts a new week.
Flat fee arrangements, for overnight shifts as an example, are typically against the law in California. An employer could consider paying different rates of pay for different types of work (as long as the rates are at or above minimum wage and overtime rules are followed). A family could pay their nanny a lower rate for overnight hours as compared to their normal rate as their children are usually sleeping at night.
Sleeping Time Laws for Household Employees in California
In California, non-exempt employees who work a 24-hour or longer shift must be paid for sleeping time. However, if an employee has the ability to get more than five hours of uninterrupted sleep, then those hours do not need to be paid. The time excluded for uninterrupted sleep can’t exceed eight hours. The employer must also furnish adequate sleeping facilities.
Rest and Meal Breaks
Employees who work five hours or more in a day must be provided with an uninterrupted 30-minute meal period that must be taken before the end of the fifth hour of work. If the employee is required to remain at the work site (for example, the family’s home) during the meal period, then the meal period is considered “on duty” and must be paid. If a meal period is not provided or is interrupted, then the employer must pay a premium equal to one hour of wages.
Non-exempt employees are permitted an uninterrupted 10-minute paid, off-duty rest break for every four-hour work period. Employees working less than 3.5 hours are not required to receive a rest period. If a rest period is not permitted or is interrupted, then the employer must pay a premium equal to one hour of wages.
California State Unemployment Tax & Rate
In California, the new employer SUI (state unemployment insurance) rate is 3.4 percent on the first $7,000 of wages for each employee. Employers with previous employees may be subject to a different rate. This is an employer-only tax.
Employee v. Independent Contractor
A recent California Supreme Court decision created a new “ABC test” that adopts an expansive definition of an employee. The test presumes that a worker hired to perform services is an employee of the hiring business, subject to the employer’s ability to provide all three of the following:
- The worker is free from the hirer’s control and direction in connection with performing the work both under contract and in fact.
- The worker performs work that is outside the usual course of the hirer’s business.
- The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.
The ruling has made it incredibly difficult for any worker in the state to be classified as an independent contractor.
Workers’ Compensation Insurance
All employers – including families that have hired household help – need a workers’ compensation policy that covers all employees. You may be able to get a rider on your homeowner’s or renter’s policy. Part-time and temporary employees are typically covered by your homeowner’s policy. A full-time worker would need to be added. Without the appropriate coverage, you could be held personally responsible for your employee’s lost wages and medical bills due to a work-related injury or illness. Check with your insurance agent on how to add a household employee to your policy.
Maintaining Time, Vacation, and Sick Time Records
Accrued but unused vacation time must be paid out at the time of the employee’s termination. There is no “use it or lose it” policy. Vacation time must also be tracked as it accrues. An employer can pay an employee for any unused vacation time at the end of the year or allow their employee to carry over time to the following year with an accrual cap.
California’s law dictates that sick leave balances must be listed on the employee’s pay stubs.
Meal and rest breaks must be documented. If they are not provided, then premium payments must be paid and noted on the employee’s pay stubs. Meal and rest breaks can be capped at two hours a day.
Employment Documentation and Pay Stub Requirements
A household employer must have proper documentation in place including:
- Signed offer letter/employment agreement
- Confidentiality agreement and/or mutual agreement to arbitrate, as appropriate
- An employee handbook that includes a harassment and discrimination policy
- Wage theft protection notice. This notice provides employees their rate of pay, designated payday, employer’s intent to claim allowances as part of the minimum wage, and the basis of wage payment (paying by the hours, shift, etc.), including any applicable rates for overtime.
According to California law, employers must give their workers an itemized statement with every paycheck that includes:
- Total gross wages
- Hourly rate of pay
- Total hours worked
- Any deductions
- Net pay
- Pay period dates
- Employee’s name and last four digits of their Social Security number
- Employer’s full name and address
Termination and Final Pay Procedures
If a household worker resigns with no notice, an employer has up to 72 hours to pay out their final wages but if an employee gives and works their notice period (i.e. two weeks’ notice), their final wages are paid on their last day worked. Employees who are fired must be paid on the same day as their termination. An employee’s final paycheck must include payment for unused vacation days. The penalty for failing to follow final pay procedures is a full day’s wages for each day the final paycheck is late up to a maximum of 30 days.
Domestic Worker Bill of Rights
California’s Domestic Worker Bill of Rights extends overtime pay rights to certain personal attendants working in the home who were not previously entitled to overtime pay. Learn more about California’s Domestic Worker Bill of Rights.
Paid Family Leave
California Paid Family Leave provides up to six weeks of partial pay to employees who take time off work to care for a seriously ill family member (child, parent, parent-in-law, grandparent, grandchild, sibling, spouse, or registered domestic partner) or to bond with a new child entering the family through birth, adoption, or foster care placement.
Beginning January 1, 2023, employees are able to take leave to care for a “designated person” who is defined as any individual related by blood or whose association with the employee is equivalent to a family relationship. An employee can designate this person at the time they request leave. An employer can limit an employee to one person in a 12-month period as the employee’s designated person.
Learn more about California’s Paid Family Leave.
Paid Sick Leave
Full-time, part-time, temporary, or seasonal household employees who work 30 or more days within a year must be given up to 24 hours of paid sick leave annually that can be used for absences due to illness; the diagnosis, care, or treatment of an existing health condition; or preventative care for the employee or an employee’s family member. Preventative care may include self-quarantine as a result of potential exposure to COVID-19. In addition, household employers must allow their workers to use at least half of their sick leave to care for a sick family member. Employees accrue one hour of sick leave for every 30 hours worked. Families can limit the amount of paid sick leave an employee can use in a year to 24 hours or three days. Employers must allow accrued, unused paid sick leave to be carried over to the next year. They can cap carryover hours of no less than 48 hours or six days.
Beginning January 1, 2023, the definition of a family member expanded to also include a designated person. For the purposes of paid sick leave, a “designated person” is a person identified by the employee at the time the employee requests paid sick days. An employer may limit an employee to one designated person per 12-month period for paid sick days.
In addition to the state law, Los Angeles, San Diego, and San Francisco have their own city laws.
Los Angeles Paid Sick Leave
Employees in Los Angeles who work 30 or more days within a year of beginning employment, whether full-time, part-time, or temporary, will earn paid sick leave based on the number of hours worked. Read more about Los Angeles Paid Sick Leave.
San Diego Earned Sick Leave
Household employers are required to provide at least five days of earned sick leave to their workers. Employees can accrue one hour of sick leave for every 30 hours worked or employers can provide no less than 40 hours of paid sick at the beginning of the year.
Earned sick leave can be used when the employee:
- is physically or mentally unable to perform his or her duties due to illness, injury, or a medical condition
- needs to obtain a professional diagnosis or treatment for a medical condition
- needs time for other medical reasons such as pregnancy or obtaining a physical examination
- is providing care or assistance to a family member, with an illness, injury, or medical condition, including assistance in obtaining professional diagnosis or treatment of a medical condition
- needs to obtain services due to domestic violence, sexual assault, or stalking.
- is providing care or assistance to a child, whose school or childcare provider is closed by order of a public official due to a Public Health Emergency.
Household employers must also post a notice about Earned Sick Leave at the workplace.
Read more about San Diego Earned Sick Leave.
Learn more about complying with Earned Sick Leave and minimum wage laws.
San Francisco Paid Sick Leave
Every employee, whether exempt or non-exempt, full-time or part-time, permanent or temporary, who is employed within the City and County of San Francisco for thirty days or longer is entitled to accrue paid sick leave at their regular rate of pay. Employees earn one hour of paid sick leave for every 30 hours worked. Household employers may cap a worker’s sick time balance at 40 hours and may provide paid sick leave in different ways:
- Allow employees to accrue up to at least 48 hours; or
- Provide an “advance” of 24 hours or three days of paid sick leave to comply with the state law’s “up-front option,” and later allow employees to accrue up to 40 hours to comply with San Francisco law.
Accrued paid sick leave carries over from year to year and the amount of available paid sick leave must be listed on each paycheck or wage statement.
Employees can start using paid sick leave on the 90th day of employment. Leave can be used for an existing health condition or preventive care, or for specified purposes if they are a victim of domestic violence, sexual assault, or stalking. Workers may use paid sick leave for their own care or care for a specified family member or designated person.
Employees may also use paid sick leave for qualified reasons related to the COVID-19 pandemic such as isolation, quarantine, vaccination appointment, recovering from vaccine side effects, and caring for a family member.
Read more about San Francisco Paid Sick Leave.
West Hollywood Paid Leave
Full-time household employees are to be provided at least 96 compensated hours and 80 uncompensated hours per year for sick leave, vacation, or personal necessity. Part-time household workers are to be provided compensated and uncompensated hours in increments proportional to that accrued by someone who works 40 hours/week. Unused accrued compensated time will carry over until a maximum of 192 hours is reached. Uncompensated time off can be used for sick leave when the employee has used up their compensated time off for the year. Uncompensated time will carry over until a maximum of 80 hours is reached. A household employee is eligible to use accrued leave after 120 days of employment. Compensated Leave designated as sick leave shall be made available to household employees no later than 90 days into their employment. Household employers must not “unreasonably deny” a worker’s request to use accrued leave.
Household employers can separate paid sick time and paid vacation time. By doing so, however, at least 50 percent of the time must either be vacation or personal necessity leave. Any personal time or vacation time will be treated as vacation time under California law and paid out upon termination.
Read more about West Hollywood Paid Leave.
San Francisco Income Tax
San Francisco imposes a local income tax on employers, not employees. This is a flat income tax of 1.50 percent on an employee’s earned income.
San Francisco Payroll Expenses Tax
Proposition F, which became effective January 1, 2021, eliminated the city’s payroll expense tax.
State Disability Insurance Tax
California is one of five states that require household employers to make additional employee withholdings for disability insurance (SDI). This program provides short-term benefits to employees who are unable to work due to a non-work-related illness or injury including pregnancy. SDI also provides paid family leave, which extends benefits to employees who are unable to work because they need to care for a seriously ill family member or bond with a new child.
SDI is a deduction from an employee’s wages. The 2023 tax rate is 0.9 percent (includes disability insurance and paid family leave) on the first $153,164 in SDI taxable wages paid to an employee each year. The maximum annual contribution by an employee is $1,378.48. The SDI rate is set by the California state legislature and may change yearly.
Helpful Links for Nanny Taxes in California
California Employment Development Department (EDD)
All household employers need to follow certain federal regulations including:
Fair Labor Standards Act (FLSA) Classification Guidelines
- Household workers are considered employees and not independent contractors. Learn more about misclassifying employees as independent contractors.
- Household workers are also non-exempt employees, which means they receive overtime pay of at least time-and-a-half for hours worked over 40 per workweek. Learn more about overtime pay.
Social Security and Medicare taxes are commonly referred to as FICA taxes. If you pay cash wages of $2,600 or more to any household employee in 2023 (or paid $2,400 in 2022), then you need to withhold and pay FICA taxes. FICA taxes are 15.3 percent of cash wages. As an employer, you pay 7.65 percent (6.2 percent for Social Security and 1.45 percent for Medicare). Your employee's share is also 7.65 percent, which you can withhold from their wages or choose to pay it yourself. You don't withhold or owe FICA taxes on wages you pay to your spouse, child under the age of 21, parent, or any employee under the age of 18 at any time during the calendar year.
Federal Unemployment Tax (FUTA)
If you pay a household employee total cash wages of $1,000 or more in any calendar quarter, you'll owe federal unemployment tax. This is an employer-only tax. FUTA is six percent of cash wages on the first $7,000 you pay an employee.
If your employee uses their own car in the course of their work, you can reimburse them for mileage. For 2023, the IRS has set the optional standard mileage rate at 65.5 cents per mile driven. Paying mileage is not mandatory or you can reimburse your employee at a different rate. However, if the cost of mileage causes your employee to fall below minimum wage, then you need to reimburse them for mileage.
GTM Can Help with Nanny Taxes in California
Call (800) 929-9213 for a free, no-obligation consultation with a household employment expert. We’ll answer all your questions and show you how to comply with wage, tax, and labor laws as a household employer. Or, if you’re ready to have GTM Payroll Services handle it all for you, get started with our nanny payroll and tax service.
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