When a person hires another to perform various duties in or around their home, they are often considered to be a household employee. This could be for nanny services, a health aide or senior caregiver, a gardener, housekeeper, a personal assistant and yes, even a chef. In many cases, this person is considered to be an employee (W-2) rather than an independent contractor (Form 1099). You need to make sure that you are classifying the individual correctly or you could be subject to taxes and significant penalties.
- Withhold Social Security and Medicare taxes from their paycheck
- Withhold federal income taxes based upon the Form W-4 they must complete (not legally required but strongly suggested)
- Pay the employer’s portion of payroll taxes as well as the federal (FUTA) and state (SUTA) unemployment insurance taxes
SUTA taxes are reported and remitted quarterly to the state. FUTA is remitted at the end of the year. Social Security and Medicare taxes can be paid quarterly by filing Form 1040-ES with the IRS or you can increase your personal withholdings to cover the additional tax. You also must file a Schedule H as part of your annual tax return.
You are also required to complete a W-2 for the employee and file Copy A of the W-2 and Form W-3 with the Social Security Administration. If you fail to correctly classify someone as an employee, and you have not withheld payroll taxes from their pay, YOU are responsible for both the employee and employer payment of those taxes. You cannot go back to the employee and collect from them.
Labor laws require the following of employers:
- You must pay at least the state or federal minimum wage, whichever is greater.
- Employers in New Hampshire are required to provide their employee with an employment contract which includes their rate of pay, payday, how paid and whether they will receive any benefits like vacation, holiday or sick days.
- Employees must be paid weekly, unless prior approval is received from the Department of Employment Security.
- Overtime requirements are dependent upon the type of work that is performed. For instance, a standard work week in New Hampshire is 40 hours over a 7 day period. If the employee works over 40 hours, you must pay them at 1 1/2 times their pay rate, unless they are a live-in employee, in which case the requirements are different. You are not required to pay overtime for a holiday worked.
New Hampshire also requires employers to carry Workers’ Compensation insurance. This also protects the employer by limiting the amount paid for damages and further litigation.
Before you decide to hire someone to work in your household, make sure you discuss this with your accountant or your State Department of Labor; you could end up paying out a lot more than you originally anticipated.