Side Bar - Employing Domestic Workers

Thinking of getting some work done around the house? Are your workers going to be employees or independent contractors? (See the question discussing the differences between employees and independent contractors on page 406.) For example, if you contract with a landscaping company to mow your lawn and maintain the flower beds, the employees the company sends out to perform the work are not your employees. If, however, you employ a cook/housekeeper whose work you control, then the worker is your employee.

Employment laws don't govern the relationship between you and an independent contractor. However, if a domestic worker is your employee, then certain federal employment laws regulate that relationship. Examples of domestic workers who may be considered employees are in-home child care workers, cooks, housekeepers, and baby-sitters.

You must make quarterly Social Security payments to the IRS for every domestic employee at least eighteen years of age who earns more than $1,200 per calendar year. You must also pay federal unemployment taxes for every domestic employee who earns more than $1,000 per calendar quarter. Consult your accountant for rules regarding withholding taxes from an employee's pay.

Here's how wage and hour laws affect domestic workers. The Fair Labor Standards Act (FLSA) covers baby-sitters if they work more than twenty hours per week. The FLSA applies to other domestic employees who earn more than $50 during a calendar quarter and work for one or more employers for more than eight hours in any workweek. Any employee who meets this definition must be paid the federal minimum wage and overtime for hours worked in excess of forty during any one workweek for a single employer.

If a domestic employee resides in your house, then the overtime provisions of the FLSA do not apply, but the minimum wage requirements do. Later in this section, we discuss federal laws governing the employment of aliens.

Finally, you may want to buy workers' compensation insurance for your domestic employee--it's a wise precaution.