Are you planning on hiring a household employee in 2022? Whether it’s a personal assistant, housekeeper, nanny, or another position, it is important to remember that hiring someone to work in your home moves you to the role of household employer. That means you are responsible for your employee’s payroll and tax withholdings. Unfortunately, many people ignore this or are not aware that they have legal responsibilities as an employer. Here are some important things to keep in mind regarding legal pay in 2022.
Know the threshold
The 2022 wage payment threshold is $2,400. That means, if you plan on paying your employee more than $2,400 this year, you are obligated to pay social security and Medicare taxes. These withholdings are reported on your employee’s W-2 form.
The federal minimum wage remains at $7.25 per hour, but depending on your state or local government, you may have a different minimum wage requirement. Be sure you do your research and know what that requirement is before you hire and negotiate a wage with your new employee.
Consider offering healthcare benefits
In addition to a fair wage, it is common for employers to provide health care to their home employees. There are healthcare reimbursement plans available through the IRS, including the Qualified Small Employer Healthcare Reimbursement Arrangement (QSEHRA) and the Individual Coverage Health Reimbursement Arrangement (ICHRA). The QSEHRA has an individual cap of $5,450 for 2022, or $11,050 or a family. The ICHRA has no cap, but employers must meet various affordability rules.
The most important thing to remember: your employee is not an independent contractor. Independent contractors work without restrictions on their employment. They set their own schedules and job duties. If you want to hire someone to work in your home with specific responsibilities and times, they are considered an employee in the eyes of the law.
At Household Staffing, we understand that becoming a household employer for the first time can feel confusing and overwhelming. We can help find the right employee for your home, and then help connect with you with tax and payroll partners to help ensure all the payment and tax details are worked out. This will give you the peace of mind you need to ensure that both you and your employee are tax compliant all year long.