Hiring a caregiver for a loved one is a deeply personal decision, and many families start with informal arrangements—sometimes paying cash or “under the table.” While this may seem simpler at first, there comes a time when transitioning your caregiver “on the books” is not only the right thing to do, but also the safest and most beneficial for everyone involved.

If you’re considering this transition, you’re not alone. Here’s how to approach the conversation and what you need to know to make the process smooth and positive for both you and your caregiver.

Why Go “On the Books”?

Before you start the conversation, it helps to understand, and be able to explain, the benefits of paying your caregiver legally, emphasizing the benefits to them, the caregiver:

• Legal Protection for Everyone: When a caregiver is paid on the books, both you and the caregiver are protected by employment laws. This means your caregiver is eligible for unemployment benefits, workers’ compensation, and has legal recourse if there are disputes over pay or working conditions.

• Access to Benefits: Caregivers paid legally can access Social Security and Medicare credits, unemployment insurance, and may qualify for health benefits and paid time off, depending on your state.

• Proof of Income: Legal pay provides your caregiver with verifiable income, which is essential for renting an apartment, applying for loans, or securing credit.

• Tax Benefits for You: As a household employer, you may be eligible for tax credits, such as the Child and Dependent Care Tax Credit, and can deduct certain caregiving expenses.

Preparing for the Conversation

Transitioning to a formal employment relationship can feel intimidating for both you and your caregiver, especially if you’ve been working together for a while. Here’s how to set the stage:

1. Gather Information First

• Learn about your legal responsibilities as a household employer, including payroll taxes, workers’ compensation, and minimum wage requirements.

• Understand the process for registering as an employer, filing taxes, and providing pay stubs and year-end forms like the W-2.

If you’re feeling overwhelmed, know that Clara can handle all of these steps for you, making the transition seamless and stress-free.

2. Choose the Right Time and Setting

• Schedule a dedicated time to talk, ideally in person and when neither of you is rushed.

• Approach the conversation with empathy, recognizing that change can be unsettling.

3. Be Honest and Positive

• Explain your reasons for wanting to make this change. Focus on the benefits for your caregiver—such as job security, legal protections, and eligibility for benefits—and for your family, like peace of mind and compliance with the law.

• Reassure your caregiver that you value their work and want to ensure they’re protected and supported.

How to Start the Conversation

Here’s a sample way to open the discussion:

“I’ve been thinking about how important your care is to our family, and I want to make sure we’re doing everything the right way. I’d like to start paying you ‘on the books’ so that you have access to benefits like Social Security, unemployment insurance, and a record of your income for your own future. I know this is a change, but I believe it’s the best way to protect both of us.”

Encourage your caregiver to share any concerns or questions. Common worries include reduced take-home pay due to taxes, uncertainty about paperwork, or fears about eligibility for public benefits. Be ready to address these honestly.

Addressing Common Concerns

Concern: “Will I take home less money?”

• Yes, taxes will be withheld, but this money goes toward Social Security, Medicare, and unemployment insurance—benefits your caregiver will rely on in the future. It’s also the case that in most states personal income tax will not be withheld.

• Legal pay also opens doors to financial products, housing, and credit that require proof of income.

Concern: “Is this going to be complicated?”

• Not with the right support. Clara specializes in making this transition easy by handling payroll, tax filings, pay stubs, and even workers’ compensation insurance for you.

• Your caregiver will receive regular paychecks and all necessary tax documents, just like any other employee.

Concern: “Will this affect my eligibility for public benefits?”

• It’s important for caregivers to check how reported income might impact any benefits they receive. Encourage them to speak with a benefits counselor or social worker if they have specific concerns.

What Steps Are Involved?

If your caregiver is open to the transition, here’s what typically happens next:

1. Register as a Household Employer: This involves getting an Employer Identification Number (EIN) and registering with state and federal agencies. Clara can do this for you or use your existing EIN if you have one.

2. Set Up Payroll: You’ll need to calculate and withhold the correct taxes (Social Security, Medicare, unemployment, and possibly state taxes), pay at least minimum wage, and provide overtime and sick leave as required by law.

3. Provide Documentation: Your caregiver will need to fill out a W-4 (for tax withholding) and I-9 (to verify their right to work in the U.S.). Clara can walk you through this process and collect the necessary forms.

4. Maintain Records: Keep accurate payroll records and provide your caregiver with pay stubs and a W-2 at the end of the year. Clara manages all of this electronically, making it easy to stay organized and compliant.

5. Get Workers’ Compensation Insurance: This is not required in all states, but even if not required by law, it is a best practice that protects both you and your caregiver in case of on-the-job injuries. Clara partners with specialized agencies to offer affordable coverage.

The Risks of Not Transitioning

It’s important to be clear about the risks of continuing to pay “under the table”:

• Legal and Financial Penalties: If your caregiver files for unemployment or is injured on the job, you could be liable for back taxes, penalties, and even lawsuits.

• Loss of Benefits for Caregiver: Without legal pay, your caregiver misses out on Social Security credits, unemployment insurance, and other protections.

• No Proof of Employment: This can make it difficult for your caregiver to secure housing, loans, or even future employment.

You can read more about the risks here.

How Clara Makes It Easy

Clara is designed to take the stress and confusion out of hiring and paying caregivers legally. Here’s how Clara supports families:

• Automated Payroll and Tax Filing: Clara calculates and withholds all necessary taxes, files quarterly and annual reports, and generates pay stubs and W-2s automatically.

• Employer Registration: Clara registers you as an employer with federal and state agencies, eliminating paperwork headaches.

• Insurance and Compliance: Clara provides access to workers’ compensation insurance, keeps you compliant with wage and hour laws, and ensures all employment records are maintained securely.

• Dedicated Support: Clara’s team is available seven days a week to answer questions and provide guidance throughout the process.

Final Thoughts

Transitioning your caregiver to be “on the books” is a meaningful step that protects you, your loved one, and your caregiver. While the process can seem daunting, approaching the conversation with empathy and information makes all the difference. By focusing on the benefits and offering support, you can help your caregiver feel secure and valued.

If you’re ready to make the transition—or just want to learn more about how it works—Clara can help you every step of the way, from registration to payroll to compliance and insurance. Reach out to Clara today to discover how easy and affordable it can be to hire and pay caregivers legally, and give yourself the peace of mind you deserve.