When you make the decision to hire a caregiver directly for your loved one, you're taking on more than just finding the right person. You're becoming a household employer, complete with tax obligations, labor law requirements, and compliance responsibilities that can feel daunting at first glance.

The reality is that many families find themselves unprepared for this transition. One day you're focused solely on finding compassionate, qualified care, and the next you're navigating unemployment insurance rates and overtime calculations. While this shift can seem overwhelming, understanding your obligations upfront will help you create a fair, legal employment relationship that protects both your family and your caregiver. (See here for more on why you should hire your caregiver legally). 

At Clara, we've worked with numerous families making this same transition, and we've seen firsthand how proper payroll management creates stronger, more trusting relationships between families and caregivers. When everyone understands the rules and everything is handled transparently, families can focus on what truly matters: ensuring their loved ones receive the best possible care.

Understanding Your Role as a Household Employer

The threshold for becoming a household employer in Oregon is straightforward: if you pay a caregiver $1,000 or more in any calendar quarter, you're required to register with the Oregon Employment Department as a domestic employer. This registration allows you to report wages and pay unemployment taxes on behalf of your employee.

Before doing that, you'll also need to first obtain a federal Employer Identification Number (EIN) through the IRS. If you pay your caregiver $2,800 or more during 2025, you'll need to file Schedule H with your annual tax return. These are required bureaucratic hurdles to construct a legitimate employment relationship that protects everyone involved.

Managing Payroll Taxes and Contributions

Once you're registered as an employer, you'll be responsible for both employer contributions and employee withholdings. Understanding these obligations helps you budget accurately and avoid surprises.

As an employer, you'll contribute to several programs. Unemployment Insurance requires 2.4% of the first $54,300 in wages per employee for new employers. If you purchase workers’ compensation insurance for your caregiver (highly recommended), the Workers' Benefit Fund requires a 2 cents per hour worked tax, split evenly between you and your caregiver. Federal unemployment tax (FUTA) is 0.6% on the first $7,000 in wages after credits. You'll also match your employee's FICA contributions at 6.2% for Social Security and 1.45% for Medicare.

From your caregiver's paycheck, you'll withhold FICA taxes at the same rates you pay, and their portion of the Workers' Benefit Fund contribution. Withholding employee State and Federal income taxes are optional for caregivers. You'll need to file quarterly payroll reports with the state and issue a W-2 form by January 31st each year.

Oregon Labor Law Requirements

Oregon's labor laws provide important protections for domestic workers, and understanding these requirements helps you maintain compliance while treating your caregiver fairly.

Minimum wage rates vary by location throughout Oregon. As of July 1, 2025, the Portland metro area requires $16.30 per hour, standard counties require $15.05 per hour, and non-urban counties require $14.05 per hour. These rates are adjusted annually, so staying current with changes is important for ongoing compliance.

Overtime requirements depend on your caregiver's living situation. Live-out caregivers earn overtime pay after working 40 hours in a week, while live-in caregivers earn overtime after 44 hours.

Oregon law also requires that domestic service workers receive 24 continuous hours off each work week. Domestic service workers are also entitled to three paid personal days off for each year they average 30+ hours per week. Additional protections apply to live-in domestic service workers.

Understanding Leave Programs and Exemptions

Being a small employer means there is a degree of flexibility when offering paid leave programs.

Oregon's paid sick leave law doesn't apply to household employers with fewer than 10 employees (or 6 in Portland). Since most families employ just one or two caregivers, they typically fall below these thresholds. The employer portion of Paid Leave Oregon only applies to employers with 25 or more employees, but employers must still withhold the employee portion of the PLO (60% of the 1% contribution rate).

Recordkeeping and Documentation

Proper recordkeeping isn't just good practice—it's a legal requirement that protects you in case of disputes or audits. You must maintain payroll and tax records for at least three years, including timesheets, pay stubs, tax withholdings, and any employment agreements.

Your year-end responsibilities include issuing a W-2 to your caregiver by January 31st, filing Schedule H with your tax return, and reporting all wages to the Oregon Department of Revenue. Keeping organized records throughout the year makes these tasks much more manageable when deadlines arrive.

The Risks of Informal Arrangements

Some families consider paying their caregiver "under the table" to avoid the complexity of formal payroll, but this approach creates significant risks for everyone involved.

From a legal standpoint, informal arrangements can result in back taxes, penalties, and interest if discovered during an audit. Labor law violations can lead to costly lawsuits, especially around unpaid overtime or minimum wage violations. Your caregiver also loses access to important benefits like Social Security credits, Medicare coverage, and unemployment insurance that they are legally entitled to.

Beyond the legal risks, informal arrangements can damage the trust that's essential to a successful caregiving relationship. When employment terms are unclear or benefits are uncertain, both families and caregivers may feel insecure about the arrangement.

Building a Sustainable Care Arrangement

Legal payroll isn't just about compliance—it's about creating a professional, respectful employment relationship that benefits everyone involved. When caregivers receive fair wages, proper benefits, and clear employment terms, they're more likely to provide consistent, high-quality care for your loved one.

Proper payroll management also provides peace of mind for your family. You'll know you're meeting all legal requirements, protecting yourself from potential liability, and treating your caregiver with the respect they deserve. This foundation of trust and transparency often leads to longer-lasting care relationships, reducing the stress and disruption of frequent caregiver changes.

Simplifying the Process

At Clara, we understand that managing payroll and compliance can feel overwhelming when you're already dealing with the challenges of arranging care for a loved one. That's why we've built our service specifically for families navigating these responsibilities.

Our platform handles automated payroll processing, ensuring your caregiver receives accurate paychecks every time. We manage all tax filings and government reporting, monitor compliance with Oregon labor laws, and track leave benefits including personal days. Our transparent pricing model typically costs 20-40% less than traditional agency fees, making professional care more accessible for families.

Most importantly, we handle these administrative tasks so you can focus on what really matters: ensuring your loved one receives compassionate, consistent care in the comfort of their own home. When the business side of employment is handled professionally, families and caregivers can build the trusting relationships that make in-home care truly successful.