When you decide to privately hire a caregiver for a loved one, one of the most important—and often overlooked—questions is: Who should be named as the employer?

This decision has significant legal, financial, and practical implications for your family. While it’s common for adult children or relatives to step in and manage the hiring process, the best practice is to name the person receiving care as the official employer whenever possible. Here’s why this approach is recommended, and how Clara can help you make the process smooth and compliant.

Why the Care Recipient Should Be the Employer

1. The Care Recipient Has the Most Direct Connection with the Caregiver

The heart of caregiving is the relationship between the private caregiver and the person receiving care. By naming the care recipient as the employer, you formalize this direct connection. The caregiver’s daily tasks, routines, and overall approach to your loved one's home care are shaped by the needs and preferences of the person they’re assisting. When the care recipient is the employer, it’s clear who is directing the work and who benefits from the services, which aligns with how employment laws are interpreted.

2. Simplifies Tax and Legal Responsibilities for Families

If a working-age relative (like an adult child) is named as the employer, they may face additional and sometimes conflicting obligations during tax season. For example, they would need to file household employer taxes in addition to their regular employment taxes, which can complicate their personal tax situation. The care recipient, especially if they are retired or have simpler finances, is less likely to encounter these conflicts. This can make annual tax filing and payroll compliance more straightforward for everyone involved.

3. Reduces Legal and Financial Risk for Family Members

Naming a family member other than the care recipient as the employer can expose that individual to legal liability if there’s ever a dispute or issue with payroll, taxes, or insurance. In California and many other states, the law looks at who actually controls the caregiver’s work and pay, not just whose name is on the paperwork. If you’re not the direct beneficiary of the care, it’s best to avoid unnecessary risk by keeping the employment relationship between the caregiver and the care recipient.

What Does It Mean to Be the Employer?

Being the employer of a private caregiver comes with a set of responsibilities, including:

• Registering as a Household Employer: This involves obtaining an Employer Identification Number (EIN) and registering with federal and state agencies. Clara can handle this step for you, making it hassle-free.

• Payroll and Taxes: You must withhold and pay Social Security, Medicare, and unemployment taxes if you pay a caregiver more than $2,700 per year (2024 threshold). State-specific taxes and withholdings may also apply.

• Workers’ Compensation Insurance: In California and many other states, you are required to carry workers’ compensation insurance, even if you only employ one caregiver.

• Compliance with Labor Laws: This includes minimum wage, overtime, paid sick leave, and providing a safe work environment.

• Written Employment Agreement: Outlining duties, pay, schedules, and expectations is essential to protect both parties and clarify the working relationship.

How to Name the Care Recipient as Employer

Here’s how you can ensure the care recipient is properly named as the employer:

• Use the Care Recipient’s Name and Information when registering for an EIN and with state agencies.

• Set Up Payroll in the Care Recipient’s Name so all paychecks, tax filings, and employment records are tied to the person receiving care.

• List the Care Recipient as Employer in All Contracts and Communications with the caregiver.

• Maintain Records and Insurance Policies with the care recipient as the policyholder and employer of record.

Clara specializes in guiding families through these steps, ensuring all paperwork and registrations are completed accurately and efficiently.

What If the Care Recipient Can’t Manage Employer Duties?

If your loved one is unable to manage these responsibilities due to cognitive or physical limitations, a legally authorized representative—such as someone with power of attorney or a court-appointed conservator—can act on their behalf. However, the care recipient should still be listed as the employer of record to maintain the correct legal structure and minimize complications for family members.

The Role of Clara in Direct Employment

Managing payroll, compliance, and tax obligations can feel daunting, but Clara is here to help. As a facilitator of in-home care, Clara offers:

• Expert Guidance: Clara will walk you through the process of naming the care recipient as the employer and handle all necessary registrations.

• Payroll and Tax Management: Clara sets up and manages payroll, tax withholdings, and provides compliant paystubs and annual tax documents.

• Insurance and Compliance: Clara ensures you have the right workers’ compensation coverage and stay up-to-date with all labor laws.

• Ongoing Support: Clara is always available to answer questions, provide backup care solutions, and help you maintain a positive, professional relationship with your caregiver.

Why Not Name a Family Member as the Employer?

While it may seem convenient for an adult child or relative to take on the employer role, this can create unnecessary complications:

• Tax Filing Complexity: Working-age adults may have to juggle household employer taxes and their own employment taxes, increasing the risk of errors and audits.

• Legal Liability: The named employer is legally responsible for all employment obligations. If something goes wrong, their personal assets could be at risk.

• Clarity in the Employment Relationship: The care recipient is the one receiving services and directing the caregiver’s work, so naming them as the employer aligns with the reality of the relationship and how authorities interpret employment law.

Conclusion: Make the Care Recipient the Employer—and Let Clara Help

When you privately hire a caregiver, the best practice is to name the person receiving care as the employer. This approach honors the direct relationship between the caregiver and care recipient, simplifies tax and legal responsibilities, and protects family members from unnecessary risk.