The Nuts and Bolts of Paying Your Nanny in the time of Coronavirus

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On Sunday, April 5, Jay Schulze of HomeWork Solutions joined us for a webinar on the nuts and bolts of nanny pay during the coronavirus crisis, including CARES, FFRCA, retroactively paying on the books, and more. We also had a webinar on April 1st, 2020 and notes from that event are listed here and focus more on the nanny/employer relationship.

Please note that this content is for general informational purposes only and is not a substitute for legal or financial advice. Every case is different, the regulations are changing all the time, and the consequences of each choice are complex. You’ll need to contact your accountant, payroll company, lawyer, and small business resources to get answers specific to your situation.

 Also note: If you are not paying your nanny on the books, you and your nanny are missing out on tax credits (if you continue to pay your nanny), or unemployment for your nanny. Park Slope Parents recommends you retroactively pay your nanny on the books so that you can 1) be in compliance with the law and 2) take advantage of financial resources which will help you and your nanny through this difficult time. Since it can be tricky to get things set up, we advise that you reach out to a nanny payroll service (such as HomeWorkSolutions, though we have reviews of other payroll services on the PSP website). 

 

 

About HWS:

HomeWork Solutions strives to make your life simpler and less stressful by assisting you with the complex management of payroll and employment tax filing for household employees. Since 1993, they've been working to educate families about domestic employment laws and best practices for successful employment relationships.  #800.626.4829, M-F, 8:30am - 7:00pm EST.

 Park Slope Parents has been working with HomeWork Solutions for over 10 years, and they know absolutely all the ins and outs of nanny pay. 

 

Q: What is the FFCRA and how does it affect me and my domestic workers?

A: The Families First Coronavirus Response Act (FFCRA) went into effect on April 1 and requires certain employers to provide their employees with paid sick leave and expanded family and medical leave for specified reasons related to COVID-19. Under FFCRA, employers must provide their employees with paid leave based on any of the five qualifying reasons:

  1. The employee is subject to a federal, state, or local quarantine order related to COVID-19

  2. The employee has been advised to self-quarantine by a healthcare professional related to COVID-19

  3. The employee is experiencing symptoms related to COVID-19 and is seeking a diagnosis

  4. The employee is caring for an individual subject to points 1–3

  5. The employee is caring for their child whose school or place of care is closed due to COVID-19-related reasons

  6. The employee is experiencing any other substantially similar condition specified by the US Department of Health and Human Services.

 

For reasons 1–3, the employer must pay the employee at 100% of their normal rate for up to two weeks of paid sick leave, or 2/3 of their normal pay rate for reasons 4–5. In addition, employers must pay up to 10 weeks of paid family and medical leave at 2/3 of the regular pay for reasons 4–5.
 

As part of FFCRA, the government will make tax credits available to you as an employer, ultimately reimbursing you 100% for what you pay out under its provisions. This is only available to people who have paid on the books and have documentation showing payments. Through this system, the government aims to keep employees on the payroll, provide continuity, and provide relief for the unemployment system. As for when these tax credits will be provided, we are awaiting further guidance on an exact timeline. The IRS has indicated that employers will be able to receive reimbursement in weeks, rather than months or at the end of the tax filing year.
 

Finally, FRCA provides additional funding to state unemployment insurance funds, therefore expediting claims processing and removing the one-week waiting period for benefits. That means your domestic worker may be eligible for immediate relief if they are furloughed or laid off.

 

 Q: What is the CARES Act and how does it affect me and my domestic workers?

A: The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) allocates $2.2 trillion in support to individuals and businesses in order to mitigate the effects of the job loss and the economic downturn. This includes the $1200 direct payment that you’ve been hearing so much about.

 

 

Most notably in terms of unemployment insurance, CARES includes pandemic unemployment assistance, which allows for an additional payment of $600 per week, on top of normal unemployment benefits, for up to 39 weeks through Pandemic Unemployment Assistance (PUA). CARES also makes unemployment available to those who would not normally qualify, including self-employed workers and independent contractors; those who choose not to go to work because they feel unsafe due to COVID-19; and those who have had their hours reduced or been placed on furlough.
 

flowchart showing what to know and do when applying for UI

Source: https://labor.ny.gov/ui/cares-act.shtm

 
Finally, CARES includes the Payroll Protection Program, which offers forgivable loans to small businesses to retain or rehire employees. Unfortunately, household employers were explicitly ruled ineligible for this program. HomeWork Solutions encourages you to contact your representative about this and ask them to reconsider the decision to exclude; you can learn more and find your congressperson here.

 

CARES is retroactive to January 27, 2020.
 

Q: My nanny is unable to work because they’re caring for their child, so I’m required under FFRCA to pay them 2/3 of their normal rate. I am able to pay them at 100% of their normal rate. Can I do so?

A: Yes, and if you can do so, and that’s wonderful. Do track what you are paying, though, so that you have all your records in order when it comes time to claim reimbursement for the 2/3 portion through tax credits.

Q: I gave my nanny paid leave beginning when all of this started in March. Will I be reimbursed under FFRCA?

A: FFRCA only covers leave taken from April 1 onward, so if you paid out leave before April 1, that money will not be reimbursed under the tax credit.
 

Q: Does New York State’s stay-at-home order qualify under FFRCA as an advisory to quarantine?

A: No, it does not meet the definition for quarantine under point 1 of FFRCA. 
 

Q: Can I put my nanny on paid leave under FFRCA if I or a member of my household is sick?

A: Under the strictest interpretation of FFRCA, no. However, if you or a family member is sick and your nanny reports this information to a physician, they would most likely be advised to self-quarantine, in which case they would qualify under FFRCA (point 2).
 

Q: How much money could my nanny take home through Pandemic Unemployment Assistance (PUA)?

A: Disregarding PUA, the amount of unemployment insurance an individual can receive depends on their historical base salary and can range from $182/week to $504/week. With the $600 on top of that from PUA, your nanny could theoretically receive up to $1104/week if they have filed or will file an unemployment claim. This can only happen if you’ve been paying on the books, or if you retroactively pay your nanny on the books. 
 

Q: What are my options if I have been paying my nanny off the books?

A: You can always go back and get your nanny on the books for prior years, or even prior quarters (since some funding requires your nanny be paid for 2 quarters in order to qualify). If you know that you’re going to terminate your nanny and make them eligible for unemployment, then it’s best for you to retroactively correct the records so that neither of you gets in trouble, their unemployment processing is not delayed, and they receive the maximum benefits for which they’re eligible.

HomeWork Solutions can help you with this, and they are offering discounts in order to help eliminate the hurdles involved with setting the records straight. You will need to pay some penalties, interest, and unemployment taxes, but it can still be worth it when you weigh out the benefits and risks. 

 

Q: What if I have been paying my nanny only partly on the books?

A: In this case, they will only be eligible for benefits based on the portion that was paid on the books.
 

Q: Can I terminate my nanny to make them eligible for unemployment and then top off their benefits out of my own pocket?

A: No. That’s illegal.
 

Q: What if I’m unable to continue paying my nanny and I have been paying them off the books?

A: This is a difficult situation, as, even if the government will reimburse you later in tax credits, that doesn’t help if you don’t have the money to front in the first place. The Payroll Protection Program would be an ideal source of assistance here, so, again, HomeWork Solutions urges you to reach out to your representative to reconsider including home businesses. In the meantime, your nanny may still be eligible for some unemployment benefits, although the process of obtaining them may take longer and, in doing so, they open you up to penalties for not paying on the books. 
 

Q: Can my nanny still claim the $600 under PUA if I have been paying them off the books?

A: If they have no on-the-books employment history whatsoever, then the nanny has nothing to point to in terms of being employed.  The idea behind unemployment insurance is to assist people who have been actively trying to work. Again, it is always best to go back and retroactively get them on the books if you can.
 

Q: Is my nanny eligible for benefits if they are not authorized to work in the United States?

A: Unfortunately, even if your nanny has been paying taxes as an undocumented worker using an Individual Taxpayer Identification Number (ITIN), they will not be able to claim unemployment benefits without U.S. work authorization.

 

Q: What if my nanny isn’t comfortable coming into work?

A: It’s a tricky situation, so have an open dialogue with your nanny to weigh the risks and come to a solution that is acceptable for both of you. Some families are addressing concerns by raising rates to offer their nanny a wage commensurate with “hazard pay.’ On the other hand, your nanny can choose to stop working and then apply for Pandemic Unemployment Assistance benefits, which do cover individuals who feel unsafe going to work. Note that, in this case, you NOT would be required to provide your nanny with paid sick leave under FFRCA, since the choice not to work is not covered under the five FFRCA conditions.

One thing you definitely should NOT do is terminate your nanny because they are taking sick leave or family leave under FFCRA and then hire someone else in their place. That’s setting yourself up for a potential lawsuit down the road. You can hire a temp to fill in, but the employee has a right to retain their job and work again when they are able.

Q: How does it affect my nanny’s benefits if I terminate them, but they have another job that they are keeping?
A: Under CARES, your nanny can still file for unemployment for a reduction in wages. This does not impact their situation with their other employer at all.

Q: What are the considerations I need to be aware of when it comes to severance pay?

A: There is nothing in the law or in the new coronavirus-related regulations that requires you to pay severance. Still, it’s important for you to check your nanny’s contract and see if it includes stipulations such as two weeks’ notice; if so, you’ll need to pay that out for them. Likewise, if your nanny has accrued sick leave or vacation leave, you might need to pay that out under the terms of your contract or under state law.

Beyond the applicable regulations, severance pay is up to your discretion, but it will have an impact on your nanny’s unemployment benefits. That is, if you pay your nanny severance that covers them through the month of April, they won’t be able to start getting benefits until May. Conversely, if you are anticipating that your nanny will face a delay in getting their unemployment benefits claim processed, it may make sense for you to provide severance to cover them until they’re able to start getting governmental assistance.

 

Final important things to remember:

  • The goal of all of these new rules and regulations is to keep people on payroll. That’s the fastest way to get money into employees’ pockets. If you want to continue your working relationship with your nanny after the pandemic is over, it is best (from both a practical and an emotional standpoint) for you to find a way to continue paying them if you are able.

  • Whatever decisions you and your nanny come to regarding their employment status, it’s important to follow up by text or email and create as much of a paper trail as possible. This eases all future run-ins you may have with the IRS and the government, whether you are retroactively getting your nanny on the books, claiming FFRCA reimbursements, or anything else.

  • If you want to retroactively get your nanny on the books, we strongly advise that you use a company—like HomeWork Solutions—that knows the intricacies of nanny pay and can ensure that what you’re doing is kosher.

  • Most important is that you show your nanny (or house cleaner, or other domestic worker) that you care. Find out how they are doing. Sit down and have a candid conversation with them; ask them what they need and how you can help connect them to resources. How this all looks depends on your relationships with these folks, and you want to tread lightly; these can be difficult conversations to have. Do not assume that their situation is dire or that they are somehow destitute; rather, first and foremost, show that you care. Showing concern can go a long way toward giving them some relief. 

 

Resources
 

Park Slope Parents

Department of Labor

IRS

New York Department of Labor

New York Paid Family Leave

HomeWork Solutions