There is a common cycle that families go through as they first navigate the waters seeking appropriate home care – sometimes referred to as senior care or elder care – for a loved one.  Home Helpers – or Home Care Little Rock – has counseled countless families on these very issues.

First, the responsible family member(s) might be anxious about finding the right home care option.  Some do not even know that such services exist.  Others are not sure about how to go about arranging services.  Once information is received and a few phone calls are made, you can easily reach information overload – the second stop in the cycle.

There are many home care agencies.  But choosing the right agency and/or caregiver is when the challenge begins.  Not all agencies are equal and not all maintain their caregivers as employees.

Hiring an agency or company that insists its caregivers are independent contractors can be attractive.  The cost could be as much as $5 less per hour – which translates into big savings over the long haul.  The purpose of this article is to explain the pitfalls of hiring an independent contractor rather than an employee caregiver.

While a family must stay within budgetary constraints, cost is only one consideration.  When cost is the primary concern, families are tempted to “hire” an independent contractor or retain the services of a company whose caregivers are independent contractors.  They do so at their own peril.

Employee-Employer Relationship

Sadly – though commonly – caregivers who are independent contractors might not realize the implications of being hired directly by a client.  If the client has outlined a service schedule, the required work, etc., it is a pretty clear that an employer/employee relationship has been established.

Often referring caregiver registries or independent contractor companies do not share with their client that he/she has assumed an employer/employee relationship with the independent contractor caregiver.  Because of that, both the worker and the aging client can suffer significant financial liabilities.

Payroll Taxes

When a worker receives a paycheck, he/she must pay appropriate taxes, to include Social Security, Medicare, both state and federal unemployment, and both state and federal payroll taxes.

As the employer, the consumer (the person in need of care) is responsible for compliance.  The government could sue the consumer (or their estate) for back taxes, including both interest and penalties.  When this situation has existed for many months or even years, the tax responsibility could be substantial.  Beyond simply collecting back taxes, interest and penalties, the government could also pursue both civil and criminal penalties.

The situation is no brighter for the worker.  With no payment into Social Security, they could become financially vulnerable in older age.

Workers Compensation versus Home Owners Insurance

Employers are mandated to provide Workers Compensation coverage for their employees.  If the worker sustains an injury on the job, liabilities can be substantial for that client to whom the caregiver is employed.  Since many home insurance policies specifically exclude employees in the home, any incurred medical costs or disability payments would be borne by the client.  This could cause significant financial hardships for even the wealthiest of employers.

The horror stories

While we would all hope that anyone who offers to care for an aging person in need of personal care or assistance was cut from the highest moral fabric, unfortunately this is not always the case.  There are those in society who prey upon vulnerable people, taking advantage – financially and even physically – of people to whom care is entrusted.  For this type of cruel person, it would be all too easy to mistreat, abuse or otherwise harm a cognitively impaired or physically challenged person.  Again, this could subject the person in need of care to physical, psychological and financial abuse.

The danger is real and because independent contractors have not been subjected to the hiring processes of a company or agency, they might not have had criminal background checks performed, successfully passed drug screening, or even had past employment history verified.


The Internal Revenue Service regulations clearly stipulate that independent contractor agencies cannot provide any substantive work supervision, scheduling or training to their workers without them becoming employees.  If they do, the relationship becomes an employer/employee relationship between the caregiver and their sponsoring agency.

Supervision, training and scheduling can only take place by companies or agencies that hire their workers as employees.  When a client hires a caregiver directly, they are now responsible for all of those considerations.

The Bottom Line

Hire an independent contractor to provide care at home for an aging loved one?  Only if you are interested in becoming an employer and assuming all of the responsibilities associated with that.

If you hire an independent contractor to perform personal care for a loved one, YOU have just become the employer.  As the employer, you are responsible for:

  • Workers Compensation
  • Federal and State payroll taxes
  • Scheduling (including replacements or fill-ins)
  • Supervision

Other important considerations that you would assume could include:

  • Drug screening
  • Background checks
  • Past employment verification
  • Professional Liability Insurance
  • Bonding
  • Training (could include CPR, First Aid, CNA, disease specific)

If you hire a caregiver that works for an agency that employs independent contractors, see above because YOU are very likely the employer.

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