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Household Employee Paid Hourly

Why is my housekeeper an hourly employee? I want to pay her a salary and not worry about tracking hours each week.

Elder caregivers, housekeepers and other 'domestic service employees' are classified under the Fair Labor Standards Act (FLSA) as non-exempt workers. The term non-exempt employee refers to a worker who IS subject to the terms of the FLSA regarding such issues as overtime compensation and minimum wage coverage, contemporaneous time tracking recordkeeping, as well as how frequently the worker must be paid. In simple terms, the household employee is required to be paid an hourly wage and most are entitled to overtime pay per the provisions of the FLSA. When your household employee receives a "salary" that covers a work week of more than 40 hours, your employment agreement must explicitly state the regular and overtime rates of pay. See our exclusive Hourly Rate Calculator for help.

COMPANIONSHIP CARE: Currently non-skilled companionship care for the aged and infirm is exempted under the FLSA. Companionship care is narrowly defined, and no more than 20% of the caregivers' working hours may be spent in housekeeping functions. In December 2011 the US Department of Labor issued proposed rules changes to the 'Companionship Exemption' that would narrow the definition of a companion to exclude ALL housekeeping functions - vacuuming, mopping, etc.- and will allow 'personal care services' only when such services are incidental to the companionship and fellowship of the individual receiving the care.

Exempt employees are paid a salary and exempted from these FLSA rules. Typically, only executive, supervisory, professional or outside sales positions are classified as exempt employment. Exempt employment will also include highly skilled computer-related employees and licensed professionals, such as doctors, lawyers, architects, engineers and certified public accountants. Many household employers are professional workers themselves, are exempt from FLSA protections, and unintentionally try to craft compensation for their caregiver in the same manner that they are compensated.

Employers often believe, incorrectly, that the act of paying a salary makes the caregiver exempt from overtime rules. However, just as applying the labels "employee" or "independent contractor" in a work agreement doesn't determine a worker's actual status in the eyes of the IRS or the law, the same is true for exempt and non-exempt employees in the eyes of the Department of Labor. The FLSA legislation was designed to cover, and protect, as many workers as possible and there is no doubt that household are covered under the act.

The Department of Labor is vigorous about protecting workers' rights under the FLSA. The DOL has, for example, created and published free smart phone apps to help workers independently track the days and hours they work, helping them create their own time and attendance records. Using GPS technology, the records created by these apps are strong evidence when filing a wage and hour claim. Wage and hour complaints are powerful payroll tax enforcement tools used by state governments to collect unpaid unemployment taxes. Twelve states, including California, New Jersey, New York and Virginia have formal information sharing agreements with the Internal Revenue Service to facilitate collection by the federal government of unpaid Social Security and Medicare taxes.

Why does this matter? There have been many high profile wage disputes involving household workers and failure to make overtime payments and/or to maintain accurate time tracking records. The household workers in these disputes have been awarded large sums of back pay - simply because the employer failed to correctly classify and compensate the nanny in the first place. In New York during 2011 - 2012 75% of such disputes were settled in favor of the employee, with cash compensation to the employee of between $5000 and $100,000, paid by the employer!

» Free Payroll Tax Calculator Tools
» FLSA Overtime Rules and the Compensation Agreement