Please note: this blogpost covers domestic employees in New York State. It is intended to educate nannies and housekeepers on the benefits of accepting legally paid salaries; it is not to replace the advice of a lawyer, as the laws that are constantly changing. Please consult a reputable payroll company such as HomeWork Solutions for more information on your specific state's domestic employment laws and procedures.
We here at KITH & KIN often hear candidates state that they only want to be paid in cash, despite being able to accept legal pay, for many understandable reasons. While admittedly, it is the norm for many domestic workers to be paid illegally in cash (an estimated 75%!), there are a myriad of benefits and protections household employees lose out on by being paid in cash, and when accepting cash only for a nanny job, you are also assuming all risks for you and your family's future financial and health situation, especially should you find yourself out of work for a period of time -- a heavy and costly burden to bear!
With the advent of laws like Lulu and Leo's Law and many advocacy groups like the NDWA calling for better protections for both families and workers, the trend will be for more and more domestic workers to be paid in a legal manner. For this reason, we have compiled the benefits of legal pay. Here are our top 10 reasons why nannies and housekeepers should insist on being paid "on the books" right now.
1. "Professional pay" translates to "professional treatment", and further legitimizes your work as a professional career.
When you insist on being paid legally, this demonstrates to a family that you take your job seriously as a professional who needs to be compensated fairly and legally for your work. It shows that you are committed to your work supporting them, and that you are also relying on them to support you as you make a long-term living, just as you would in any other field.
When your employer agrees to pay legally, they are demonstrating their belief that you deserve legal protections and benefits, just as they receive in their work, too! Even though they may be offering a lot of great benefits like guaranteed minimum hours and paid time-off, they also believe that ethically, you deserve an extra level of protection as individual and professional.
2. You have secure income available, even if laid off.
Let’s say that on Sunday night, you get a text from your boss that tomorrow, you are no longer needed because a spot opened at daycare, and their child starts the next morning. Now, most parents would not leave you high and dry without notice, (especially if you have a solid work agreement in place before the job commences!), however you may never know your employer's private financial situation or debts. They may appear to have it all, and then the economy crashes overnight, or they find out they have lost every penny to a Ponzi scheme, and now they find themselves unable to pay you the $2500 buffer you were relying on. Stranger things have happened; you need to be protected from situations that are outside of your control.
While domestic employees in New York are hired “at-will”, meaning you may be terminated without notice or reason at any time, unemployment is there to provide you with a financial buffer while you search for a new job. If you’re laid off due to no fault of your own, and you are able to work in some industry, you are eligible - even in some instances of justifiable firing, you may still be eligible. This is only available to people who are paid legally in their most recent long-term position.
3. Medical costs or loss of income covered via Workmans Compensation if you’re injured on the job (State-by-State).
Even if you are outside of NYS, should you have an injury that leads to a long leave from work, you may be eligible to receive Disability coverage from the government as well. This would cover part of your income, and make sure that you are not in an even larger financial bind. If you are out of work because of an injury, but don't have traceable or substantial income reported, the income coverage would be significantly lowered, if available at all.
4. You are eligible for Paid Family-Leave.
The details and benefits will upgrade year to year, but beginning in 2019, you would be eligible for 10 weeks paid leave per year, up to 55% of your weekly salary, with a maximum of roughly $746/week; By 2021, 67% of your salary may be covered for up to 12 weeks. This is separate from FMLA, and is specific to New York State. For more information, click here.
5. Protection in the event you, or your bosses, get audited by the government.
Any employer who chooses to pay their employee 'under the table' runs the risk of being audited, particularly if all parents are working full-time, and they can't prove payments made for childcare. An audit will have their finances called into question by the government, and if your employer is audited, you too may be at risk for your portion of employment taxes. If your employer doesn't remit taxes on your behalf, you may be asked to account for those taxes by the government. While it is not the law that the employers withhold your portion of taxes in New York for you (you must request that they do this, and the majority do when using a payroll service), it is the law that you pay your portion. If it is not withheld, we recommend setting aside a conservative percentage based on your state in a separate savings account so you have enough to pay at the end of the year.
If you or your employers were to be audited, the government makes a habit of looking back several years, meaning you could be set up on a hefty payment plan to hand over whatever amount you would have owed in taxes from previous years.
6. Provides verifiable, traceable income to rent or buy a home, car or other big-ticket purchases.
Should the day come when you want to make a big "life-investment", be it purchasing a new home or car, or even renting a new apartment, you will often be required to provide proof of income; not just for present time, but also from the past two years! Lenders want to make sure you are a consistent earner and responsible spender, and you will need a paper trail to prove your track-record of financial credibility. Cash-employees will often have a difficult (likely impossible) time providing legitimate proof of income that would hold up to scrutiny. This can be a real hold-up, and potential block, if you are in the throes of purchasing a home.
Not buying a car, home, or renting an apartment now? Think two or three years ahead. Even if your credit is terrible, First Time Homebuyer Loans make this dream possible for more people, so as home prices continue to rise, now is a great time to get on the books and start accepting legal pay!
7. Easier mental leap to start your career with legal pay now, rather than years in.
Take it from us, the people who interview many qualified, career candidates who have been paid cash for years: it is very challenging for nannies and housekeeper to leap from a high dollar cash take-home salary per week to a far lower net wage. When you are not used to this, it will require a large lifestyle adjustment for yourself and family, when that time comes.
Talking to your employer about transitioning from a cash-salary, to an "on the books" salary is going to take a big shift. Essentially your employer will have to make a drastic increase in your pre-taxed (gross) pay-rate in order for you to be taking home the same amount as you were before, and it's possible that financially, they simply cannot swing it, as they will be paying 12-25% more than they are used to, depending on where you live.
If your employer isn't able to increase your rate enough for you to be taking home a net-salary that is comparable to your cash salary, meet in the middle! Start by taking a lower take-home wage, knowing that they are giving you a gross-wage raise. That being said, employees who are paid on the books, will also be eligible for a tax-return at the end of the fiscal year where you would get a portion of that back, so don't be too demanding of your employers if you really love your job in all other aspects.
8. You’re building your Social Security fund, and making sure you’re eligible for disability benefits, too.
The amount of taxable income which you report to the government each year makes up your 'covered income' and directly affects the amount of money you may receive each month when you retire. In other words, if you pay in for 45 years instead of 10, you will have far more to retire on. Therefore, for your future, it's better to start paying income taxes sooner rather than later!
9. Helps better protect you from “bad-apple” bosses.
Finding a boss who is willing to pay you on-the-books, means that your boss is more likely to view you as an employee with certain inalienable rights. A working agreement that is based on a clear contract and a taxed salary can protect you from various instances of employee discrimination, wrongful termination, harassment in the workplace, withholding of overtime, and various other workplace injustices.
Many employers who pay cash may hesitate to put anything in writing to avoid a paper trail of employment in the event they were to be audited -- this translates to no work agreement for you or contract for you to fall back on or reference.
10. Plainly, it’s the right thing to do!
Last of all, paying your taxes is the right thing to do! The money you pay in taxes goes to many places. In addition to paying the salaries of government workers, your tax dollars also help to support common resources that we all utilize, such as safe and well-maintained roads, police and fire departments, post-offices, public libraries and parks, as well as caring for your fellow neighbors and children who presently may not be able to care for themselves.
In conclusion, starting a job with mutual professional respect is the best foot to start on. By you and your employer insisting to operate according to the law affirms that this is a true, professional career, with the commitment to integrity and respect toward both parties.
But aren't nannies 1099 workers? On the family/employer side of things, there is sometimes confusion about the classification of domestic employees and who is responsible for their taxes. However, make no mistake: by law, nannies and housekeepers are classified as household employees of the family, unless they are hired through a company who is paying them as an employee; nannies and housekeepers are not contractors. Families must provide you a W-2 at the end of the year.
Have a question about being paid or hiring "on-the-books" versus in cash? Send us an email and we will do our best to direct you to where you may find your answer.
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Copyright 2020. Kith and Kin is a division of Adventure Nannies. Kith and Kin does not discriminate on the basis of race, creed, color, ethnicity, national origin, religion, sex, sexual orientation, gender expression, gender identity, age, height, weight, physical disabilities, veteran status, and marital status. We place nannies, newborn care specialists (formerly called baby nurses) and private educators throughout the New York metro area. You may contact us at 917-310-2300 or at hello@KITHandKINnyc.com