by Michelle LaRowe
Editor in Chief
Recently I had the chance to catch up with Guy Maddalone of GTM Payroll Services about his updated book, tax stats, labor and tax compliance and nanny retirement options. From common myths about household employment to how many families really pay legally, here’s what he had to say.
eNannySource: Why did you write How to Hire a Nanny: A Household HR Handbook?
Guy: To debunk the myths about household employment! I was amazed at how many people were ignorant about the legal requirements and human resource practices for their domestic employees. The majority of people who employ nannies or other household employees don’t see themselves as “employers” in any business sense of the word. So part of the reason for writing the book was to shed light on the importance of running your household as a genuine business. Another main reason was to open people’s eyes about how nannies and other caregivers are viewed; many people don’t realize that being a nanny isn’t just a part-time job to supplement income or an interim position. For many nannies, it’s their career – and therefore they should be treated as an employee and receive the same benefits that most employees who work outside of the home receive. The book provides not just the legal advice and requirements for being a household employer, but the reasons why it’s so important to do so.
eNannySource: What percentage of families do you estimate don’t pay nannies legally? Why?
Guy: It’s about 90% nationwide. This is mainly due to the ease of paying a nanny “under the table” – the nanny works a number of hours, and gets paid cash with no tax withheld. As I mentioned before, many families don’t understand the risk to the nanny and themselves in the way of personal injury, lack of unemployment protection and tax evasion.
eNannySource: What are the benefits of using a tax and payroll company like GTM?
Guy: Ease of use and peace of mind. For those who have decided to pay their household employee legally, there is definitely a lot involved; from proper paperwork, producing a paycheck, tax regulations and calculations, to benefits like paid time off and health insurance, to HR practices like interviewing, background checking, hiring, and termination. A lot of time and accuracy is required, and many families don’t have the time or resources to do all of those things properly. That’s why using GTM is so beneficial for a household employer. We take care of getting them set up with the IRS and their state agencies as a business. We produce paychecks accurately and on time. We calculate tax withholdings and submit them as required. We provide guidance on best practices for human resources. Additionally, we offer insurance in many states, which allows us to provide health insurance, workers’ compensation and disability insurance without the family having to do the legwork. We also offer a 401(k) retirement plan for household workers. Basically, we are a one-stop shop for families.
eNannySource: What are the benefits to families for being compliant with labor and tax laws? For nannies?
Guy: Many first-time families who hire nannies worry about keeping abreast of the legal requirements and mandates issued by federal, state, and local governments. If they decide not to follow the laws and regulations, they may find themselves in a much more time-consuming and frustrating situation. It could greatly cost them both monetarily and in the lifestyle their family enjoys. Legislatures and courts throughout America are no longer turning a blind eye and instead are enforcing laws and regulations pertaining to household employment at an aggressive rate.
There are many benefits for nannies by being compliant with labor and tax laws. Nannies are considered employees when they work for a family, at their home, and expect to earn more than $1800 per year. A few of these benefits include:
- Unemployment insurance coverage – in the case the nanny becomes unemployed, they may be eligible to apply for unemployment insurance.
- Social Security tax credit – this tax will count toward the nanny’s retirement income.
- Workers’ Compensation /Disability coverage – depending on the requirements of the state, the nanny may be eligible for reimbursement of lost wages if he/she gets hurt on or off the job
- Employment history – helps the nanny in the case of applying for credit or a loan for a car or a home
eNannySource: Tell me about retirement options. I know you’ve recently launched a 401K retirement program for your clients. Can you tell me about that?
Guy: Due to the typically high administrative cost of 401K plans, household employers have traditionally not been able to offer their employees this type of benefit. GTM’s retirement plan provides our household clients an excellent and cost-effective tool to retain and recruit quality employees. With minimal effort, families can open an account for their nannies, housekeepers, elder care providers, or any other household worker, so that their employees can build their retirement income. Domestic workers will have the potential for significant pre-tax savings through a flexible benefit structure and have access to support from advisors who can help guide them with investment decisions. Household employers will have the option to make tax-free contributions into the plan in the form of profit-sharing contributions, which can be used to further reward and retain their household help.
To learn more about GTM visit www.gtm.com .
Guy is a 25 year veteran of the payroll, human resource, and employment services industry. Originally starting with the placement of home healthcare and eldercare services, Guy expanded his business to include nannies and other household staff, and named the company A New England Nanny. In 1991, he founded GTM Payroll Services to provide payroll & tax administration for households, the first in the industry. In 2002, GTM expanded by adding business payroll services as a complement the fast-growing household payroll and tax processing operation.