Legal and Safety Considerations

*This guide is intended for informational purposes only and does not constitute legal, tax, or financial advice. Laws and requirements vary by state and change frequently. Families should consult a licensed household payroll service, employment attorney, or elder law attorney before making hiring or compliance decisions. 

Employment classification

The federal rule: caregivers hired through BAHS are the family’s W2 employees

When a family hires a caregiver through BAHS, the family becomes the direct employer. BAHS is a matchmaking and placement service — the legal employment relationship is between the family and the caregiver. 

The IRS, in Publication 926 (Household Employer’s Tax Guide), classifies in-home caregivers as household employees, not independent contractors. The determining factor is control: if the family sets the schedule, defines the duties, and directs how care is delivered, an employment relationship exists under the law, regardless of what any private agreement says. 

Important: Even if a family and caregiver mutually agree in writing to a 1099 arrangement, the IRS will not honor it unless the caregiver genuinely meets the legal definition of an independent contractor, which in-home caregivers virtually never do. A written agreement cannot override federal tax law. 

IRS three-factor test

🇺🇸The IRS applies a three-factor test to determine classification. In-home caregivers almost universally fail to qualify as contractors under all three. 

• Behavioral control: Does the family control when, where, and how care is provided? Does the family set the schedule and care routines? Yes = employee. 
• Financial control: Does the caregiver work exclusively or primarily for one family? Does the family supply equipment and materials? Yes = employee. 
• Nature of the relationship: Is the work ongoing and continuous (not project-based)? Is the service a core function of the household? Yes = employee. 

🇬🇧In the UK, BAHS recommends contacting HMRC for guidance as each case is different, however, an in-home caregiver is almost always classified as an employee unless they are working for multiple families simultaneously and have structured their work as a business. You can read more about HMRC work classifications here, and check employment status using this HMRC CEST tool. 

If you employ an in-home caregiver, you must register with HMRC and operate a PAYE scheme if you are paying the caregiver at or above the National Lower Insurance Earnings Limit (£125/ week in 2025/26). You can find more information about setting up and operating a PAYE scheme here. 

 What the family owes as household employer (US federal baseline)

• FICA taxes: Withhold 6.2% Social Security + 1.45% Medicare from caregiver wages; pay a matching 7.65% employer share. (2026 threshold: wages of $3,000+ in the calendar year.) 
• FUTA: 6% on first $7,000 of wages, reduced to 0.6% if state unemployment taxes are paid. Applies when a caregiver earns $1,000+ in any calendar quarter. 
• Form W-2: Issue to any caregiver paid $3,000+ in 2026. File Schedule H with the family’s Form 1040. 
• Form I-9: Verify the caregiver’s work authorization before their first day. 
• FLSA compliance: Pay at least federal minimum wage and overtime at 1.5x for hours over 40/week for live-out caregivers. 

What the family owes as a household employer (UK baseline)

The rates for 2026/27 (England, Wales, Northern Ireland):

• Employee NI: deducted from the caregiver’s wages — 8% on weekly earnings between £242–£967, 2% above that
• Employer NI: 15% on earnings above the secondary threshold (reduced to £5,000/year from April 2025) 
• Income tax: deducted via PAYE according to the caregiver’s tax code; the standard personal allowance remains frozen at £12,570 for 2026/27 
• Every UK household employer legally must provide a workplace pension, automatically enrol eligible workers, and contribute to that scheme. Auto-enrolment is compulsory if your caregiver is aged 22 to State Pension Age and earns more than £10,000 per year. The minimum employer pension contribution under auto-enrolment is 3% of qualifying earnings.

As the employer, you are legally obligated to declare and send these deductions to HMRC. 

BAHS recommendation

Families should use a household payroll service (such as GTM Payroll for households in the US or Stafftax and Carer Payroll in the UK) to manage this correctly. The cost is modest relative to the liability of getting it wrong.

State-by-state requirements in the US

Federal law sets the baseline. States cannot lower that standard, but many significantly exceed it, adding workers’ comp mandates, overtime rules, paid leave, and domestic worker-specific protections. Twelve states plus Washington D.C. have passed formal Domestic Workers Bills of Rights. 

 This table reflects the legal landscape as of mid-2025. Laws change — always verify with a licensed household payroll service or employment attorney in your state. 

What families that have hired through BAHS need to do before care begins

🇺🇸In the United States:

1. Obtain an EIN (Employer Identification Number) from the IRS — required to file payroll taxes and issue a W-2. 
2. Complete Form I-9 to verify the caregiver’s work authorization before their first day.
3. Set up payroll with federal and state tax withholding, or engage a household payroll service. In the US, we partner with the payroll company GTM that specializes in household staffing.
4. Check your state’s workers’ comp requirements — required in many states, even for part-time household employees. 
5. Review US state-specific obligations: paid leave, overtime rules, and written contract requirements vary significantly.
6. Create a written employment agreement defining hours, pay rate, duties, overtime policy, and termination terms.

🇬🇧In the United Kingdom:

1. Register as an employer with HMRC.
2. Check original documents (passport, visa, share code) to verify a caregiver’s work authorization before their first day.
3. Set up payroll with federal and state tax withholding, or engage a household payroll service. In the UK, you are automatically enrolled for PAYE online when you register as an employer with HMRC. HMRC offers free payroll services which you can manage yourself, or you can engage a household payroll service like Stafftax.
4. Obtain employers’ liability insurance whether the caregiver is full or part-time. Information on this is covered in the following section.
5. Review UK-wide obligations: paid leave, overtime rules, and written contract requirements. 
6. Create a written employment agreement defining hours, pay rate, duties, overtime policy, and termination terms. 

Insurance considerations for the household employer in the US

What changes when you become an employer

When a family hires a caregiver through BAHS, they take on legal status as a household employer. Standard homeowners and renters policies are built for residents, not employees. Without updating coverage, families carry significant uninsured exposure from the moment a caregiver starts work. 

Homeowners or renters insurance

• Notify your insurer before care begins. Many policies exclude or limit coverage for injuries to household employees. Some carriers require a rider or endorsement to extend liability coverage. 
• Medical payments coverage within a homeowners policy may provide limited reimbursement ($1,000–$5,000) if a caregiver is injured on-site — inadequate for any serious injury and does not replace workers’ comp. 
• Property damage and theft coverage may or may not respond to incidents involving an employee — review policy terms and document valuables before the first day. 

BAHS Recommendation

Call your homeowners or renters insurer before hiring and explicitly ask how your policy responds to a household employee injury. Get the answer in writing. 

Umbrella liability policy

A personal umbrella policy provides an additional layer of liability coverage above standard homeowners limits — typically $1–5 million. For household employers, this is one of the most cost-effective risk management steps available. 

• Covers serious injury claims from a caregiver hurt on the job if workers’ comp is not in place or limits are exhausted 
• Covers claims where a caregiver causes harm to a third party while under the family’s direction 
• Typically costs $150–$300/year for $1M in additional coverage 
• Most carriers require an underlying homeowners policy before adding an umbrella 

BAHS Recommendation

Any family employing a caregiver directly should carry a personal umbrella policy. Ask your homeowners carrier — most can add this at minimal cost.

Workers’ compensation insurance

Workers’ comp is the most important insurance consideration for household employers and the one most often overlooked. It covers the caregiver’s medical costs and lost wages if they are injured on the job, and protects the family from personal liability. 

Common caregiver injuries in eldercare: back and musculoskeletal injuries from lifting and transfers; slips and falls in bathrooms and on stairs; injuries from behavioral incidents in clients with dementia; exposure to infectious illness. 

How to obtain coverage: 

• Homeowners rider: some carriers extend workers’ comp to household employees — check with your existing insurer first. 
• Standalone household employer policy: available through EMPLOYERS, The Hartford, and Travelers. A household payroll service like GTM Payroll can often facilitate enrollment. 
• State fund programs: several states operate funds specifically for household employers. 

Required vs. recommended: Workers’ comp is legally required for household employers in CA, NY, NJ, WA, HI, DC, and others. Even where not required (TX, FL), coverage is strongly recommended given the physical demands of eldercare. See the state-by-state table for details or review specific workers’ compensation requirements by state.

Auto insurance

• Caregiver driving the family’s vehicle: confirm your auto policy covers a non-household-member driving for care-related purposes. Some policies require the caregiver to be listed as a covered driver. 
• Caregiver using their own vehicle: their personal auto insurance is primary, but many personal policies exclude employment use. Consider a non-owned auto endorsement on the family’s policy. 
• Mileage reimbursement should be addressed in the employment agreement. Required by law in California and several other states. IRS standard mileage rate is the most common reference point. 

Insurance considerations for the household employer in the UK

Employers’ liability insurance

In the UK, it is a legal requirement for all employers to hold employers’ liability (EL). This applies from the moment a caregiver becomes your employee.

The minimum cover required by law is £5 million, though most insurers offer a minimum of £10 million. Families who fail to hold valid EL insurance can be fined £2,500 for every day they are uninsured.

EL insurance covers compensation and legal costs if your employee is injured or becomes ill as a result of working for you. 

Public liability insurance

In addition to employers’ liability insurance, families should also consider public liability insurance, which covers damage or injury caused by the carer to other people or property while working for you. This is not legally required but is recommended. Specialist providers such as Carer Insure offer combined EL and public liability policies designed for families employing carers. 

Liability concerns

When the family is the employer, liability follows

Because BAHS matches families with caregivers rather than employing caregivers itself, the family assumes direct legal responsibility as the household employer. The risks below are specific to the direct-hire model. 

Best practice: A written employment agreement signed before the first day of work is the single most effective liability management tool available to families. It defines scope of care, compensation, overtime policy, termination terms, and confidentiality obligations — and is required by law in several US states as well as in the UK (known as a Principal Statement).

Privacy and confidentiality in the home: what families need to address

🇺🇸Private homes in the US are not governed by HIPAA — that law applies to covered healthcare entities, not household employers. But the privacy stakes in a private home are arguably higher: a caregiver has daily access to the elder’s medical information, finances, personal routines, and physical space. Families need to establish clear, written privacy expectations before care begins. 

🇬🇧 Similarly, in the UK, homes are not covered by the NHS Confidentiality Code of Practice or the Common Law Duty of Confidentiality, which applies to both private and NHS healthcare settings.

Confidentiality agreement

Every caregiver should sign a confidentiality agreement covering the elder’s medical conditions, financial information, family dynamics, and household details. This should be part of the employment agreement. The agreement should explicitly prohibit sharing information about the household on social media, with third parties, or after employment ends.

Home surveillance and cameras

🇺🇸In the US,

• State consent laws vary significantly. Two-party/all-party consent states (CA, FL, IL, MD, MA, NV, NH, OR, PA, WA) require all recorded parties to consent. Recording a caregiver in these states without consent may be illegal. 
• Cameras in common areas (living room, kitchen, hallways) are generally permissible in one-party consent states; in two-party states, written notice to the caregiver is required. 
• Cameras in private areas (bedrooms, bathrooms, dressing areas) are prohibited in virtually all states regardless of consent.

Best practice: disclose camera locations in writing, include the policy in the employment agreement, and consult state law before installation.

🇬🇧In the UK, the Information Commissioner’s Office (ICO) states that families employing in-home caregivers on an ongoing basis must comply with UK GDPR when recording them in the home. Families should therefore treat any in-home recording of a carer as subject to data protection rules and seek legal advice before installing cameras.

Financial security and home access

• Secure financial documents, credit cards, and checkbooks in a locked location 
• Define in writing which areas of the home the caregiver may access 
• Consider a separate household account for caregiving-related expenses rather than providing access to primary accounts 
• Set up account alerts for unusual transactions if the caregiver has any financial access 

Medical information sharing

• Sharing the elder’s medical history, medications, and care needs with the caregiver is both necessary and appropriate — document what was shared and when 
• The caregiver should not share medical information with third parties without the family’s explicit consent 
• Consider designating one family contact person as the communication point for medical updates, particularly in multi-sibling households 

Visit GTM’s senior care payroll service to leverage their professional expertise in household payroll, processing, tax compliance, and more.