Help Your Employee Understand Why It's MUCH Better To Be Paid Legally.
Many household employees think it's better to be paid under the table. But the reality is, most don't understand the bigger picture and how they are losing out. If they are being paid over $2,100 in a year, being paid legally is not only the law, but it brings them a lot of benefits:
They qualify for unemployment. This can really help employees get through a transition while looking for a new job. The household working world has high turnover, with kids growing up fast, or an elderly person needing care passing away. Employees can be dismissed or fired from their job easily, but they wouldn't qualify for unemployment unless they are paid legally (and note to employers: if the employee applies for unemployment anyway, this would expose the employer).
They can apply for loans. Without salary history, this just isn't possible. Student loans, renting an apartment, mortgages, credit card applications, auto insurance applications and car loans all require employment history.
They save for their future. They will build up their social security, which is based on their 35 highest-earning years in the workforce. For every year employees are paid under the table, it will be a zero against their future. Read here to learn how it gets calculated.
They pay into Medicare so they can have health insurance when they reach 65. It takes at least 10 years (or 40 credits) working and paying into Medicare to receive medical coverage at retirement age.
If they get sick, hurt or pregnant, they’ll get disability. If your state offers it (currently CA, NJ, RI, HI and NY), and they get hurt or sick NOT on the job (or pregnant), they could qualify for a short-term period to receive a weekly benefit, usually a portion of their salary. This can help to tie them over while they recover. Please check your specific state disability plan. If you live in a state that doesn't include disability taxes, you can purchase it directly and it is relatively inexpensive. Read the details here.
They qualify for workers' compensation (assuming employer has this coverage, mandatory in many states). This benefit provides coverage for lost wages and medical bills related to an injury ON the the job. Employers who provide this coverage are protected from lawsuits if there's an accident, so it is worth the protection for the employer too. Read more about why this could be your #1 reason for paying legally.
For further understanding, read here for an interesting explanation by the State of California as to why paying under the table isn't worth it. And remember that you, the employer, will be the one paying ALL back taxes (employer AND employee), and any fines and penalties if the IRS finds out you were paying under the table.