Yes, you need unemployment insurance for your nanny.
When you hire a nanny, several things should become your concern. While you do not necessarily need to worry about such things, it is pertinent that you know and help you make informed choices concerning employing a nanny.
One of these things is nanny unemployment insurance. Perhaps you have no inkling about what this means and want to get in on the information, or you have an idea and want to know if it is compulsory for your nanny.
For the rest of this article, we will introduce you to the basics of unemployment insurance and why you need it for your nanny.
What is Nanny Unemployment Insurance
A nanny is a domestic staff under a domestic employment contract. Nanny unemployment insurance (tax) is one of the taxes paid by families who hire caregivers and nannies.
Like other unemployment taxes, the nanny unemployment insurance is taxes paid to state and federal unemployment funds. Workers benefit when they become unemployed or laid off until they return to employment.
The nanny unemployment tax is paid by employers of hired nannies and guardians, where the latter earn $1,000 and above in a calendar quarter. In some jurisdictions, this threshold amount could be lesser. The tax is usually paid every quarter and is based on the tax rate fixed by a state’s labor department.
Why You Need Unemployment Insurance for Your Nanny
As you already know from above, the government created a program to help cushion the financial negatives of unemployment on unemployed workers who were made so due to no fault of theirs. This is why those laid off for reasonable cause and those who willingly resign from their jobs will not benefit from unemployment insurance.
Suppose you pay your nanny under the table, which is a term for paying your nanny illegally. And eventually, they get laid off. In that case, they will not qualify for the benefits.
This is because paying under the table equals not paying unemployment insurance taxes. Following this, when your former nanny decides to claim unemployment benefits, they will be restricted from doing so. You may also be penalized for failing to pay taxes.
And this brings us to your available options when your nanny files for unemployment benefits.
What Happens If Your Nanny Files for Unemployment
Suppose you illegally paid your nanny without paying the required unemployment insurance rates.
In that case, chances are you will face penalties from your State for not paying the taxes. You will also be required to pay back the unemployment insurance tax and other taxes like Medicare.
To avoid this, you could agree with your former nanny to stop them from claiming unemployment, ultimately protecting you from the fines and penalties you could face.
On the flip side, if you do not “owe the law” and have faithfully contributed to your State’s unemployment insurance scheme, you have nothing to worry about when your nanny claims unemployment benefits.
You may only be required to furnish your State’s Department of Labor with information concerning your nanny getting laid off and the compensations you paid (if any).
You can only think of paying unemployment taxes for your nanny only when you have a nanny. And hiring a nanny can prove a wild goose chase, especially if you have specific and particular preferences.
TENT Group is a nanny agency committed to getting families the best nanny services anyone can ever ask for. We match nannies with suitable families based on the needs of the families and the nannies.
With our nannies selectively picked and made to pass through a series of tests and interviews to ensure their capabilities for the job, The Elite Nanny Team is the nanny agency you can trust.
Tom Breedlove, ‘Unemployment Insurance Taxes: What Families Hiring Caregivers Need to Know.’