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Why the Gross Wage vs Net Pay Discussion is Important for Private-Duty Care

Published July 25, 2014

By Tom Breedlove, HomePay by Breedlove

Families in need of a private-duty caregiver have a laundry list of items to account for during the hiring process. Most importantly is selecting the right candidate, but once that item is crossed off the list, it’s crucial to account for the expenses of hiring this new household employee.

When you make a caregiver a compensation offer, it is critical that both of you are on the same page as to what the Gross Wages and Net Pay will be. For those in the professional world, this seems like a no-brainer, but it’s actually quite common for caregivers and families to confuse the two. Just to be clear, Gross Wages refers to the amount of money an employee earns prior to taxes being withheld and Net Pay is the amount the employee actually takes home.

So just as in the professional world, if you’re hiring private-duty care, it’s paramount that the compensation offer is in gross wages. It’s impossible for you to know what your caregiver’s Net Pay should be before they accept your offer because you don’t know exactly how much in taxes to withhold until the appropriate paperwork is filled out.

If you have already offered a Net Pay amount, feel free to use our Employee Paycheck Calculator to translate it into Gross Wages. Once the caregiver has filled out a Federal W-4 and a New York IT-2104, the calculator can determine their federal, state, and perhaps local income tax withholdings.

This is extremely important for you to do since all compensation you pay your employee must be reported to the government in terms of Gross Wages. It’s also the figure that will be used to calculate your caregiver’s benefits and your taxes and tax breaks. For example, let’s say a family (who doesn’t live in Yonkers or New York City) offers a candidate $550 a week, but it’s Net Pay. The caregiver is Single with no children, so she fills out her W-4 as Single with 2 allowances and her IT-2014 as Single with 0 allowances. Using our Employee Paycheck Calculator, the family can easily make the adjustment from Net pay to Gross Wages as follows:

Net Pay:                          $550.00
Social Security Tax:      $43.48
Medicare Tax:                $10.17
Federal Income Tax:     $67.20
State Income Tax:          $29.90
State Disability Tax:      $0.60

Gross Wages:                   $701.35

This calculation takes seconds to process and immediately the caregiver can see what her gross wages are, what taxes are being withheld and how much she’ll take home. Additionally, the calculator will also show that the family will need to budget for an additional $62.58 in employer taxes each week, which means their budget for hiring the caregiver is really $763.93 each week.

The main point to take away from looking at these numbers is that open communication is extremely important when discussing compensation with a caregiver. When both of you understand the true cost of hiring an employee and what taxes are involved with being an employee, conflicts are less likely to occur and the employment relationship starts off on the right foot.

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