Health Insurance for Household Staff: Stipends vs. Plans
Health insurance has become one of the most common topics of conversation—and one of the most requested benefits—among professional nannies and care providers. As families seek experienced, career-minded caregivers, offering access to health benefits is increasingly seen as a key part of attracting and retaining top talent. Health insurance not only supports the well-being of the caregiver but also provides families with greater peace of mind, knowing that the individual caring for their children is protected and cared for.
We loved this thoughtful blog post by My Household Managed that explores why health insurance is such a vital part of professionalizing the nanny industry, and what families and agencies alike should consider when navigating this important topic.
At Preferred ChildCare, we are passionate about supporting professional caregivers and elevating industry standards, and we are proud to share resources that empower both families and providers.
You can read the full blog post from My Household Managed here.
A Complete Guide for Families Employing Nannies, Housekeepers, and Private Staff
Providing health benefits has become an essential standard when employing domestic staff. As a household employer, understanding the options available for offering health insurance to your nanny, housekeeper, or house manager can help you attract and retain top talent. This comprehensive guide explores the best approaches to provide healthcare benefits that protect your employees while remaining compliant with employment laws.
What Are Health Insurance Stipends?
A health insurance stipend is a designated amount you provide to help cover the cost of your employee's health insurance. While often added to their paycheck, proper structuring is necessary to keep this benefit non-taxable for both parties.
To maintain tax-free status, you should establish a qualified small employer health reimbursement arrangement (QSEHRA) or partner with a payroll service specializing in domestic employment law. This arrangement typically works through:
Employee submission of insurance coverage proof
Your reimbursement of monthly premiums up to an agreed amount
Your employee can find their own insurance policy through healthcare.gov, but they'll face monthly premiums ranging from $700 to $1,000+. A stipend helps reduce this financial burden while giving them freedom to choose coverage that best meets their needs.
Consider including dental and vision coverage in your discussions about benefits. These essential health services aren't always included in standard health plans but are important components of comprehensive healthcare that high-quality staff will appreciate.
For detailed implementation guidance, many household employers reference GTM Payroll Services' comprehensive guide on setting up stipends.
Why Health Insurance Stipends Make Sense for Your Home
Health insurance stipends have joined the ranks of standard benefits expected by professional household staff, alongside:
Guaranteed weekly hours
Paid time off (PTO)
Paid holidays
Sick leave
A properly structured stipend offers simplicity for you as an employer, attracts career-minded professionals, and demonstrates that you value your staff's wellbeing. Most importantly, employees with reliable healthcare access tend to be healthier, happier, and more likely to maintain long-term employment, reducing costly turnover and retraining.
Formal Health Insurance Plans: Another Option
If you employ multiple household staff members, you might consider offering a formal health insurance plan. This typically involves providing a group insurance policy or establishing a QSEHRA-style reimbursement system.
Advantages of Formal Health Plans:
Potentially lower pricing through group rates (when available)
Non-taxable employee benefit
Ensures continuous health coverage for your staff
Creates a more professional employer-employee relationship
However, implementing a formal plan requires administrative expertise and may not be practical if you only employ one or two staff members.
Nevertheless, in today's competitive hiring market for quality household employees, offering structured health benefits demonstrates your commitment to professional employment practices and helps you stand out to top candidates.
Why Simply Increasing Wages Isn't the Best Solution
You might wonder: "Can't I just pay my employee more per hour instead of dealing with health insurance?"
While this approach seems straightforward, there's an important distinction:
Increasing an employee's hourly wage to cover health insurance costs creates taxable income, resulting in:
Higher income taxes for your employee
Increased payroll taxes for you as the employer
No guarantee the extra income will actually be used for health coverage
Conversely, a properly structured stipend specifically designated for health insurance reimbursement remains untaxed and ensures the funds support your employee's healthcare needs.
Legal Compliance: Avoiding Common Mistakes
Some families incorrectly add household staff to their business payroll to provide company benefits. This practice is illegal and potentially costly for both parties.
Household employees must be paid directly by you as an individual or family, not through your corporation or business. This distinction protects both parties' legal status and ensures correct tax treatment.
For a deep dive into this topic, check out our blog on employing household staff under a business.
For comprehensive information on this topic, consult resources about the proper employment of household staff versus business employees to avoid potential tax penalties and legal complications.
The Bottom Line for Household Employers
Offering health insurance benefits isn't just about complying with industry standards, it's about making a smart investment in your household's stability and service quality. Professional domestic employees increasingly expect health benefits as part of their compensation package, and providing them can significantly improve your ability to:
Attract higher-caliber candidates
Reduce staff turnover
Demonstrate your commitment to professional employment practices
Create a healthier, more stable household environment
Whether you choose stipends or formal plans, implementing health benefits shows that you value your employees' wellbeing and recognize the professional nature of their work in your home.
Explore GTM Payroll’s resources or read our guide to health insurance stipends to get started.
Additional Resources
For more detailed guidance on implementing health insurance for your household staff, explore these valuable resources:
This article provides general information about health insurance options for household employers. Individual circumstances may vary, and readers should consult with appropriate tax and legal professionals for personalized guidance.
