Careswitch offers payroll services integrated into our agency management software, so complying with local, state, and federal regulations is one of our top priorities. Making sure employees are being paid accurately and on time while remaining compliant is integral to the success of our platform as well as our customers.
We often receive questions about how certain payroll-related calculations, like overtime, are performed so we'd like to share a quick guide designed for agency owners and operators to understand the regulations and how Careswitch is built to keep your business operations compliant.
Home Care Final Rule
On January 1, 2015 the Home Care Final Rule went into effect, making sure that home care workers have the same basic wage protections as most U.S. workers. This essentially means that workers employed by agencies are entitled to receive at least the federal minimum wage and overtime pay. Importantly, this also applies to live-in domestic workers employed by agencies—we'll return to this point shortly.
To better understand this, let's take a look at an example. If a caregiver earns $10/hour and works 45 hours in a work-week, then the overtime rate is $15/hour and the caregiver must be paid $15/hour for the five hours of overtime work in that work-week. The caregiver would then earn a total of $475 ($10 x 40 + $15 x 5) in that work-week.
The Careswitch platform will automatically perform these calculations based on federal guidelines that 40 hours constitute a work-week and the OT pay rate is 1.5x the regular pay rate.
According to the Home Care Final Rule, all home care workers are W2 employees (there may be some exceptions where an employee may qualify as a 1099 contractor, but that's a rare exception). There are two types of W2 employees: salary and hourly—home care workers will, by and large, be paid hourly.
Careswitch currently supports flat pay rates which allows workers to be paid a flat amount each day, regardless of the hours worked. This is where things can get a little messy and risk non-compliance, so let's revisit the example from above.
Instead of paying the caregiver $10/hour, let's suppose we pay a flat rate of $70/day. The caregivers works for 5 days and earns a total of $350 ($70 x 5) in that work-week. To make sure we're in compliance with the Home Care Final Rule, we need to be able to answer two questions:
Did the caregiver earn at least minimum wage?
Is the caregiver owed overtime pay?
To answer both questions, it is important to know exactly how many hours the caregiver worked.
If the caregiver works 8 hours each day, that's an effective hourly rate of $8.75/hr ($70 / 8). However, if the caregiver works 10 hours each day, the effective hourly rate comes out to $7/hr ($70 / 10), which is below minimum wage and therefore not compliant with federal wage regulation.
Similarly, if the caregiver worked 10 hours each day, that would net out to 50 hours for the work week, and therefore be owed 10 hours worth of overtime pay.
Flat pay rates, by design, obscure the actual hours worked and therefore are problematic for staying compliant with the Home Care Final Rule. For this reason, we will be revisiting our current implementation of flat pay rates in the near future to help ensure our customers remain compliant.
Live-in Domestic Workers
The Home Care Final Rule also mandates that live-in domestic workers who are employed by an agency must be paid at least the federal minimum wage and overtime pay for all hours worked.
Some of our customers use flat daily rates to pay live-in workers to simplify payroll calculations, but unfortunately many of them are either not compliant with the Home Care Final Rule or end up incurring OT pay that is not anticipated.
This is another reason why we're revisiting flat pay rates in our system and will soon require clear hours to be associated with all home care work that is performed.