STAFF RISK: A Guide to Employment Practices for Private Families
What happens if a hire a nanny? Can I pay a housekeeper under the table? Mary has been with our family forever. She wouldn’t sue us…would she?
Private families have an immense need for support in their lives. Personal assistants, housekeepers, au pairs, even the CFO in the family office come with risks. Let us look at how to protect your legacy when employing staff.
In this guide we will explore the best practices of hiring domestic workers, discuss handling the overlap between business and personal work, and even look at how to determine if someone is truly an independent contractor.
privateRISK: LEARN ALL YOU NEED ABOUT LIABILITY RISK MANAGEMENT
ADDITIONAL CHAPTERS IN OUR COMPLETE GUIDE
Private Family Liability Risk Analysis
What Is Employment Practices Liability?
Whether they are managing your books, cleaning the house, or tending to the grounds, there are a variety of ways in which you may be exposed to loss when employing staff. Employment Practices are often overlooked as a risk to private families. This refers to the way that employees are treated and managed in their scope of employment.
Best practices for managing domestic staff
When thinking about your staff, it is important to remember that even though they provide immense value to your life, they also pose a tremendous risk to your balance sheet and your family’s well-being. Let’s look at a few best practices to minimize this.
Top 10 Best Practices For Employees
- Provide a detailed job description
- Complete a background check
- Execute an employment agreement
- Have a formal onboarding process
- Have formal discipline and termination procedures
- Develop a code of conduct for family and staff interactions
- Provide an employee handbook
- Set an interval to have employment reviews with each member of staff
- Purchase workers compensation insurance, particularly if compulsory in your State
- Purchase employment practices liability coverage either through your family office or your personal liability umbrella
5 Best Practices For Independent Contractors
- Complete a background check
- Have an attorney review contractor agreements / 1099 and assure the worker will meet the legal status of an independent contractor
- Execute the contractor agreement / 1099 between parties
- Request a certificate of insurance from the contractor
- Set an interval to review your agreement and obtain renewal certificates of insurance
NOTE: be sure to exercise very little control over the contractor as too much oversight can jeopardize the legal status of an independent.
Is this worker my employee?
Employer
- Controls the detail of work, hours of labor, and all expectations
- Worker is economically dependent on the relationship
Independent Contractor
- Lacking controls of work
- Economically dependant on multiple relationships
NOTE that an independent contractor is a legal status and not a label that can be assigned. It depends on the specific litmus test used by various State and Federal Government agencies.
comparison of employees vs. contractors
Independent Contractor
A business offering its services for hire to the public. Has its own facilities and employees.
Employee
An individual without an independent business organization.
Business Structure
Independent Contractor
Contract is for the duration of the project or less than 1 year. IC may work for others.
Employee
Employment is continuous and the Individual is not allowed to work for others.
Business relationship
Independent Contractor
Responsible for own business expenses and invests in own business.
Employee
Provided tools and resources and reimbursement for business expenses.
investment
Independent Contractor
terms are set by bid/paid by project. Terminated only for breach. Can subcontract.
Employee
Terms set by principal, paid salary/hourly, cannot incur loss, terminated at-will.
contract structure
Independent Contractor
The work is not integral to the principal’s business and can be performed by the IC’s employees.
Employee
Work is essential to principal’s needs and performed by at-will hire.
type of work
Additional Learning
As you continue learning about managing your personal cyber risk, the additional chapters in our guide will prove to be invaluable resources.
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