Home Care Agency Payroll Compliance: What Has to Be Right
$844,274 came out of two home care providers in January 2025, for 158 caregivers the Labor Department found had been paid as independent contractors instead of employees. That is the shape of most payroll trouble here. Four things have to be right: who is a W-2 employee, what counts as paid time between clients, when overtime starts, and what the records show. The rest is bookkeeping.
Pull up last week's schedule. Find a caregiver who covered two clients in one day, which at most agencies is most of the roster, then look at her stub for the twenty minutes she spent driving between the two houses. Often it is not there.
Nobody decided to leave it out. The scheduling software bills visit time. The payroll system pays visit time. The drive between two visits belongs to neither, so it quietly goes unpaid until somebody else does the arithmetic.
The Labor Department's guidance on domestic service employment is plain about that drive. Employees who travel to more than one worksite during the workday must be paid for travel time between each worksite. The same guidance says third-party employers cannot claim the companionship or live-in exemptions.
The four lines that actually have to be right
None of the four is exotic. Each is a place where a small repeated error turns into a five-figure number once somebody multiplies it across the roster.
| What has to be right | Where agencies get caught |
|---|---|
| Employment status | Caregivers on 1099s. The January 2025 case turned on 158 of them, and $422,137 of the recovery was unpaid overtime that followed from the misclassification. |
| Travel between clients | Billed to the client at zero and paid to the caregiver at zero. It is hours worked. |
| Overtime past 40 | Straight failure to pay time and a half. That was the violation in four of the five December 2024 cases. |
| Records | Visit notes are not time records. Domestic service gets no exception from the usual recordkeeping. |
Did the 2013 rule just go away?
Only at the federal enforcement level. On July 25, 2025 the Wage and Hour Division issued Field Assistance Bulletin 2025-4, titled Home Care Enforcement Guidance, which states that while the bulletin is in effect the division "will not apply the 2013 final rule when determining whether a home care worker is subject to the FLSA's wage requirements."
Read what that sentence covers. It describes what federal investigators will do. The bulletin says nothing about state wage law, and plenty of states set their own overtime and travel-time rules independently. A non-enforcement bulletin is not permission.
Where does a benefits plan sit in all this?
On top of it. A Section 125 election is one line on the caregiver's stub and one number on the agency's 941, so it inherits whatever the hours and the classification underneath it say. Wrong hours, wrong election.
The structure is not new. Section 125 dates to 1978, regulators objected to one specific design that counted the same dollar twice rather than to the structure, and the paperwork is named: CBIZ wrote the CPA opinion, HitesmanLaw the legal assurance. Both sit on the compliance page, with the longer answer at whether the plan is legitimate.
Then the money question. You priced a raise and you priced a group plan, and both need new money the margin does not have. This one does not. It redirects employer payroll tax the agency already pays, which is why it reaches part-time caregivers a group carrier will not touch.
The part this does not fix
A wellness plan does not fix payroll. If a caregiver was on a 1099 last year and should have been on a W-2, the plan does not reach backward, and nothing about offering benefits settles that. Sort the classification out first, with a payroll professional or an employment attorney. Doing it the other way round leaves a tidy benefits file on top of an untidy wage file.
What would this look like at your agency?
Two numbers answer it: how many caregivers you run, and roughly what they earn. That is the whole ask and it stays small on purpose. The estimator takes those two and shows what the agency pays in employer payroll tax, what turnover at the median costs, and how much of the first could go to caregiver benefits instead. Thirty seconds, no signup, nothing to send.
For scale: UnifyWell's published example nets an employer roughly $640 per participating employee per year on a $44,000 earner, after the monthly administration fee, and caregiver wages sit below that. Across Home Care Wellness's own proposals the figure has landed between $300 and $900 per participating employee per year. That is a range and not a quote. Which of your caregivers qualify, and what lands on their check, is something only your own numbers answer. Have your own CPA read the plan documents first.
Open the estimator
Caregiver count and average wage. It returns what your agency pays in employer payroll tax, what turnover costs, and what could be redirected into caregiver benefits.
Free, no signup, no documents to send.
Home Care Wellness is not an insurance company and does not sell insurance. The Unify Wellness Plan is a Section 125 wellness benefit and is not a substitute for major medical coverage. Nothing here is tax, legal or accounting advice, and no savings figure is guaranteed. Wage and hour obligations vary by state. Have your own CPA and employment counsel review your payroll practices and the plan documents before acting.
