Published and Written By: Accutax Firm | 5-7 minutes read
Picture yourself dedicating your life to caring for others, helping them, and ensuring they live comfortably and in dignity. It’s a noble profession, yet often, it slips under the radar and is undervalued. Here’s how home health aides can put more in their pockets – wage parity.
Understanding payroll taxes and wage parity is complicated, but you can unlock these benefits today. Every dollar you pay your employees attracts diverse payroll taxes such as FICA, worker’s compensation, and unemployment taxes, among others. These taxes add up to about 15% of the total pay.
The same principle is applied to wage parity cash benefits; let’s take New York City as an example. Suppose you pay your home healthcare employees $21.09 per hour ($17 basic pay plus $4.09 wage parity). This implies that you’ll have to pay approximately $3.16 per hour in payroll taxes, a substantial 15% of the $21.09 wage.
But there’s a silver lining: most wage parity benefits are not taxed. Returning to the New York City case, if you provide $17 per hour and $4.09 in benefits (like medical, dental, and dependent care), you’ll only be taxed 15% on the $17 base wage.
So, what does all this mean for you in terms of savings? Your net savings would be about $3.16 per hour. While this might seem small, step back and see the bigger picture. Multiply this $3.16 by the average 1,560 hours worked annually, and you’ll save approximately $5,000 per employee each year! For a company employing 200 people and offering wage parity benefits, this could translate to nearly $1,000,000 saved annually!
How agencies benefit from wage parity:
Agencies can greatly reap benefits from wage parity, as it’s not just about fair compensation—it’s about setting up a supportive work environment that sets your business up for success. The journey toward realizing wage parity is a collective effort. Here are helpful strategies:
- Agencies save on taxes: Your agency will be saving on average 15% per employee every hour on payroll taxes. Your net savings would be about $3.16 per hour.
- Improved Cash Flow: Providing benefits saves money and positively affects your agency’s cash flow. This is because, unlike regular wages, which are often paid weekly or bi-weekly, wage parity benefits are typically paid out monthly. This reduction in your weekly cash wage obligations gives your agency more financial flexibility, especially considering the often delayed reimbursements from Managed Long Term Care (MLTC) systems.
- Employer Support: Acknowledging the critical roles of home health aides and ensuring their fair compensation is vital. This results not only in improved employee morale and productivity but also in better talent retention.
- Consumer Influence: By supporting agencies that prioritize just compensation, consumers can play a significant role. This enhances the agency’s reputation and helps to grow a loyal customer base.
Why home health aides like wage parity:
When wage parity is achieved, it’s not just home health aides who benefit:
- Putting more money back in the caregiver’s pocket: Caregivers save on average 25% on income, social security, and Medicare taxes combined, which means they receive a higher hourly rate.
- Ensuring a higher quality of care: Adequate compensation motivates home health aides to provide better care. When they feel valued, they go the extra mile to ensure the well-being of their patients.
- Increasing job satisfaction and retention: Higher wages and better benefits increase job satisfaction. When home health aides are happy in their roles, they are more likely to stay, reducing the high turnover rate in your agency.
Navigating the complexities of wage parity and financial matters can be overwhelming, but it doesn’t have to be. At AccuTax Firm, we specialize in home healthcare finance, and our experienced accountants can provide you with the guidance you need to make informed decisions for your business.
With our help, you can ensure that your employees are satisfied and receive the financial benefits they deserve. Our expertise can help you navigate the intricacies of wage parity and government assistance programs, providing you with the peace of mind that comes with knowing your business is in good hands.