How to Mitigate Risk When Employing Staff in Your Home

Many high-net-worth families employ household staff to help support and manage their busy lifestyles. If you’re considering hiring employees such as nannies, housekeepers, gardeners, and chefs, there are risks to consider as well. By following these tips you can help protect yourself, your family, and your assets from the increased risk associated with retaining household staff.

Beyond simply interviewing potential employees and requiring references (both professional and personal), it’s important to conduct a thorough background check before hiring household staff. It’s best to use a professional security firm that can investigate national and international criminal records, DUI records, and charges without conviction. Disclosure 1 1 Chubb, “Overview for Families: Household and Domestic Employees Essentials, accessed Sept. 14, 2021, https://www.chubb.com/content/dam/aem-chubb-global/static-pages/family-office-resource/pdf/overview-for-families--household-domestic-employees-essentials.pdf

To make matters even simpler for you, consider using an employment agency. An employment agency will handle basic items such as workers compensation insurance, payroll, and other items for you.

Reach out to your risk advisors, attorneys, accountants, and, of course, your McGriff Family Risk Manager to help answer any questions and determine what your hiring process should include.

Most likely, your current homeowners, auto, and personal umbrella coverage isn’t enough to mitigate the increased risk of employing staff in your home.

Employment Practices Liability Insurance (EPLI) is valuable coverage you can add to your insurance portfolio. EPLI protects you against claims of discrimination, defamation, and other wrongful employment acts.

If any employees will be using your vehicles (such as a nanny driving your car to pick up your child from school), remember to add them to your auto insurance policy. If they will be using their own car to fulfill any job duties, make sure that they have adequate auto and liability coverage as well.

Workers compensation insurance is another important policy to look into. Workers compensation covers medical care, lost wages, rehabilitation, survivor benefits, etc., due to job-related injuries, illness, or death.  Most states require employers to carry workers compensation insurance, so research your local guidelines. 

You should provide an employment agreement for your household staff to sign. This contract should outline job duties and responsibilities, compensation and payroll frequency, tax treatment, the termination process, and any other important requirements. Disclosure 2 2 Chubb, “Mitigating the Risk of Injuries, Lawsuits and Theft When Employing Domestic Staff,” accessed Sept. 14, 2021, https://investors.chubb.com/investor-relations/media-center/press-releases/press-release-details/2015/Mitigating-the-Risks-of-Injuries-Lawsuits-and-Theft-When-Employing-Domestic-Staff/default.aspx

Protecting your family’s personal information is a top priority when inviting new employees into your home and your lives. If confidentiality expectations aren’t already included in the employment agreement, you should consider adding a separate confidentiality agreement or nondisclosure agreement.

Stay up-to-date on federal and state labor laws to avoid any violations. Violating labor guidelines can result in fines and lawsuits that can not only threaten your assets but your family’s reputation as well. Make sure to provide your staff with the correct tax forms. Check IRS guidelines to properly differentiate between an employee and an independent contractor, and follow state revenue laws as well. 

If any employees have access to your credit/debit cards, bank information, or purchase orders, make sure to review your bank statements at least once a month to ensure no unauthorized spending has taken place. Consider issuing prepaid debit cards to employees when necessary and practical. Always keep any sensitive and financial information in a secure location, and keep your passwords to yourself (get rid of that sticky note with your passwords scrawled across it for anyone to find!).

Talk with your McGriff insurance professional to review your current insurance coverage and discuss what modifications or additions may be necessary before employing staff in your home.