Referral Agency vs. Home Care Agency
This comprehensive guide reveals the hidden costs, legal responsibilities, and critical questions that determine which option truly provides the best protection for your family.
When San Diego families first research home care, the options feel overwhelming. Caregiver referral services promise lower costs. Domestic referral agencies add convenience. Licensed home care agencies seem expensive.
Here’s what changes everything: One question determines your actual costs, legal liability, and what happens when problems arise.
That question is: Who is the employer? After helping hundreds of local families navigate these decisions, I’ve seen how this single factor affects everything—from surprise expenses to emergency coverage to legal protection.
Understanding Your Three Main Options
At first glance, hiring a caregiver independently may seem more affordable or convenient. However, it’s crucial to understand the hidden responsibilities and liabilities that come with being an independent employer. In California and under federal law, when you hire a caregiver directly, you become their employer—and that comes with significant obligations. Here are the major risks you assume when hiring privately:
Option 1: Caregiver Referral Services (The Matchmaker Model)
How it works:
- They source and screen potential caregivers
- You pay a flat finder’s fee (typically $2,500-$5,000)
- You interview and select the caregiver
- You become the employer
What this means:
- You and the caregiver negotiate wages directly (the referral service doesn’t set rates)
- You must comply with all federal and state employment laws
- You handle payroll, taxes, insurance, and workers’ compensation
- You manage day-to-day supervision and performance issues
- If termination is needed, you handle it
Option 2: Domestic Referral Agencies (The Middleman Model)
How it works:
- They source and screen potential caregivers
- Similar to referral services, but no hefty upfront fee
- You pay the caregiver’s wage PLUS the agency’s hourly cut
- You’re still the employer with all the same responsibilities
What this means:
- You and the caregiver negotiate wages directly (the referral service doesn’t set rates)
- You must comply with all federal and state employment laws
- You handle payroll, taxes, insurance, and workers’ compensation
- You manage day-to-day supervision and performance issues
- If termination is needed, you handle it
Option 3: Licensed Home Care Agencies (The Full-Service Model)
How it works:
- The agency is the employer (caregivers are W-2 employees)
- They handle hiring, training, supervision, and scheduling
- Insurance, payroll compliance, and backup coverage included
- You receive care coordination and professional oversight
What this means:
- Predictable, all-inclusive pricing
- Professional management of care team
- No employer liability for you
- Seamless coverage when changes are needed
Family Testimonial
The Math Was Eye-Opening
“We were quoted $25/hour by a referral service versus $37/hour from All Heart. Seemed like an obvious choice until we used All Heart’s cost calculator. After payroll taxes, workers’ comp, liability insurance, and a payroll service, we were actually paying $33/hour—plus all the management headaches.
The $4/hour difference for professional supervision, guaranteed coverage, and zero liability? Total no-brainer. Sometimes you don’t realize how much stress you’re carrying until it’s gone.”
— A Grateful Son in Rancho Bernardo
Five Reality Checks Every Family Should Consider
Reality Check #1: Employment Law Compliance
When you’re the employer, you must ensure:
- Minimum wage compliance (federal and state—whichever is higher)
- Overtime pay for hours exceeding 40 per week
- Paid sick time requirements (varies by state)
- Proper break and meal period compensation
- Quarterly tax filings and annual reporting
- Workers’ compensation coverage
Miss a compliance requirement? You’re facing penalties and potential legal issues.
Reality Check #2: Replacement Costs Add Up Quickly
Caregiver turnover is common in private hire situations. Each time you need a replacement:
- New finder’s fees (often required by referral services)
- Lost time during the search and interview process
- Care gaps while you find someone new
- Starting over with training and relationship building
We’ve seen families pay finder’s fees three times in six months, tripling their initial investment.
Reality Check #3: Emergency Coverage Is Your Responsibility
At 6 AM, your caregiver calls in sick. With private hire arrangements:
- You scramble to find immediate coverage
- Family members may need to miss work
- Care routines get disrupted
- Stress levels spike when you’re already managing a lot
Licensed agencies maintain backup staff specifically for these situations.
Reality Check #4: Performance Management Gets Personal
What happens when your privately hired caregiver:
- Isn’t following the care plan?
- Shows up late consistently?
- Has personality conflicts with your loved one?
- Needs additional training?
You handle these conversations. There’s no HR department, no professional mediation, and termination discussions happen directly with someone who has keys to your home and access to your vulnerable family member.
Reality Check #5: Legal Liability Follows the Employer
If an incident occurs during care:
- You’re legally responsible as the employer
- Your insurance may be the primary coverage
- Referral services typically have no liability for caregiver actions
- Workers’ compensation claims become your responsibility
This liability extends beyond just accidents—it includes allegations of theft, abuse, or negligence.
How to Choose the Right Option for Your Family
Choose Caregiver Referral Services or Domestic Referral Agencies If You:
✅ Want maximum control over the hiring process
✅ Are comfortable with employment law compliance
✅ Have time to manage HR responsibilities
✅ Can handle coverage gaps and emergencies
✅ Prefer to manage caregiver relationships directly
Important note: Despite the initial appearance of lower costs, factor in all employer expenses and management time for accurate comparison.
Choose Licensed Home Care Agencies If You:
✅ Want professional care coordination and oversight
✅ Need guaranteed backup coverage
✅ Prefer predictable, all-inclusive pricing
✅ Want to avoid employer liability and compliance risks
✅ Value having a professional buffer for difficult conversations
Red Flags for Any Option:
❌ No workers’ compensation coverage
❌ Unlicensed or uninsured operations
❌ No clear backup plan for caregiver absences
❌ Unclear or changing fee structures
❌ Poor communication during the screening process
❌ Unwillingness to provide references or credentials
What Makes All Heart Home Care Different
As a licensed home care agency in San Diego, we understand that choosing home care is about more than just finding someone to help with daily tasks. It’s about:
Professional Standards:
- Comprehensive background checks and skills assessments
- Ongoing training and care plan supervision
- Regular family communication and care adjustments
- 24/7 support for questions or concerns
Reliable Coverage:
- Trained backup caregivers for sick days and vacations
- Consistent care team familiar with your loved one’s needs
- No gaps in coverage during caregiver transitions
- Professional scheduling and coordination
Legal Protection:
- Full workers’ compensation and liability coverage
- Complete employment law compliance
- Professional handling of performance issues
- Proper documentation and care records
Peace of Mind:
- One point of contact for all care coordination
- Professional resolution of any issues that arise
- Seamless transitions when changes are needed
- Focus on your loved one, not employment logistics
Need Assistance with the Comparison Calculations?
Want a personal walkthrough? Call All Heart Home Care at: (619) 736-4677 for a no-pressure consultation. We’ll help you choose the safest, most sustainable path for your San Diego family—even if that’s not us.
Because peace of mind shouldn’t come with surprise bills or employment headaches.
Cost Calculator Comparison Worksheet
Don’t guess at the real expenses. Our Private Hire Cost Calculator shows precisely what you’ll pay with each option—including the hidden costs that catch families off guard.
Weekly Schedule
| Day | Input Mode | Shift 1 Start | Shift 1 End | Shift 2 Start | Shift 2 End | Total Hours |
|---|---|---|---|---|---|---|
| Total Hours This Week |
Rates & Comparison
| Model | Reg Hrs | OT Hrs | Weekly Cost |
|---|---|---|---|
| Caregiver Referral Services | |||
| Domestic Referral Agency | |||
| All Heart Home Care | |||
| Total Hours |
| Effective $/Hour (Monthly) | Caregiver Referral Services | Domestic Referral Agency | All Heart Home Care |
|---|---|---|---|
Cost Breakdown (Monthly)
| Cost Component | Caregiver Referral Services | Domestic Referral Agency | All Heart Home Care |
|---|
Monthly Cost Chart
Employer Costs (2025, CA)
Estimated Cost Impact
| Weekly | Monthly (4.333×) | |
|---|---|---|
| % Burden on Wages | ||
| Liability | $100.00 | |
| Payroll Service | $650.00 | |
| Total Employer Costs | $750.00 |
Average Rates Guide (2025, CA)
| Category | Average Rate | Notes |
|---|---|---|
| FICA (Social Security + Medicare) | 7.65% | 6.2% SS + 1.45% Medicare; wage cap applies to SS. |
| Unemployment Insurance (UI) | 3.4% (new employers) | CA EDD; first $7,000 wages/employee; rate varies over time. |
| Workers’ Compensation | 1.50–2.50% of wages | Caregiver/home health class; confirm with your carrier. |
| Liability Insurance | $50–$150/month | Household employer policy; homeowners often exclude employment injuries. |
| Payroll Service Fee (CPA/Accountant) | $650–$1700/month | Household employer payroll & filings; per-employee fees may apply. |
| Expected Caregiver Turnover | 3-6 Months | High turnover; dependent on agreed wages |
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