Many families in San Diego and throughout California assume that hiring a private caregiver will cost less than working with a home care agency. This assumption makes sense at first glance—an independent caregiver might quote a lower hourly rate than an agency charges. However, “cheaper” doesn’t always mean better value.
Several hidden costs and legal responsibilities come with hiring a caregiver privately. When you factor in taxes, insurance, labor laws, and potential risks, you may discover that a private caregiver isn’t as affordable as initially thought. This article explores those hidden costs, with a focus on California (specifically San Diego), to help adult children and aging parents make informed, financially sound decisions.
The Appeal of Private Hiring vs. Agency Care
In California’s market, agency-provided home care averages around $35–$40 per hour, which exceeds the national average. In San Diego, the median cost for a licensed home health aide is approximately $39 per hour (according to 2024 surveys), while privately hiring an individual might cost only $25–$30 per hour. On the surface, this difference suggests substantial savings.
However, comparing hourly rates alone isn’t an “apples to apples” comparison. Agencies charge more because they handle numerous behind-the-scenes costs and provide protections that independent hires do not. Let’s examine the hidden expenses and risks that come with becoming an employer when you hire a private caregiver.
Hidden Cost #1: Becoming an Employer – Payroll Taxes and Paperwork
When you hire a private caregiver directly, you effectively become an employer in the eyes of the law. This means handling payroll taxes and administrative duties that an agency would normally manage. The IRS requires that if you pay a household employee (like a caregiver) above a small threshold—just a few thousand dollars annually—you must treat them as an employee for tax purposes.
For example, in 2025, paying a household worker $2,800 or more in a year means you must withhold and pay Social Security and Medicare taxes (FICA) for that employee. You’ll also likely owe federal unemployment (FUTA) taxes if you pay $1,000 or more in a calendar quarter, plus applicable state employment taxes.
What This Means in Practice
When hiring privately, you take on these responsibilities:
Registering as an Employer: You must obtain an Employer Identification Number (EIN) and register with tax agencies.
Withholding and Paying Taxes: You’re required to withhold the employee’s share of Social Security/Medicare taxes and submit your employer matching share (total FICA is 15.3% of wages). You must also pay federal and state unemployment insurance taxes, and possibly state disability insurance, on the caregiver’s wages.
Payroll Filings: You’ll need to file a Schedule H (Household Employment Taxes) with your federal 1040 tax return, issue the caregiver a W-2 at year-end, and file W-3 and other employment tax forms with the IRS. You may also need to file quarterly wage reports with the state (California’s Employment Development Department).
Work Eligibility Verification: Federal law requires you to verify that your employee can legally work in the U.S. by completing an I-9 form.
Managing these tasks can be time-consuming and may require hiring a payroll service or accountant—adding another cost. If you fail to handle taxes properly, you’re engaging in what the IRS considers “illegal hiring.” Many well-meaning families pay caregivers in cash “under the table” to save money, but this can backfire severely. You could face liability for back taxes, interest, and penalties if caught. Additionally, if the caregiver ever files for unemployment benefits or reports the income, it could trigger scrutiny of your arrangement.
Simply put, skipping payroll taxes isn’t worth the risk—it’s part of the real cost of employing a caregiver.
Hidden Cost #2: Workers’ Compensation and Injury Liability
One of the biggest hidden expenses (and potential nightmares) of hiring a private caregiver involves workers’ compensation insurance. When you work with a home care agency, the agency serves as the caregiver’s employer—they carry workers’ compensation coverage for their staff, as required by law. But if you directly employ a caregiver, you may be legally required to provide workers’ compensation coverage in case they’re injured on the job.
California law is very clear on this point. Any domestic worker (including in-home caregivers) who works at least 52 hours or earns $100 or more in a 90-day period must be covered by a workers’ compensation policy. In practical terms, even a part-time caregiver quickly meets this threshold.
The Risks of Non-Compliance
If your privately hired caregiver falls or injures themselves while caring for your loved one, and you don’t have a workers’ compensation policy, you could be held personally liable for their medical bills and lost wages. Your homeowner’s insurance typically does NOT cover injuries to domestic employees on the job, so without workers’ compensation, the full cost could come out of your pocket.
Moreover, not carrying required workers’ compensation insurance is illegal in California. The state imposes serious penalties for employers who fail to insure their employees. Employing a worker without workers’ compensation coverage is a criminal offense (enforced under Labor Code Section 3700)—some sources note it can be treated as a felony if an injury occurs. At minimum, you could face fines and be liable for all injury-related costs.
The Solution
To comply with the law, you need to either purchase a workers’ compensation policy (many homeowners’ policies offer a rider, or you can buy a separate policy through the state fund) and pay an annual premium based on the caregiver’s wages—or use an agency that provides this coverage.
Licensed agencies automatically carry workers’ compensation, liability insurance, and bonding for their caregivers, protecting you and your loved one. This protection is built into the agency’s hourly rate. If you hire privately, you must budget for workers’ compensation insurance (which could cost hundreds or more per year) as part of the real cost of care. Without it, you’re effectively “self-insuring” and gambling that an accident won’t happen—a gamble that could cost tens of thousands of dollars if it goes wrong.
Hidden Cost #3: Overtime and Labor Law Compliance
Home care often isn’t a strict 9-to-5 job. Your loved one might need help for longer shifts, overnight, or around the clock. When using an agency, they manage caregivers’ schedules to comply with labor laws—if a caregiver works long hours, the agency handles paying any required overtime or assigns a second caregiver to avoid excessive overtime. But if you employ a private caregiver directly, you’re responsible for understanding and obeying labor laws, including overtime rules. California’s overtime laws for domestic workers are quite strict.
California’s Domestic Worker Bill of Rights
California’s Domestic Worker Bill of Rights (AB 241) grants overtime pay rights to many household employees, including caregivers. Specifically, personal attendants (most in-home senior caregivers) must be paid overtime at 1.5 times their regular rate for any hours over 9 in a day or over 45 in a week. (40 hours under federal law).
For example, if you have a caregiver work a 12-hour day, you must pay 3 of those hours at time-and-a-half. If they work more than 40 hours in a week, each hour beyond 40 must be paid at the overtime rate. Many families hiring privately aren’t aware of these rules—but ignorance isn’t a defense if the caregiver later demands overtime back pay.
The Financial Risk
Failing to pay required overtime creates another hidden financial risk. A caregiver could later claim unpaid overtime, and you could face a wage dispute or lawsuit for back wages, penalties, and legal fees. As one senior care resource cautions, if a family doesn’t carefully track and pay overtime, they “may be exposed to a lawsuit in the future” for wage violations. These cases can be very costly—California is known for favoring employees in wage claim disputes.
Common Scenarios
Paying overtime can significantly increase costs beyond the caregiver’s base rate. Two common scenarios illustrate this:
Full-Time Care Needs: If your loved one needs 50–60 hours of care per week and you rely on one private caregiver, you’ll owe overtime pay for 10–20 hours each week at 1.5x the regular rate. This can erase any savings from a lower base hourly rate. An agency would likely split that schedule between two caregivers to avoid overtime or charge accordingly for overtime hours.
Live-in or 24-Hour Care: California no longer has a special exemption for live-in personal attendants beyond a certain point—overtime still applies after 9 hours per day, including sleep time hours. Private families sometimes think a flat daily or weekly rate is acceptable, but this can violate wage laws. With an agency, if live-in care is provided, they structure it in compliance with labor laws (such as two caregivers covering 24 hours in shifts).
The bottom line: when calculating costs, you must factor in overtime premiums if you plan to have a single caregiver cover long days or extensive weekly hours. Not doing so isn’t just unfair to the caregiver—it’s illegal and could cost you far more later.
Hidden Cost #4: Screening, Training, and Quality of Care
Selecting the right caregiver involves more than finding someone willing to work for a given wage. Time and expense are involved in properly vetting a caregiver’s background and qualifications, as well as ensuring ongoing quality care.
Agency Advantages
Agencies excel in this area by conducting rigorous screening—including background checks, reference checks, credential verification, and sometimes drug testing—before hiring caregivers. In California, licensed Home Care Organizations are required by law to fingerprint and background-check all caregivers through DOJ and FBI databases before placement in a home. Agencies also verify that caregivers have legal work status, clean driving records (if transportation is needed), and any necessary certifications.
Your Responsibility When Hiring Privately
If you hire privately, all this due diligence falls on you. You’d need to inspect resumes, verify training or licenses, check references, and run criminal background checks on your own. Comprehensive background check services cost money, and doing it thoroughly takes time and expertise.
Skipping this step to save money is dangerous—it could mean entrusting your vulnerable loved one to someone with an undisclosed criminal history or false credentials. As one placement advisor warns, hiring a caregiver with unknown identity, character, or background leaves you with little recourse if there’s theft, abuse, or other serious issues. Unfortunately, elder abuse and fraud by in-home workers is a real concern, so skimping on screening can carry a huge hidden cost in terms of safety and peace of mind.
Training Considerations
Training is another factor. Agencies provide ongoing training and oversight for their staff. Caregivers employed by agencies often receive education in senior care best practices, dementia care techniques, emergency procedures, and more. Their performance is periodically evaluated.
When you hire privately, you may be getting someone with minimal training or experience. There’s a higher risk that an untrained or less experienced caregiver could make a mistake or be ill-prepared for an emergency, potentially harming your loved one’s health or costing you in other ways. While you can certainly find skilled independent caregivers, they typically charge higher rates—and you still won’t have the same infrastructure of support and supervision that an agency provides.
These quality considerations don’t show up in an hourly rate, but they absolutely affect the overall value you receive. A slightly higher hourly fee to an agency helps pay for background screening, training programs, supervision by care managers, and assurance that the person coming into your home is qualified and trustworthy. If you try to replicate this on your own, expect added costs (for background check services, etc.) and a significant investment of time and effort.
Hidden Cost #5: Reliability, Backup Care, and Flexibility
Life is unpredictable. Caregivers are human—they might get sick, have emergencies, or need time off. One often-overlooked advantage of agencies is that they have a team of caregivers and can provide backup on short notice if your regular caregiver can’t make it.
The Private Hire Challenge
When you hire privately and your sole caregiver is unavailable, the responsibility falls entirely on you to find coverage. This could mean scrambling to find a replacement (perhaps an expensive temp from an agency or another private hire on the fly) or taking time off work yourself to care for your parent. The stress and inconvenience of a last-minute gap in care represents an intangible “cost” to your family, and if you do have to hire alternate help in a pinch, it might come at a premium rate.
Furthermore, if a private caregiver decides to quit with little notice—which can happen if they find better paying work or have a change in personal circumstances—you’re left starting the hiring process all over again. This can lead to periods where your loved one has no care or you’re paying for interim solutions.
Agency Benefits
Agencies handle all HR aspects for you: if one caregiver quits, they can quickly assign another trained worker, so care continues uninterrupted. They also manage scheduling logistics, so if you need to adjust hours or add more care, the agency can accommodate by drawing from their staff pool. With a private individual, you have far less flexibility—their schedule is their schedule, and if your needs grow beyond what one person can provide, you’ll have to hire additional help yourself.
This reliability and flexibility is part of what you pay for in an agency’s higher hourly rate. It translates to peace of mind: you’re not left alone to deal with coverage crises or caregiver turnover. For adult children who may live out of town or juggle full-time jobs, having an agency’s support can be invaluable. While it’s hard to put a dollar figure on this peace of mind, it’s certainly a real benefit that adds value over the “cheaper” private hire scenario.
So, Is a Private Caregiver Really Cheaper?
When you add everything up, the gap between a private caregiver’s apparent cost and an agency’s cost narrows considerably—and may even flip, making the private route more expensive overall.
The Hidden Costs Recap
Here are the often unseen costs a family assumes by hiring privately in California:
Employer Taxes: Roughly an extra 10–15% on top of wages (for Social Security, Medicare, unemployment, etc.), plus possibly the cost of a payroll service.
Insurance: Workers’ compensation insurance premiums (hundreds per year), or huge liability if an injury occurs with no coverage. Also, no automatic bonding or liability insurance for theft/damages as agencies provide.
Overtime Pay: Time-and-a-half kicks in after 9 hours per day or 45 hours per week in California (40 hours under federal law). —this can significantly increase costs if you rely on one person for extensive hours. Ignoring it can lead to legal penalties.
Hiring Costs: Your time (or money) spent on background checks, reference calls, and verifying qualifications. If you pay for formal background check services, that’s an added fee.
Training and Supervision: Any additional training you want the caregiver to have (CPR classes, etc.) might be paid out-of-pocket. You’ll need to monitor their performance yourself. Agencies include these aspects in their service.
Replacement/Backup Care: The potential cost of last-minute backup care if your caregiver isn’t available—or the personal cost of your time filling in. With an agency, backups are provided as part of the service.
Legal Risks: Perhaps most concerning, the risk of IRS audits, lawsuits for wage/hour violations, or workers’ compensation claims if you haven’t met your obligations. The financial fallout from these can dwarf any hourly wage savings. One missed overtime payment or injury could cost thousands of dollars.
Expert Perspective
Given all these factors, it’s no surprise that elder care experts often advise using reputable agencies unless a family is fully prepared to handle the role of employer. As one in-home care provider noted, while agencies might charge 20–30% more per hour than an independent caregiver, the “risks, added responsibilities and hidden potential costs” with a private hire often make agencies the obvious choice. The extra dollars you pay the agency buy you protections, convenience, and professional oversight that actually save you money (and headaches) in the long run.
For San Diego families, it’s especially important to consider California’s strict labor laws and requirements. The state has put these laws in place to protect domestic workers and consumers, and non-compliance can be costly. When you work with a licensed home care agency, you don’t have to worry about calculating payroll withholdings, obtaining workers’ compensation coverage, or tracking overtime—it’s all handled for you, above-board and legally. You also gain assurance that the caregiver has been thoroughly vetted and trained according to state standards.
Making the Best Decision for Your Family
Ultimately, decisions about care often come down to balancing cost, safety, and peace of mind. If you’re an adult child trying to do right by your aging parent, the slightly higher hourly fee of an agency may be well worth eliminating the risk and burden from your shoulders. The true cost of a private caregiver includes not just dollars and cents, but your time, potential legal liabilities, and the quality of care your loved one receives.
The Bottom Line
A private caregiver is not automatically “cheaper” once you understand these hidden costs. For many families in San Diego and throughout California, choosing a reputable home care agency ends up being the safer and even more cost-effective route when all factors are considered. You get the benefit of professional management, compliance with all laws, insured protection, and vetted, reliable caregivers. This allows you to focus on your relationship with your loved one, rather than becoming an employer and compliance officer on the side.
If you’re weighing your home care options, reach out to local resources or licensed agencies for guidance. An honest agency will help you understand exactly what services and protections are included in their rate. By being informed about the hidden costs discussed above, you can make a confident decision that ensures your loved one’s care is in good hands—without any unwelcome surprises to your budget or wellbeing.
When it comes to in-home care, you truly “get what you pay for.” Investing in a professional agency may save you from paying a much higher price later on. Your loved one’s safety and your own peace of mind are priceless—and that’s something no bargain hourly rate can match.
