Do you hire in-home help? Here's how to protect yourself from problems down the road.

Here's how to protect yourself from problems down the road

What happens if the professional you've hired to help with your children or elderly parents suddenly becomes injured in your home? That "professional" may be like family, but the legal liability is likely to sit with you, the employer. However, the purchase of a separate worker's compensation policy or additional no-fault medical coverage under a homeowner's insurance policy is a good way to protect everyone's interests.

Attorney LaVeeda Morgan Battle, 43, of Birmingham, Alabama, knows the struggle of balancing family with career. She was confirmed a presidential appointee to the Legal Services Corp. board of directors in 1993, which sometimes requires mid-week travel. Her two teenage daughters also have busy after-school schedules. To keep the family out of chaos, she and her husband, another business traveler, decided to hire Clara Slater as a live-in housekeeper. According to the Bureau of Labor Statistics, Battle's household is one of 800,000 with full-time childcare workers or housekeepers; millions more are estimated to work in homes of the elderly.

"Slater is like a part of the family," Battle says. Slater even encourages Battle-to join in her walking routine every week. That promotes good health, but they both know it's not enough. Slater, 65, automatically qualifies for Medicare because of her age, and because Battle pays the proper federal, state and local taxes, Slater has the protection of unemployment compensation if she cannot work. To put yourself in-the-know like Battle, consider the following points:

The tax question. "Luckily, I knew what to do because I'm a lawyer and I work with tax lawyers," Battle says. It can be a confusing process, she admits. State and local tax must be filed quarterly. (Federal law changed in 1995 to allow federal filing only once a year with income taxes.) Social Security tax must be paid, and some states take the decision for workers' compensation insurance out of your hands by mandating the coverage. Prices vary, but a typical policy costs around $400 for employees making at least $15,000 annually, says Donald Stukes Jr., a New Rochelle, New York, accountant with his firm, Donald Stukes & Co. L.L.P. Most disability insurance will provide up to 65% of income. Stukes recommends you see your insurance agent and accountant as soon as you hire someone.

Make sure you pay all your taxes. "People often get in trouble if an employee leaves or is fired, then files for unemployment or disability. Then the state realizes that the person was receiving unreported compensation," Stukes says.

Taxes and workers' compensation are the sole responsibility of the employer in many states. However, you may not be liable if the employee works only part time or is under contract with an outside agency.

Look into your auto and homeowners insurance. The average $100,000 policy may include only $1,000 of no-fault medical coverage for which you can get reimbursement for medical bills. Ask your agent about an increase to $3,000 or more, which may just add dollars to your premium. Also, update your automobile coverage if the person will drive regularly. A small percentage increase will depend on the age and gender of the additional driver, says Rob Hair, an Allstate Insurance underwriter.

Arrange for an additional benefits package. Work with your insurance company, or with a firm like Eisenberg Associates of Boston--the official insurance provider of the International Nanny Association (INA). Eisenberg is a full-service underwriter that arranges medical and dental insurance for thousands of service workers. Nearly half of Eisenberg's clients split the costs of medical and disability insurance with their employers. The insurance diminishes the need for lawsuits. Call 800-777-5765.

Your responsibilities. Finally, do not be afraid to manage the home situation as you would the one in the office, says Mary O'Connor, president of the INA in Collingswood, New Jersey. This is a business arrangement, after all, and you are the employer.