When a family office says, “I just need help paying my household staff,” they often believe it’s merely a matter of processing wages. Just another expense, similar to paying off utilities like the electric bill. However, the reality is that it is far more complicated. As Joe from TEAM Risk Management Strategies puts it, “It’s much broader than just making sure someone gets paid.” There are quite a few boxes that need to be ticked off before cutting the check.
Unlike dealing with corporate professionals, the household environment can be far more nuanced. While many of the same wage and hour and other employment implications are present as they are for other working professionals, it may not feel as apparent when discussing work topics in the living room instead of a boardroom. In addition, imagine giving a performance review to a personal chef or the children’s nanny. These individuals have an intimate understanding of your family’s habits, making it significantly more challenging to maintain professional boundaries.
The “just payroll” myth
To get a better sense of where families often trip up, we picked Joe’s brain. One of the biggest pitfalls or issues, he says, is the habit of “banking” hours. It’s a common scenario: a family might pay for 40 hours upfront during a slow week where the staff only worked 30, assuming those extra 10 hours can just be “carried over” when things get busy later on. But as Joe explains, it doesn’t work like that. Legally, overtime has to be calculated and paid based on that specific day or week.
Another common issue that comes up is when a family is travelling with, say, a nanny. Joe points out, “If a nanny sleeps with a baby monitor nearby, legally, that is considered on the clock.” Unless a nanny is fully off-duty, meaning they are in their own room, door closed with no requirement to respond, their waking and sleeping time is considered compensable.
Finally, in an attempt to stay ahead of both these issues, families tend to assume they only need to follow one set of rules, like federal standards if based in the United States. However, sick time and overtime can vary wildly by state, city, and even county. As Joe highlights, “places like San Francisco, Seattle, and Chicago have their own specific regulations.”
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When things go wrong
For family offices, the real complications often arise during termination. Since household staff operate within the intimate confines of the home, the employer/employee relationship can take on a deeply personal tone. This emotional proximity makes the decision to terminate feel like a personal affront, increasing the stakes and amplifying risks.
When lines get blurred between personal and professional life, communication becomes informal. The boundaries tend to vanish, and that’s when the legal risks grow. Even in “at-will” states, where the employer or the employee can terminate the working relationship at any time without notice, a family can still face a lawsuit for wrongful termination or discrimination. And without a clearly documented paper trail, a decision that was made with the right motives can be very hard to defend in court.
“Employment liability falls into three buckets: workplace injuries, wage and hour compliance, and wrongful termination. Wage and hour claims are particularly dangerous because they often carry a look-back of up to six years, depending on the state, and penalties up to double or even triple the missed amount.” –Joe Sofia, CEO of TEAM Risk Management Strategies
The hardest part
Furthermore, even though family offices are considered private employers, they are still bound by many of the same employment regulations as large corporations. Joe describes one given scenario where a client terminated an underperforming employee. The family felt justified and ready to move on. However, the situation took an unfortunate turn when it turned out that she was in a protected class (she was pregnant). Because the family had neglected the critical step of formally documenting her performance, she sued for wrongful termination.
For family offices, neglecting or overlooking such details can lead to penalties that spiral out of control. For instance, paying an employee “under the table” may feel convenient in the moment. However, it can lead to significant exposure at the time of termination. Family offices may be liable for wage claims, tax reporting issues, and potential fines or audits.
Additional complexity arises with live-in employees. In such instances, termination is not just an employment matter but also involves housing considerations. For example, employers may need to adhere to notice requirements and time-to-vacate laws. And, in some cases, employees may have tenant-like rights that limit the family office’s ability to require an immediate departure.
The golden rules
There are several “golden rules” that can make a meaningful difference in reducing risk for family offices. First, it is important to keep the relationship as professional as possible, even if it feels personal or informal. That means maintaining a thorough, written record of performance, attendance, or policy violation issues at all times. It is better than waiting until a problem escalates.
Second, from a compliance standpoint, consistency is one of the strongest forms of protection. Decisions should align with documented behaviour and be applied fairly across similar situations. When employers approach termination with both care and a clear understanding of their responsibilities, they are far better positioned to navigate what is often one of the most sensitive and high-risk aspects of household employment.
Finally, for family offices just starting to realise that household payroll extends far beyond cutting a check, the most prudent step is to partner with experts who can manage the heavy lifting. TEAM provides a comprehensive solution for managing household staff like housekeepers, assistants, and nannies. By assuming the role of legal employer of record, they effectively shield clients from the administrative and liability burdens of domestic employment. Unlike a traditional PEO or standard service, their high-touch model specialises in household staff and takes on employment-related liability, addressing every aspect of the employment relationship. That includes tax compliance and healthcare benefits to ongoing HR support, which is handled with professional rigour and dedicated oversight. As Joe summarises, “When the employees are happy, and our family office clients are protected, we’ve done our job.”
