Legal / Financial / Hiring
You Pay $50 an Hour. Your Caregiver Sees $18.
Families are billed premium hourly rates while the caregiver takes home a fraction of it. Where the rest goes, what it buys, and when it is worth paying.
By Dan Hellman, J.D.Published
Former employment attorney and HR director. Managing in-home care for his mom.
Disclosure: Some future product links may be affiliate links. We only plan to include related products when they are relevant to the caregiving topic.
Home care agency markup is the gap between what you are billed and what the caregiver is paid, and it is usually double or triple. Some of that gap is real cost. Some of it is not.
Here is the number that stops families cold.
You are billed $50 an hour. The person bathing your mom receives $17 or $18 of it.
That split gets posted by home health insiders regularly, and it lands hard every time, because most families genuinely believed the rate they were paying was the rate the caregiver was getting.
It is worth understanding where the rest goes. Some of it is real. Some of it is not.
Where the Money Actually Goes
An agency is a business with costs, and I am not going to pretend otherwise.
Payroll taxes are real. The employer side of Social Security and Medicare, plus unemployment insurance, is a meaningful percentage on top of wages.
Workers' compensation is real, and in this industry it is expensive, because caregiving involves lifting human beings.
Liability insurance and bonding are real. So is recruiting, background screening, scheduling staff, a nurse supervisor, an office, and a phone somebody answers on a Sunday.
Add all of that up honestly and you get a substantial multiple over the wage. Most legitimate service businesses run somewhere near double.
The gap between double and triple is the part worth asking about.
What You Are Actually Buying
Strip it down and the agency premium buys you four things.
Somebody else is the employer of record. That is not nothing, and posts fifteen through twenty in this series are about exactly how much it is not nothing.
Insurance if something goes wrong.
Screening you did not have to do.
And coverage when your person calls out.
That last one is the one families pay the most for and receive the least of. Ask any group of families about agency call-outs and you will get a wave of stories about the day nobody came and nobody could be sent.
If you are paying a premium primarily for reliability, make the agency show you what reliability looks like before you sign. Ask what happens on a call-out, how often it happened last month, and whether there is any credit when coverage fails.
Why This Matters to the Care Itself
This is not just an accounting complaint.
$17 an hour is less than a lot of retail and warehouse work, for a job that involves lifting adults, cleaning bodily fluids, absorbing verbal abuse on hard days, and carrying real responsibility for someone's life.
The predictable result is turnover. The good ones leave for hospital jobs with benefits, and your parent meets somebody new again.
The caregiver rotation you hate is downstream of the wage you never saw.
What This Means If You Hire Privately
Now the useful part.
When you hire directly, that whole margin is on the table. You can cut your own cost and raise the caregiver's pay at the same time. That is a rare situation and you should take it seriously.
Say the local agency rate is $35 an hour and the caregiver behind it is getting $18. Offer $25 directly. You save nearly a third. The caregiver gets a raise of nearly forty percent.
That is not a hypothetical for me. The agency quoted my mom's care at about $40 an hour and was advertising caregiver jobs at around $15. I paid a little over $20 directly, and paying more than the agency offered got me a better pool of applicants. By my math it has saved my mom around $40,000 a year, roughly $200,000 over five years of her retirement savings. More importantly, that money is what lets her stay home longer.
But be honest about what you just took on. You are now responsible for the taxes, the insurance, the workers' comp question, and the Thursday when she has the flu. Those costs did not vanish. They moved to you, and if you skip them, you did not save money. You took a risk and called it savings.
Budget the employer costs at something like ten percent above the wage and you will be in the neighborhood. It still comes out well below agency pricing.
Do Not Try to Negotiate Around the Person
One thing not to do. Do not go around an agency to hire their caregiver directly.
Most agency contracts have a non-solicitation clause with real teeth, and you can create a genuine legal and financial problem for a person earning $18 an hour. She is the one with the most to lose.
If you want to move to private hire, end the agency relationship cleanly and hire from somewhere else, or ask about the agency's own conversion or buyout terms, which sometimes exist.
The Point
Know what you are paying for. Pay it if you are getting it.
If you are paying a premium for reliability and the reliability is not showing up, that is a conversation to have with the agency, in writing, before the next invoice.
And if the person in your mom's house is being paid less than the person who made your coffee this morning, at least know that is what is happening.
Everything about how you manage that relationship gets easier once you do.
Read next:
Agency or Private Hire? The Real Trade-Offs Nobody Explains