Financially successful families often employ domestic staff to make their busy lives easier to manage, but they can inadvertently achieve the opposite if they do not follow proper employment methods. To help these families avoid mistakes and potential loss when employing domestic staff, ACE Private Risk Services, the high net worth personal insurance business of ACE Group, today released a white paper titled, “Managing the Risks of Employing Domestic Staff.”
“As a specialty personal insurer, ACE has deep expertise in mitigating risks for individuals and families with substantial assets. We’ve seen that while these families have been very successful managing employees in their professional lives, they often do not bring the same due diligence to their personal lives,” said Jim Williamson, Division President of ACE Private Risk Services. “As a result, they run the risk of fines and liabilities related to federal and state labor law, identity and property theft, and even personal physical harm. We developed recommendations to help families better understand the risks they face and to encourage them to work with their team of advisors to ensure a smooth and safe running household.”
To underscore the importance of proper hiring and management practices, the paper notes that an international firm specializing in security for organizations and private individual’s reports finding a cause for concern in the backgrounds of one out of every three applicants for domestic positions it has investigated.
Recommendations in the ACE white paper include:
- Build the right team: Families should consider consulting with an insurance agent, attorney, accountant, and background screening firm before making a hire. Specialized household risk management firms also can take on a variety of responsibilities for operating large households or providing human resources solutions for families and family offices.
- Plan in advance: For long-term employees, a proper hiring process can take four months or more.
- Have backgrounds professionally checked: Personal recommendations and cursory checks by employment agencies can only go so far. Families should thoroughly check the backgrounds of job finalists, including criminal records both in the U.S. and potentially abroad. Follow-up checks should also be conducted every three to five years.
- Document expectations: A signed employment agreement should detail job duties and requirements, compensation, tax treatment, performance evaluations, the termination process, confidentiality expectations, and any other important aspects of the job.
- Get the proper insurance: Families should carry workers compensation insurance in case their household employee suffers a job-related injury or illness. Employment practices liability insurance (EPLI) is necessary to protect against claims of discrimination or another wrongful employment act. Homeowners, valuable collections, auto, and umbrella liability insurance policies also provide important protections. If the employee’s duties will involve driving his or her own car, the family should make sure the employee carries adequate auto and umbrella liability coverage, as well.
“Even when the best hiring and management practices are used, unfortunate incidents can still occur,” added Mr. Williamson. “It is vital for families to work with both an insurance agent and carrier that specialize in serving high net worth clients to ensure they are properly advised and protected.”