A Risk Management Guide for Household Employers

Your biggest treasures are in the hands of your household staff: the safety of your children, the security of your property and the privacy of your information. These employees are necessary and helpful but also a risk, be it from accidents, reckless behavior or bad intentions.

While there is no way to minimize the concerns entirely, establishing clear communication, crisp policies and appropriate checks and balances can prevent, or at least decrease, most issues. We’ve created a checklist of important steps to head off problems with domestic employees.

Step 1: Hire carefully

• Do extensive background checks.
For every potential employee— even part-time or temporary workers— you should initiate a pre-employment background check to investigate criminal records, driving violations, financial problems, etc. We recommend hiring an in-depth service that can provide an intensive historical dive compared to your typical investigation. For example, one client’s nanny candidate passed a basic background check of U.S. records, but a deeper inquiry found links to a foreign-born terrorist group. These background checks not only raise red-flags but could also help protect you if there is ever a liability suit.

• Hold contractors to the same measures as full-time employees.
Those workers hanging your art collection might also be sizing up your home for a break in. We recommend checking all workers out, whether they report to you or your contractor.

Step 2: Train staff

• Create an employee handbook.
Putting important details in one place benefits all parties. It might seem trivial, but writing down rules and expectations can help you down the road, should someone violate them.

• Empower employees to do the right thing.
Give staff the knowledge on how to safely and effectively handle situations such as fires or weather incidents. This way, employees know how to properly protect themselves, family members, and, if there is time, art or other valuables. Also prepare them for less catastrophic problems such as red wine spills on your silk carpet. You may want to pay for training in key skills, like first aid for the nanny, defensive driving for the chauffeur, etc.

Step 3: Set limits

• Have employees drive your car, not theirs.
Any staff member that regularly drives on your behalf should use a car that you own and insure. There are potential liability issues if they get into an accident in their car and are underinsured. But don’t forget to name him/her and all regular drivers on your policy.

• Limit access to financial accounts and personal information.
Give employees access to only as much information and authority as they need to do their jobs. Regularly review any bank and credit card accounts staff members use, and make sure they know you’re keeping a close eye. In addition, be careful about giving employees access to your email, especially if you use that account to send instructions to your banker or financial advisor. Create a procedure to verify any emailed transaction, such as requiring the banker to confirm instructions by phone. This can help reduce the chance of unauthorized bank transfers or cyber related losses.

• Establish clear social media policies.
Make sure staffers know what is okay to post, and what’s not. For example, do you want pictures of your house, children and vacation spots on their feeds? Consider asking them to share their social media handles to double check that they are complying with the rules you have put in place.

Step 4: Get insured

• Obtain workers’ compensation and employment practices insurance.
Many states require you to carry workers’ compensation insurance. Even if your state doesn’t have those requirements, we recommend you obtain the proper coverage so employees are protected in the event they are injured on the job. Consider adding employment practices coverage to the basic workers’ comp policy to assist with liability from claims regarding discrimination, sexual harassment, and other workplace violations. Any workers who spend time on a boat or even on a dock may need special maritime workers compensation coverage, so ask your broker about proper coverage options.

• Consider employee crime coverage.
With your broker, explore whether you need a separate policy to cover cases of employee theft. This is usually obtained when staffers deal with finances or regularly handle your valuables. Some family cyber insurance policies will include coverage for computer theft by employees and other digital attacks.

Step 5: Terminate relationships carefully.

• Take suspicions seriously.
If you suspect improper behavior, speak with your financial advisors, attorney and insurance broker to be sure you are properly protected in all areas, if action is needed.

• Consult your legal team before letting employees go.
If you no longer want someone to work for you, call your lawyer first. In this litigious age, you don’t want to create new problems as you solve old ones.

Following these steps can help establish both a foundation of trust and a series of smart checks and balances. Furthermore, if you have the right policies in place you can help ensure that each employee is properly protected which is an added, but important bonus.


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