Why is private-hire home care cheaper than agency care?
Key facts
- Private-hire educational range
- $18–$28/hr (comparison only)
- Agency Personal Care rate, SE MI
- $29–$37/hr (2026)
- Payroll tax load
- ~7.65% FICA/Medicare + 1–3% unemployment
- Workers comp premium
- ~2–5% of payroll for home-care work
- What private hire excludes
- Vetting, training, RN oversight, backup, supervision, insurance
The gap between a private-hire rate ($18–$28/hr in Southeast Michigan) and an agency Personal Care rate ($29–$37/hr) is not the agency\u2019s markup — it is what the agency absorbs on the family\u2019s behalf. Payroll tax alone (FICA, Medicare, federal and Michigan unemployment) runs 7.65 percent plus another 1–3 percent unemployment when the family becomes the employer of record.
Workers compensation insurance is the item that most surprises families. In Michigan, a household that regularly employs a caregiver is typically required to carry workers-comp coverage — premiums run 2–5 percent of payroll for home-care work. A single back injury on shift without coverage becomes a personal-liability claim against the family.
The uncounted costs are larger than the counted ones: no vetting stack (ICHAT, drug screen, references), no training, no RN oversight, no backup when the caregiver is sick, no supervision when the family is at work. Each of those is included in the agency rate at typical 2026 Southeast Michigan pricing — $27–$32/hr Companion, $29–$37/hr Personal, $35–$42/hr Specialized.
Private hire can work in narrow situations — a longstanding neighbor doing a few hours weekly, or a family member paid on the books. It rarely holds up as the primary care model once hours cross ~20 per week or when the client’s condition escalates.
For the full breakdown, see the cornerstone: Understanding Home Care Costs in Michigan.
Related questions
- Can we pay a caregiver under the table?
- No. Cash payments create IRS, Michigan Treasury, and workers-comp exposure — and disqualify most LTC insurance and tax-deduction claims.
- When does private hire actually make sense?
- Narrow situations — a few hours a week, a longstanding trusted person, and low acuity. Rarely holds up above ~20 hours/week.
- Does long-term care insurance pay a private caregiver?
- Most modern policies require a licensed agency. Older indemnity policies sometimes pay regardless of provider — check the policy language.
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