Whether you file your parents on sch H as household employees or not, their income is not employee income so it must be self-employment income in this case. File the sch H as required.
Pub 926 Household Employers Tax Guide from the IRS is the ultimate authority. Page 11 discusses required forms. If it was not a grandparent, you would have to provide a w2.
Here is the actual schedule H so you can see what the form looks like and Instructions for Schedule H (Form 1040), Household Employment Taxes.
@Hal_Al answer just popped and is correct.
@efender
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