We appreciate that employing a nanny to care for your little ones is a big decision. Once you have found your Mary Poppins, there are a number of things you need to think about from contracts and cars to wages and tax. It can seem a daunting prospect, but it doesn’t have to be!
On hiring a nanny, you will become an employer. As an employer, you have an obligation to pay tax, national insurance and provide a pension for your nanny.
Agree a gross wage
Most people’s salaries are defined in gross terms, but unfortunately in the nanny industry, net salary arrangements, that is, agreeing a take home pay figure, have been the traditional practice.
But beware, agreeing a net salary could end up costing you a lot of money!
If you agree a net wage and your nanny has a student loan or an outstanding debt with HMRC then the nanny’s monthly money in their pocket would remain the same but your costs would increase, as you would effectively be paying the nanny’s student loan or debt on top of their wages!
We would always recommend agreeing a gross salary as this then protects you the employer from any hidden costs.
But gross can be better for nannies too!
The tax-free allowance increases every year and net agreements will not see the benefit of this. The employer will see the tax saving, not the nanny.
Tax and National Insurance
As an employer, you are responsible for deducting and paying your nanny’s Income Tax and National Insurance contributions to HMRC.
You will need to register as a new employer with HMRC and set up a PAYE scheme but, don’t worry, a good Nanny Payroll company can do this for you.
Pension contributions
If your nanny is between 22 and state retirement age and earns more than £10,000 a year, you must set up a pension scheme for them.
You will have to make a contribution towards this pension scheme each month, based on your nanny’s gross salary.
Again, a good Nanny Payroll company can set up the pension scheme and administer it for you.
Employer’s liability insurance
When employing someone in your home, you will need to make sure your home insurance covers you for people working in your home.
Employer’s Liability Insurance is a legal requirement for all employers in the UK set by the Employers Liability (Compulsory Insurance) Act 1969. This protects the employer from any claim for compensation by an employee for illness/injury sustained as a result of their employment with you.
Nanny share
Nanny shares are becoming an increasing popular way of making nanny employment more affordable and accessible for many families. It can also be a good way of allowing an only child to socialise with other children without going to nursery.
Nannies can often work for two or more families, by caring for the children all at the same time or by splitting the week between them.
It is important to remember that however many families the nanny is working for, each will be considered an individual employer and as such have the individual responsibilities, even if all the children are being cared for at the same time.
Other bits and pieces…
You must provide your nanny with a payslip every week or month, showing their earnings and any deductions that have been made.
You must pay your nanny at least the national minimum wage. This is currently £7.83 per hour for employees aged 25 and older, £7.38 for employees aged 21 to 24, £5.90 for 18 to 20 year olds, and £4.20 for under 18s. However, it’s likely you’ll be paying them much more than this.
You should issue a written contract to your nanny before they start work, or within two months of their start date. It should include the salary, hours, days worked, notice period and holiday entitlement, plus a description of their duties.
All employees, whether full or part-time, are entitled to pro-rata 28 days paid holiday per year including bank holidays. You can offer more than this, as a way of obtaining the best nanny!
You are responsible for paying your employee’s statutory sick pay; statutory maternity pay and holiday pay. If you wish the nanny to accompany you on holiday, then please note that this does not count towards the nanny’s annual leave and she will need to be paid as normal. Also, if you want the nanny to take some of her holiday when you take holiday, this should be specifically stated in the contract.
You must check that your nanny has a legal right to work in the UK. Check your applicant’s identification documents, such as passport, birth certificate or identity card before making a formal offer of employment.
DBS (formerly CRB) checks are essential for anyone who wants to employ a nanny to look after their children. When checking your nanny’s references, always ask to see their DBS check which must be valid within 12 months.
Hopefully, this article highlights all the big things you need to think about when employing your nanny. It may seem like a lot but a good Nanny Payroll company, can handle it all for you from as little as £18 per month.
If you have any further questions or would like to sign up, please email us at payroll@payrollfornannies.co.uk or give us a ring on 01273 446595.
