There is no doubt that a good nanny will provide the very best in childcare and make a working parent’s day-to-day life significantly easier. Only a nanny can stay late, care for sick children, cover business trips or work around shift patterns and on-call work. A good nanny will prepare the children’s meals, do their laundry and generally contribute to the smooth-running of the family home. But what exactly are you getting yourself into?
Employed or self-employed?
The first point to make is that nannies are employees who work in the home. They are not self-employed and cannot be paid as such, no matter what they tell you. The only exceptions are nannies who flit from job to job, e.g. settling newborns. If you treat a nanny as self-employed, or pay her cash-in-hand, and HMRC find out, you could be charged penalties as well as all the back tax and National Insurance, even if the nanny has already declared the income.
Gross or net?
Pay rates vary considerably according to where you live, and a local nanny agency such as www.tinies.com will be happy to help, giving you the low down for your area. Do check whether they are talking in terms of net rates or gross rates, since this will make a big difference to your cost per hour. Most professional agencies only talk in terms of gross rates, but some nannies, in some parts of the UK, try to negotiate their net (take-home) pay.
Net pay rates are bad news for parents, who might end up picking up the cost of expensive backdated tax bills. Net rates are also bad news for nannies, who lose out on the extra net pay generated in April each year when the personal allowance increases. That’s worth hundreds of pounds each year to a nanny. Always, always, negotiate a gross rate. You can use the calculator tool at www.nannymatters.co.uk to see how much your gross offer will generate in take-home pay.
Which payroll service?
Payroll records have become particularly complex in recent years. Employers have to submit payslip information to HMRC every pay day, and may have to calculate student loan, pension etc. as well as tax and National Insurance. Happily, there are payroll companies who specialise in nannies. If you have neither the time nor the inclination, this will be money well spent. Prices range from £120 to £280pa, but customer service varies considerably, so email and call them to check out the speed and quality of the response. NannyMatters charge £240pa for a fully-managed service that takes care of all your payroll responsibilities, including the employment contract.
Generally, the earlier you register with a payroll company, the better prepared you will be. Most will charge you when you register but offer a partial refund if you change your mind. NannyMatters doesn’t charge until the nanny starts.
Employer’s National Insurance
This is only payable on amounts that exceed £156 per week, and doesn’t apply at all if the nanny is under 21. Use the calculator tool at www.nannymatters.co.uk to see your total costs including Employer’s NI. Note too that you may qualify for a substantial discount if your child has special needs.
If you want your nanny to be able to accept payment in Childcare Vouchers, or to claim tax credits, she will need to be a registered nanny. In England and Wales, registration is with Ofsted and costs a little more than £100 per year. First aid training will be required, along with a DBS check (formerly CRB). Being registered is of no financial benefit to the nanny, so normally the parents meet some or all of these costs.
Finding a nanny
A professional nanny agency such as www.tinies.com will take the risk out of the recruitment process. Nanny agency charges vary hugely, and are often based on a percentage of the nanny’s salary, making part-time placements cheaper than full-time.
Fees could be anything from £400 to £1500+ but this should be money well spent, and the best agencies will find you a replacement at no charge if the nanny leaves shortly after starting. If you don’t use an agency, be prepared to spend extra time interviewing and make sure you thoroughly check every reference. You may also have to draw up your own employment contract.
What about nanny sharing?
Some families get together to recruit a nanny to look after their children and this can be a great way of reducing your childcare costs. You will need an experienced nanny and she will expect a good pay rate, but the total cost of paying her will effectively be halved. Setting up a share is complicated, so do get some initial free advice from www.nannymatters.co.uk