Paying Your Nanny
While it’s a common misconception that nannies are independent contractors, they are not. Nannies are the employees of the families for whom they work. For that reason, it’s important that nanny employers have a clear understanding of the best practices and legalities involved with paying a nanny.
Determining Salary and Benefits
Nanny employers should be familiar with the market value of nannies in their area. A nanny’s salary is based on many things, including geographical location, duties and responsibilities, experience, education and any special skills or certifications that she holds.
Typical nanny benefits include paid vacation, contributions towards health insurance, 8 to 10 paid holidays off, paid sick days and the use of the employer’s vehicle during working hours. Additional benefits may include retirement contributions and annual bonuses.
Each year, the International Nanny Association (www.nanny.org) conducts a salary and benefits survey. This survey provides data on salary and benefits for nannies in major metropolitan areas across the United States. The 2012 INA Nanny Salary Survey found that on average, nannies earned $700 gross per week.
Negotiating a Fair Deal
Negotiating salary and benefits can be uncomfortable for nannies and parents. Once the parents present the nanny with a written job offer, the negotiating begins. The nanny may accept the offer as is, or come back to the parents with suggested changes to the proposal. The parents then need to consider if they are willing to accept the proposed changed, make a counteroffer or end negations.
When speaking in terms of financial compensation, nanny employers should speak in gross terms and communicate clearly to the nanny that the rate offered is the rate before taxes are withheld. This will eliminate any possible confusion over hourly rates.
Hourly rate, overtime, paid time off and health insurance are some of the most common deal breakers for nannies. If their expectations aren’t met on these key points, they may not accept a position.
Typically during the nanny hiring process, parents look for nannies who are within their budget and nannies look for families who are willing to meet their salary requirements. When this happens, it leaves little wiggle room for negotiation because the budget of the parents and the salary expectations of the nanny are in the same ballpark.
When nannies and parents are not upfront with their expectations and budgets, negotiating can be more complicated. If there is a significant difference between the nanny’s salary expectations and the family’s budget, an employment arrangement may not be secured.
For both parties to feel that they are not being take advantage of, both the nanny and the employers must feel satisfied that they have secured a fair deal.
What About Overtime
All nannies, both live-in and live-out, must be paid at least minimum wage for each hour worked. For nanny employers of live-out nannies, paying overtime is not an option. Live-out nannies must be paid overtime for every hour worked over 40 within a 7 day period. For parents who employ a live-in nanny, the employment laws vary from state to state. In some states, like New York and Massachusetts, live-in nannies are entitled to overtime pay. When overtime is mandated for live-in nannies, whether after 40 or 44 hours worked within a 7 day period, for example, also varies from state to state.
While nannies and nanny employers typically talk in terms of salary, it is important to be aware that the salary must be translated into an hourly rate when overtime is involved. For live-out nannies, the first 40 hours must be calculated at a base rate and the additional hours must be calculated at an overtime rate of 1.5 times the base rate. The base hourly rate must be more than minimum wage to be compliant with the Fair Labor Standards Act. Nannies cannot legally be given compensatory time off in exchange for working overtime.
You Get What You Pay For
When it comes to in-home childcare, you get what you pay for. Offering to pay a nanny below market value may attract candidates that are not worthy of market value.
Parents who wish to pay below market value may attract candidates who are unable to secure work through traditional nanny placement agencies (due to background issues or bad references), who are not legally able to accept work in the United States and who may not be qualified but are desperate for any type of employment.
Your nanny is an investment in your child. If you are looking to secure long-term, consistent care for your child, pay your nanny fair and pay her legally.
The Nanny Tax
On top of their nanny’s gross wages, nanny employers can expect to pay about 10% of their nanny’s gross wages in employer taxes (although there are tax breaks that can offset this amount).
Nanny employers are responsible for reporting and paying:
- The employer’s half of FICA (Social Security and Medicare)
- State Unemployment Taxes
- Federal Unemployment Tax
- Other state taxes.
Nanny employers are also responsible for withholding taxes from their nanny’s paycheck and making the appropriate payments. These withholdings include:
- The employee’s half of FICA (Social Security and Medicare)
- Federal Income Tax (optional but advised)
- State Income Tax (sometimes optional, but advised)
- Other state taxes (including disability and unemployment, where required).
Help is Available
If establishing and maintaining payroll for your nanny seems overwhelming, consider outsourcing your payroll. There are many companies that specialize in providing payroll and tax assistance to household employers. For a list of reputable nanny payroll and tax service providers, visit the International Nanny Association website, www.nanny.org, and search for member companies.