When you take on a nanny you’ll need to think about PAYE, tax and National Insurance as well as workplace pensions, holiday entitlement and employers’ liability insurance.
Whether you’re employing a nanny for the first time or you’ve done it before but need a reminder of what’s involved, then follow our step-by-step guide to becoming an employer.
Decide how much to pay
You can get an idea of rates by talking to local parents and nanny agencies. You need to pay at least the National Minimum Wage (NMW), unless the nanny is going to live with you as part of your family. In which case you’re exempt from this.
Many nannies will want to know how much they’re going to get each month. This is known as the net rate and is what’s left after tax and National Insurance (NI) have been deducted. But it’s important to agree a gross rate (the rate before tax and NI). There are two reasons for this:
- If you agree a net rate you will have to pay tax and NI on top of this. This means you could end up paying tax that is owing from a previous year, before your nanny even started work with you.
- A net rate also means that your nanny will miss out on any increase in the personal allowance. And will miss out on any tax refunds due to periods of lower earnings.
Once you’ve negotiated a gross rate we’ll do the sums for you so that you can let your nanny know how much he or she will take home each month.
Work out holiday entitlement and other benefits
The legal minimum holiday your nanny should get is 28 days or 5.6 weeks. This includes bank holidays. You can give more holiday if you want to. If your nanny works part-time or irregular hours you can use this calculator to work out how much holiday he or she should get.
Sort out insurance
If you employ anyone, even just for a short time, you must have employers’ liability insurance. It’s a legal requirement to have at least £5million of cover. And it you don’t have it, the fines are harsh. The only exception is if you employ a family member as your nanny.
Your home contents insurance may provide some employers’ liability cover. You need to let your house insurance provider know that you’ll be employing somebody to work in your home even if you have automatic cover. It might not affect the premiums you pay, but if you have to make a claim your insurance company could turn it down if you haven’t told them about your nanny. If your nanny is to live in your home she may need to take out her own personal possessions cover.
If your nanny will drive your car, then you’ll need to extend your insurance to cover him or her to drive.
Carry out background checks
Once you’ve offered a job to a nanny it makes sense to carry out some basic checks. If your nanny isn’t from the UK you check that he or she has the right to work in the UK. If you employ a nanny that doesn’t have the right to work in the UK you could be fined.
If you’re employing a nanny through an agency ask to see a copy of the Disclosure and Barring Service (DBS) certificate. Ofsted-registered nannies will also come with a DBS certificate. Unfortunately, you won’t be able to carry out a DBR check yourself.
Finally, ask for references from previous employers. They’re not obliged to give you one but if they don’t then you can draw your own conclusions.
Register as an employer with HMRC
If you use a payroll bureau this will be done for you
Set up payroll
For a small set-up fee and ongoing monthly fee a payroll bureau will take of everything to do with paying your nanny. A bureau will:
- Pay your nanny regularly and provide payslips
- Pay your nanny’s income tax and National Insurance (NI) contributions
- Pay your employer’s NI contributions
- Work out and pay Statutory Sick Pay (SSP) if your nanny is sick
- Work out maternity pay if your nanny is having a baby
- Work out and pay holiday entitlement
- Submit your PAYE payroll information to HMRC under Real Time Information
- Finally, your payroll bureau may help you to choose and set up a workplace pension.
Set out a contract
Ideally you will have a written contract in place on day one. If you don’t you must have one within two months of the start of employment. It’s the law.
In the contract you can set out working hours, holidays, probationary period, notice period etc. There are contract templates available online. But for a small fee our HR expert can write a contract that’s specific to your family and circumstances.