Parents Advice

 BAPN Guide to Employing a Nanny

 Nannies are the most flexible of all childcare options, with one to one care of your child in your own home by the person of your choosing. They can become an invaluable part of your family and selecting a nanny is a very personal decision.

 This guide aims to give you an overview of the process of employing a nanny, covering advertising, interviewing and becoming an employer. It is applicable whether you are employing a full or part time nanny on a live-in or live-out basis.

Guide to Employing a Nanny    click here

Guide to Nanny shares         click here

Guide to Childcare qualifications for nannies     click here

 

 

 

We would like to thank Nannytax for providing the following information.

 

 Pensions for Nannies info -click here

 

 What you need to know when employing a nanny

When you employ a nanny in the UK you not only have to find the best carer for your children, you also become an employer, and as such you take on a host of responsibilities. For instance, you have to draw up an employment contract with your nanny within 2 months of her starting date and you must also give your nanny a payslip every time she gets paid.

It is a legal responsibility that you have employer’s liability insurance, and you must also make sure that you pay your nanny at least the NMW or above.

In addition you need to have a good understanding of the basics of employment law, because it’s surprisingly easy to make mistakes when you're juggling issues such as holiday entitlement, SSP, benefits in kind, SMP and redundancy pay.

Key points to consider when employing a nanny

If you employ a nanny in the UK you have the same legal responsibilities as a commercial employer and the law requires you to:

  •     Register as an employer
  •     Set up and operate a PAYE (Pay As You Earn) scheme on your nanny's behalf
  •     Keep tax records on her behalf
  •     Provide your nanny with regular payslips
  •     Provide her with an employment contract
  •     Pay regular income tax and National Insurance Contributions
  •     Pay employer's National Insurance Contributions
  •     File an employer's annual tax return

    These obligations also apply:

  •     In short-term employment (i.e. a week or longer)
  •     To any employment taking place in the UK - irrespective of the country of origin of the nanny or employer

Failure to register as an employer if you are paying your nanny above the weekly threshold is an offence, which can potentially lead to heavy penalties and career-damaging publicity.

Consider the following;

Failure to file employer's annual returns by 19 May can result in penalties of £100 per month filed lateFailure to pay all tax/NI liabilities before 19 April results in interest being charged on the amount outstanding. All these legal obligations can be not only complex but also time-consuming, especially for a first-time employer. Without working knowledge of the tax system and current employment law, you are entering a minefield. Businesses use skilled payroll, legal and human resources professionals, you can too - for a fraction of the price. Nannytax has more than 15 years' experience in domestic and nanny payroll and we can transform your hassle into peace of mind.

 

Can nannies be self-employed?

"Can't I just ask my nanny to sort out her own tax?" this is a question we're frequently asked by parents. Whether someone is employed or self-employed depends on the terms and conditions of their work. It is important for all employees to know their employment status as it affects employment and benefit rights, and how to pay tax and National Insurance Contributions. It is equally important that you, as the employer, are absolutely certain whether your nanny is employed or self-employed.

How to determine employment status

A worker is probably considered employed if they:

  •     have to do the work themselves
  •     can be told at any time what to do, where to carry out the work or when and how to do it
  •     work a set amount of hours
  •     can be moved from task to task
  •     are paid by the hour, week or month
  •     can be paid overtime or receive bonus payments

A worker is probably considered self-employed if they:

  •     can hire someone else to do their work or engage helpers at their own expense
  •     risk their own money
  •     provide the main items of equipment needed to do their job, not just the small tools that many employees provide for themselves
  •     agree to do a job for a fixed price regardless of how long the job may take
  •     can decide what work to do, how and when to do the work and where to provide the services
  •     regularly work for a number of people
  •     have to correct unsatisfactory work in their own time and at their own expense

*Please note that these lists are not exhaustive.

The exception to the rule

It's clear to see that in most cases nannies do not meet HMRC's criteria for self-employment. The childcarers that do are maternity nurses and childminders.

However in some cases HMRC do grant nannies self-employment status. It's very important to remember that if a family takes on a nanny who was previously self-employed they should contact the Revenue and request confirmation in writing that her status still applies in the new position.

Transfer of self-employment status between jobs is not automatic, and each situation should be considered individually. This is the employer's responsibility, and if they do not receive written confirmation from the Revenue and it later comes to light that nanny is not self-employed, then it's the employer, not the nanny who will pursued for unpaid taxes. And in the eyes of the law it is a criminal offence not to declare an employee and pay tax and NI contributions on their behalf.

 

Always agree a gross wage

If you agree a fixed net wage you are committing yourself to paying all of your employee’s income tax and NI to make up their gross wage, irrespective of their individual tax code or tax position.

Parents often agree a net (i.e. take-home) wage with their nannies, but in reality a nanny is always paid a gross salary, with tax and National Insurance Contributions deducted and paid to HMRC on a quarterly basis by the employer. Although many employers tend to look on this as an additional cost, it is actually part of the nanny's gross wage.

If you agree a fixed net wage you are committing yourself to paying all of your employee’s income tax and NI to make up their gross wage, irrespective of their individual tax code or tax position.

Please also be aware that a gross wage is not the total cost to you as an employer. In addition to this you have to pay an Employer’s National Insurance Contribution, which is not part of the employee’s gross wage. This extra sum will be advised to you when we send your first payslip for your employee.


Insurance

As an employer you have a legal duty to take out employer's liability insurance, but you should also consider nanny public liability insurance, legal expenses insurance and motor insurance too.

Employer's Liability Insurance

As you act in the capacity of employer, you have a duty to take out Employers Liability Insurance and provide a safe workplace for your employee.

Should they have an accident in your home whilst working, there may be a claim brought by them for reimbursement of costs and compensation. Employers Liability would pay for the damages awarded and associated costs.

Should this insurance not be in force, the employee could pursue a claim against you, holding you responsible for the accident. This could result in you paying substantial amounts from your own wealth and may affect the relationship you have with them.

The most convenient way to obtain this cover would be to speak with your household insurers. Their policy may automatically include this cover or they may be able to extend it at your request.

 

NMW & the working time directive

It is a criminal offence for an employer to pay below the NMW (except for exemptions - see below), currently carrying a fine of up to £5,000. The National Minimum Wage (NMW) normally increases every year in October, please check Nanny Tax rates page for the most up-to-date NMW rates.

Only nannies who live as part of the family are exempt from the NMW. An employee who lives as part of the family household, is treated as a member of the family, and is not provided with separate accommodation is excluded from the NMW. For employers who provide separate accommodation for their employees there is an allowance per 7-day week, which can be offset against the NMW hourly rate.

Employees may need to check that their employers are paying them (at least) the current NMW rate. Because many domestic employees’ wages are agreed on a net basis, this amount will have to be converted into its gross weekly equivalent and then divided by the number of hours worked in a week in order to establish whether it falls above or below the NMW.

All employers are already required by law to give their employee regular payslips, which should show the gross wage and the tax and NI deducted to arrive at their net pay. Where friendly or informal communication between employer and employee has broken down, an employer must give their employee access to their PAYE records within 14 days of receiving a written request.

The working time directive

Domestic employees, including nannies, are exempt from the measures concerning working hours but are entitled to a 20 minute rest break for every six hours worked.

Your nanny's statutory rights

By being on a PAYE scheme and having NI contributions deducted from her salary your nanny has certain statutory rights, which you as an employer have a legal responsibility to adhere to. These include rights to statutory sick pay and maternity pay, as well as contributions towards her state pension and unemployment benefits. In addition your nanny is also entitled to annual paid leave and redundancy pay.

Holiday entitlement

Holiday entitlement can be difficult to calculate. There are so many variables to take into account; is the nanny working full-time or part-time? Is she in a temporary position? Is the family giving the nanny all bank holidays as paid days off, or only the statutory entitlement? And last, but not least: what does the term pro rata actually mean?

Holiday can only be taken as it has been accrued, so if nanny takes more time off than she is entitled to for the duration of her employment, the employer has the right to withhold a portion of her final salary as compensation. Nannytax will help with this calculation.

Statutory entitlement

All employees in the UK are entitled by law to 5.6 weeks holiday per annum. For a full-time employee that is 28 paid days off per year, of which 4 weeks is standard leave and 1.6 (or 160% of the working week) is 8 of the bank holidays.

The entitlement to 8 bank holidays as paid days off is a new law, which was introduced in April 2009. Previously it was only those actually worked in a bank who were legally entitled to the bank holidays as paid days off.

Many families have been giving their nannies all bank holidays as paid days off well before the introduction of the new law, and if this is the case the nanny's statutory entitlement will remain at 5.6 weeks, including the 8 bank holidays as arranged with the family. Not 5.6 weeks plus 8 bank holidays.

 Part-time and temp nannies

What about if the nanny is only working part-time? The calculation is simple. Multiply the number of days the nanny works by 5.6.

If the nanny is employed on a temporary basis she is also entitled to holiday. The calculation of the holiday entitlement for a temp nanny in a full-time position is straight forward: divide 28 (the total number of days she would be entitled to if she was working the whole year) with 52 (the total number of weeks in a year). Then you simply multiply the answer with the number of weeks the nanny has been contracted to work for.

Example 1: Nanny A has been hired to work for family B 5 days per week for 16 weeks:

28 / 52 = 0.54 * 16 =8.6

The holiday entitlement for nanny A is 8.6 days.

If the nanny is employed on a part-time basis in a temporary position the calculation is a little bit more complex. First you need to establish the annual entitlement if she was working the whole year. As before, you simply multiply the number of days she works per week by 5.6. Then you follow the steps as outlined in the calculation above.

Example 2: Nanny C has been employed to work for family D for three days per week for 6 weeks:

5.6 * 3 = 16.8 / 52 = 0.323 * 6 = 1.9

Holiday entitlement for nanny C is 1.9 days.

Pro rata

Pro rata is a word that pops up frequently whenever you're dealing with a part-time nanny. Just like the salary will be calculated on a pro rata basis so will the holiday entitlement. Pro rata is Latin for "proportionally" or "a proportion of" and it simply means that the part-timer's entitlement is calculated according to what proportion of a full-time job their hours make up.

 

We would like to thank Nannytax for providing this information, further details can be found at:

 http://www.nannytax.co.uk/nannytax-for-parents

 

 

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