January 2003
All Change! Professional Nanny/Nannytax survey of UK nanny wages
This year our annual survey shows a far different picture than in the past few years. Unsurprisingly, given the current downturn in the economy, the fairly sharp rises in nannies' wages previously seen have given way to more modest increases which, on average, are keeping just ahead of inflation.
Across the UK, live-in nannies' wages have increased by an average of 4 per cent this past year, while daily (live-out) nannies have seen an average 3.5 per cent increase in their wages. The vast majority, 90 per cent, of the 84 nanny agencies who took part in the survey felt that over the next 12 months nannies' pay would either remain the same or only rise in line with inflation.
TOWN AND COUNTRY
The average net pay for a daily nanny in central London rose by a further 5 per cent to £361 a week. This equates to an annual gross salary of just over £25,000. Taking into account the employer's National Insurance of almost £2,500 that a working mother employing a nanny would also have to pay on this, she in turn would need to be earning a gross salary of £37,500 just to cover the cost of employing her nanny out of her own net earnings. However, the average pay of a live-in nanny in central London actually fell by 1.5 per cent to £268 net a week, or £18,000 gross a year.
On the other hand, live-in nannies in outer London and other towns around the UK saw the greatest average increases for the year, by 7 per cent (£16,360 annual gross) and 8 per cent (£14,151 gross) respectively, while their daily nanny counterparts saw rises of just 3 per cent (£19,882 gross) and 5 per cent (£16,360 gross). Meanwhile in the countryside, the average annual gross income of a live-in nanny rose by 3 per cent to £13,382, while daily nannies' rose by only 1.5 per cent to £15,143.
IT'S THE ECONOMY
These figures can be seen as a clear reflection of several factors which have affected the employment of nannies over the past year. The slowdown in the general economy has led to widespread redundancies among actual or potential nanny employers, particularly those who work in financial services and information technology, leading in turn to more nannies being made redundant, according to 58 per cent of participating nanny agencies. The consequence is that for the first time in several years, many nanny agencies have found themselves with more nannies looking for jobs on their books than parents looking for nannies. If the supply of nannies continues to outstrip the demand, then inevitably wage rates will start to fall.
With many parents having to tighten their belts, and denied any tax breaks from the Government when employing a nanny, the rising wages that nannies have expected over the past few years have forced a growing number of parents to choose alternative childcare such as au pairs, nurseries or childminders. Many others have opted for a nannyshare, or employing only a part-time nanny, as a more affordable solution. Nanny agencies reported that almost half of the positions they were finding for their nannies were now in part-time work, a further increase in a trend that has already been much in evidence over the past few years. With a further 1 per cent increase in employers' National Insurance contributions due this April, this trend towards part-time employment is certain to continue.
All of this suggests that it is essential for nannies to have realistic expectations when seeking new employment, since these quite different market conditions mean that they can no longer just name their price.
CHANGING ROLES
Another consequence of the higher pay that some nannies can command nowadays, as pointed out in last year's survey, is that parents want more for their money. They expect more in the educational content that nannies can bring to the relationship with their children - in some cases requiring an almost traditional governess role – and, more controversially, in wanting their nannies to be more of a combined nanny/housekeeper, especially while the children are at school.
It seems that most nannies' ideal job description, of being in sole charge on a fulltime basis, is at odds with an increasing number of parents' requirements. Parents want greater flexibility from their nannies in terms of both hours worked and tasks done. . More are seeking nanny cover before and after school or nursery, or for only part of the working week. Several agencies confirmed that many nannies now need to hold down two or more part-time jobs in order to work a full week. On the plus side, more nanny mothers are being allowed to bring their own young children to work with them.
In a similar vein, more parents are seeking live-in nannies in order to cut costs. This reverses a recent trend towards daily nannying. On the other hand, more nannies considering the live-in option would prefer separate accommodation to maintain their privacy and independence, a taxable benefit which can be costly for parents to provide.
Now that employers are required to give four weeks' holiday pay, many are asking their nannies to take at least some of this paid leave at the same time as they go on holiday themselves, no longer having them accompany the family on holiday.
On the question of fringe benefits, the survey revealed that fewer perks were on offer, perhaps because parents tend to offer them in order to retain good nannies when they are in short supply - not the case at present. The most common perks mentioned were the use of a car outside of working hours and health club membership. Exceptional benefits, few and far between this year, included two free flights home each year for a nanny from overseas, and the nanny who was made redundant but given the family car she had been using as a parting gift. Other unusual perks included 10 per cent of a mother's annual work bonus
STATEGY GAP
The Government's reluctance to recognize nannying within its overall childcare strategy should be seen as the other main factor, apart from economic slowdown, which is putting pressure on both parents and nannies. In terms of Government sensitivity - or paranoia - over the electoral risks of being seen to give tax breaks or any other support to nanny employers, nannying is fast becoming the profession that dare not speak its name. Only parents employing childminders in their own homes - an unlikely scenario - are currently eligible for the new 'home childcarers' tax credits that come into effect this April. But in its childcare strategy document on work-life balance published last week, the Government still says it is 'considering how to widen the scheme to include people who are not already childminders'. Yet again, it seems that using the word 'nanny' would choke them! But such squeamishness is doing working parents no favours.
Several nanny agencies commented that it is high time the nanny sector as a whole adopted the practice of quoting gross wages as standard. The outdated convention of discussing pay in terms of a net (take-home) wage keeps both parents and nannies from being able to make realistic comparisons with other types of work. As a result, nannies end up with unrealistic wage expectations, which are particularly unhelpful to them in current market conditions. Meanwhile many parents are tending to look on their responsibility to pay their nanny's tax and Ni contributions as an additional cost, rather than as an intrinsic part of her wage.
CUTTING CORNERS
There is some evidence in the survey that the trend over recent years for more employers to pay the tax and NI for their nannies is being reversed by this financial pressure on parents. Some are risking criminal prosecution by not declaring their nannies' wages at all, while the nannies are disbarred from state benefits and the other protections and advantages of legitimate employment. The Government is being extremely short-sighted in failing to encourage nanny employers to meet their statutory obligations by offering them tax incentives or other subsides, since it is undoubtedly losing a substantial amount of tax revenue as a result.
In the absence of tax credits, more parents are considering “nanny company” schemes, which carry some tax and NI savings but, in the eyes of HMRC, are not appropriate to the parent/nanny working relationship and soon be disallowed. Nannies should be aware of the risks they run if they agree to cooperate in these (see article in February’s Professional Nanny).
THE BIGGER PICTURE
Overall, this year's survey reveals a mixed picture where many nannies will have to adopt a realistic approach to future job negotiations, where additional educational skills will be at a premium, and where many parents finding themselves caught between the cost of employing a nanny and the lack of Government support for their changing childcare needs are cutting back on the amount of hours they give their nannies. One nanny agency commented, 'There will always be a small number of very well-off parents who can afford to employ a nanny under any economic conditions.' But many more hard-pressed parents who would like to employ a nanny will consider other less flexible, but more affordable, childcare options, so long as the Government continues to turn a blind eye to the profession that dare not speak its name.