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8 things you need to know 
before employing a nanny

Employing a Nanny | Nannytax

Employing a Nanny for the first time? Read this first!

You may come across terms you’ve never even heard of when employing a nanny for the first time. This is totally normal as tax and employment law can be complicated – that’s why it’s a full time job for us here at Nannytax! 

We can give you plenty of support throughout the employment of your nanny but this should give you a good slice of the nanny employer know-how.


Check out Nannytax’s 8 things you need to know before employing a nanny:

1. Research types of nannies

Consider the type of nanny you require ahead of the recruitment process. For example, would a Live-in or Live-out nanny be more suitable? If you only require part time childcare then a nanny share arrangement could help bring your costs down. Or maybe you’re looking to plug that gap between school finishing and getting home from work, in which case an After School Nanny is a possible solution. Many nanny agencies can talk you through your options. Alternatively there are other ways to find a nanny here.

2. Register with HMRC and set up a Nanny PAYE scheme

You’ll need to register with HMRC so that you can set up a Nanny PAYE scheme. This will enable you to declare tax and NI contributions each time you pay your nanny. Nannytax can get you set up with HMRC and run weekly/monthly payslips displaying the tax and NI amounts to pay. Or with our ‘Pay my Nanny and HMRC’ add-on we’ll do this on your behalf so that’s one less thing to worry about.

3. Provide your nanny with a contract of employment

You must now provide your nanny with a contract of employment by their first day of work. This should include things like the salary, hours of work, description of duties, holiday entitlement and other paid leave. There are also optional terms you may want to consider such as confidentiality and redundancy. This is why our team of Nannytax HR experts draw up a bespoke nanny contract of employment based on individual requirements.

4. Administer sick pay and maternity pay where applicable

Something that you may not have considered is sick pay and maternity pay. Here’s a quick summary of each below:

Nanny Sick Pay

The first three days of sickness are unpaid but from the fourth consecutive day of sickness you must pay Statutory Sick Pay. At Nannytax we can calculate the sick pay and reflect it on the pay slips – all you need to do is report the sick days taken and we’ll sort the rest.

Nanny Maternity Pay

If your nanny falls pregnant, they are entitled to up to 52 weeks of maternity leave. Statutory maternity pay (SMP) is a set amount that an employee can receive each week whilst on maternity leave. Unlike sick pay, the Government can fund an employee's maternity pay. At Nannytax we can deal with all the paperwork required, claim the maternity pay and help set up the payroll for any temporary/ cover nanny.

5. Set up your Nanny Pension Scheme (if they qualify)

If your nanny is aged 22 or over and earns above £10,000 per annum they will qualify for a workplace pension scheme. All UK employers must ‘automatically enrol’ their qualifying employees into a workplace pension as soon as they begin working for them. Enable Autoenrol is our fully-managed Nanny Pensions service and that means our team of pension specialists can do all of this for you – phew!

6. Understand the difference between Net and Gross

We strongly advise that you agree a Gross salary with your nanny. A Gross salary will include your nanny’s tax and national insurance contributions (and pension if applicable). However, a Net salary is the take home pay that your nanny receives after these deductions. Agreeing a Gross Salary will protect you from becoming liable for any of the nanny’s unpaid tax from previous jobs which can even include child maintenance payments and student loans.

Net to Gross calculator here

More on Net vs Gross here

7. Calculate your Total Cost of Employment

Unfortunately, the Gross salary doesn’t account for all your costs when employing a nanny. What does is something called the Total Cost of Employment. This figure incorporates your Employer National Insurance and Pension Contributions (if applicable). Our Nannytax Total Cost Calculator can show you what your annual total cost of employment will be based on your nanny's salary.

Total Cost of Employment = Gross Salary + Employer’s National Insurance Contributions (+ Employer’s Pension Contributions if applicable)

8. Take out Nanny Employers Liability Insurance

All UK employers must hold Employers Liability Insurance to protect them against potential claims from employees. We highly recommend taking out our Enable Insurance policy which gives you up to £10million Employers Liability plus an additional £5million Public Liability which provides protection if something unexpected were to happen whilst you're nanny is working in a public place.

Apply for Enable Insurance here.

Nannytax and employing your Nanny

There may be more to consider than you first realised - but that's why we're here. With our annual Nannytax payroll subscription we’ll set you up with HMRC, draw up a bespoke contract and run the pay slips weekly or monthly. You’ll also have unlimited access to our HR specialists if you ever require legal expert advice.  Plus we can provide you with Employers Liability Insurance and ensure your nanny is covered for pensions too.

If you’d like to sign up to our services or speak to someone who can tell you more, please don’t hesitate to give our team a call.

Looking for as little admin as possible?

Remember we can even pay your nanny and HMRC on your behalf with our optional ‘Pay my Nanny and HMRC’ add-on – just select Nannytax Payroll Plus when you subscribe online or request this over the phone.

Contact Nannytax