Can I afford a nanny?
Hiring a nanny is a wonderful childcare option, the most flexible available and unique to your family’s routine and lifestyle. What can seem daunting is working out and tallying up the costs involved. At Nannytax, we want to make budgeting as simple as possible for you, so here’s a 7-step guide about what to consider when hiring a new nanny.
1. Live-in or Live-out – what working arrangement will suit your family?
Firstly, you’ll need to set out what hours and days of the week you’ll require your nanny. A live-out nanny is ideal for daytime care as they work a set number of hours, commuting to your house each day and leaving at an agreed time. Our 2018/19 salary index reveals that live-out nannies in London earn an average gross wage of £13.35 per hour, in the rest of the UK, the average gross wage is £10.96.
For parents who work shifts, travel a lot or have irregular working hours, a live-in nanny may be more suitable. The nanny will live in your home and will therefore need appropriate accommodation such as a private, furnished bedroom and bathroom. According to our salary index, live-in nannies earn an average gross wage of £9.56 per hour in London and £8.32 per hour outside of London. Due to the provision of accommodation, live-in nannies are generally paid a lower salary than live-out nannies.
2. Experience and qualifications – do you require a nanny with specialist training?
This is all about the requirements you have for your nanny and the work you’ll expect them to carry out. For example, if you want your nanny to provide some additional tutoring, it’s likely they’ll need a teaching degree and due to this kind of qualification, will likely cost more than a regular nanny. Modern nannies have a range of skills so each role requires some research when it comes to looking at salary ranges.
3. Your legal responsibilities – paying your nanny and getting insured
In order to be a compliant employer in the UK you will need to run payroll, hold Employer’s Liability Insurance and offer a pension scheme if the nanny qualifies. Nannytax can help you with all this. From £276 we run the payroll, supply an employment contract and offer HR support (read more here). We also offer a service for pensions and an Employers Liability Insurance package. If you would like your nanny to be Ofsted-registered, they'll need to have their own Public Liability Insurance and our Nannyinsure insurance policy (£70 per year) will cover this part of the criteria.
4. Childcare support – are you entitled to financial help from the government?
You may be entitled to financial support from schemes such as Tax-Free childcare – eligible parents with children under 12 can get up to £2,000 per child, per year, towards their childcare costs or up to £4,000 for disabled children under 17. Parents entering the scheme open an online childcare account which they use to pay you directly for childcare. Please note that to qualify for this scheme each parent must earn less than £100,000 per year and your nanny must be Ofsted-registered. We recommend using the calculators on childcarechoices.gov.uk to work out whether you’re entitled to each scheme and how much help you can get.
5. Are there other ways of saving money?
When looking at part-time childcare it might also be worth considering a nanny sharing arrangement which is where the nanny splits the week between one family and another. Nannyshares are a way of keeping childcare costs down but each family must involved must still fulfil their responsibilities as separate employers – such as paying National Minimum Wage. You can find out more about how nanny shares work here.
6. Agree the nanny’s salary in Gross terms – protect your employment costs!
When you agree to pay a gross salary with your nanny your total costs are protected and you will know exactly how much you are paying each period. If you agree a figure in net terms you are essentially writing a blank cheque – committing to pay all your nanny’s tax and National Insurance contributions, including any unexpected additions such as their previous unpaid tax and student loan debt. A net pay arrangement is also unfavourable to your nanny as they would not benefit from any increases in their personal tax-free allowance and would lose out on their employee rights. That’s why we’re currently running our #GoGross with Nannytax campaign.
7. Be sure to calculate your total cost
Sometimes nanny employers make the mistake of assuming they will only have to pay the nanny’s gross salary. However, employers have to pay Employer’s National Insurance contributions and their percentage of the pension contributions if the nanny qualifies (19/20 Pension Contributions rate is 3%) on top of the nanny’s gross salary. This is called the Total Cost.
Gross Salary + Employer’s NI + Employer’s Pension Contributions = TOTAL COST
Nannytax can support you with running payroll, your legal responsibilities, insurances and calculating your total costs. If you’d like to know more about our services, you can visit our Subscription page or call us on 020 3137 4401.