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Nannies and employment law: what you need to know

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Written by: Kirsty Wild
23/08/2018
Hiring a nanny can have multiple benefits for busy working families, but if you’re considering employing one for the first time, here are the financial and legal aspects to consider.

Contract

When you find and hire the right nanny, you will become their employer. This comes with a host of responsibilities that you may not have previously been aware of. Your nanny is making a career out of caring for children, and they are entitled to the same employment rights as any other UK workers.

When you employ them, it is your legal requirement to create a formal contract of employment which details their salary, working hours, holiday entitlement and notice period, plus a clear and concise job description that sets out their exact duties.

HM Revenue and Customs requirements

As their employer, you will be responsible for taking care of their income tax and national insurance contributions, plus a pension scheme if they qualify. It is hugely unadvisable to pay cash-in-hand, as this could lead to large fines from HMRC.

Each week or month, you should issue a payslip to your nanny which details their wages, plus any deductions made for tax, national insurance and pension purposes. It is also your job to contribute to their national insurance and pension, and make sure everything is paid correctly.

Wages

Live-out nannies are covered by the National Minimum Wage and Living Wage schemes. These are the minimum hourly rates they must be paid, dependent on their age. A qualified and experienced nanny may command higher figures, but as an employer you do need to be aware of minimum salaries.

Those aged 18-20 must earn at least £5.90 per hour, 21-24 year olds qualify for £7.38 per hour, and 25+ year olds must receive at least the National Living Wage of £7.83 per hour. Live-in nannies who become part of the family, while eating and socialising with the parents could be exempt from these hourly rate schemes.

Insurance

Another legal requirement when becoming an employer is to take out an Employers Liability Insurance policy. This ensures you are covered if your nanny was to take ill, or become injured while at work.

Companies have also developed insurance policies specifically aimed at nannies. Also be aware of insurance needs if they travel abroad with you on business or holiday trips and double check they are covered. If your nanny is required to drive your children around, you will also need to make sure they are insured to drive their own car or your car for business purposes.

Government funding

Launched in 2017, the government introduced a tax-free childcare scheme to help working families. This applies to funding for nannies too, as long as they are registered and approved within the scheme themselves.

To qualify, your children must be aged 11 or under, and both parents/carers, or the single parent/carer, must be in work. Earning thresholds do apply, but if you qualify for the funding you could see a large reduction in your childcare costs.

For every £8 you spend on childcare, the government will add another £2, which can then be used to pay your nanny’s wages. This means you could receive £500 per quarter per child, which adds up to £2,000 a year.

Kirsty Wild is head of sales and marketing at Nannytax, a nanny payroll and employment admin firm

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