Gross versus Net Pay for Nannies – Advice for Parents
Our recommended partners at www.PayrollForNannies.co.uk provide payroll advice for parents and have created this content.
Gross Pay is the amount of money your nanny receives before any taxes are deducted. Net pay is the amount of money your nanny receives in her pocket after all the deductions have been taken out of her salary (i.e. for Tax, National Insurance, Employers National Insurance, workplace pension, student loans to name but a few). Salaries for employment in the UK are usually defined in gross terms. Unfortunately, in the nanny industry, net salary arrangements have been the traditional practice.
If you were to agree on a net salary with your nanny, you would be liable for any deductions for tax and NIC regardless of the tax code or tax history. For example, if you agree on a net salary with your nanny, and they had a student loan or an outstanding tax debt to pay back to HMRC, their net pay would remain the same but the employers’ overall costs would increase because of the outstanding debt to HMRC. By agreeing on a gross salary with the nanny, the employers’ overall costs would be protected and the outstanding debt would be deducted from the nanny’s salary, meaning their net pay would be reduced, rather than being added to the employer’s costs, if the employer was to agree on a net salary.
Therefore, as the employer, always agree on a GROSS wage, rather than a NET wage with your nanny, so that your overall costs are protected at all times.
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