employing a nanny – Page 4

RTI Real Time Information

RTI stands for Real Time Information and was introduced by HMRC in 2012. HMRC put this system into place so that every time an employee is paid, it is the employer’s responsibility to make a submission to them detailing this payment.

By employers using RTI, it enables HMRC to process any amendments to employee’s tax free allowance in real time rather than as done previously on previous years records and pass this information to Department for Work and Pensions. In turn this makes sure Universal Tax Credit claims are based on accurate figures of an employee’s income.

As an employer, if your payroll submission is not sent to HMRC on time, £100 fines will be issued. It is important as an employer to make sure all pay details are sent to HMRC on or before the date nanny is paid.

Live in Nannies

There has been a rise in live-in nannies, and with that confusion over nanny’s legal pay.

If nanny lives in the family home, is treated as part of the family – eating most meals with them and spending time together such as leisure activities and evening time in the same sitting room, then the national minimum wage does not apply.

The national minimum wage will come into effect for nanny’s who are not treated as part of the family, but instead the employer will be able to use the offset allowance when the nanny is live-in by £7.55 a day, £52.85 for a whole week.

The other scenario is that nanny is given accommodation separate to that of the family, this then becomes a benefit in kind and needs to be declared annually to HMRC.

If there is a benefit in kind, it will mean nanny’s tax code will be decreased and her net pay goes down and as an employer having to pay an additional national insurance on the benefit amount.

The law is very strict, so you need to make sure you know how to proceed with your live in nanny.

Understanding Tax Codes

Your tax code determines the amount of tax you pay each pay period and for current tax year the standard tax code is 1250L.

Whatever your tax code the numbers denote the amount you can earn each year before you are liable to pay tax, you just need to add a zero to the end of code and this then means the 1250 code gives you a figure of £12,500 you can earn before you pay tax.

This amount is then split into the number of pay periods you will have in the tax year, 52 if weekly and 12 if monthly.

Weekly £12500/52 = £240.38

Monthly £12500/12 = £1041.67

Once you have reached the above earnings in each pay period you then pay tax at 20%.

If you’re annual earnings are above £50,001.00 then the tax rate increases to 40% on earnings above this.

If you have several jobs it could well be that one of your employers has the full allowance (£12,500.00) and the other is using a tax code of BR, BR denotes that all earnings in that employee pay tax at 20% as the full allowance is being used elsewhere.

Should both employers have the full tax code, you will then need to contact HMRC directly (0300 200 3300) to get one of these corrected, you will need your NI number to hand when contacting them.

Payroll Terms

These are some of the most common terms used in payroll.

Gross pay – this is the pay before deductions for tax, national insurance, pension and student loans. The gross pay includes overtime, commission, bonuses, statutory payments and any other taxable income.

Net Pay – This is what nanny takes home in her pocket.

Tax – Deducted based on nanny’s tax code which determines nanny’s tax free allowance and then any earnings above the tax free allowance is deducted at 20%.

NI – National Insurance. There are 3 types of NI for PAYE.

Employees NI deducted from nanny’s gross wage at 12% on earnings above £166.00 per week.

Employer’s NI on top of nanny’s gross wage paid at 13.8% on earnings above £166.00 per week.

Class 1A NICS, this is a yearly payment for any benefits in kind nanny may have had for the previous tax year.

SMP – statutory maternity pay. Nanny is entitled to 39 paid weeks of leave providing she meets the criteria. Nanny is allowed a further 13 weeks unpaid

SPP – statutory paternity pay. Nanny entitled to 2 weeks of statutory pay.

SSP – statutory sick pay. Nanny will get SSP after 4 consecutive working days of sickness

P60 – Nanny will be given this form at the end of the tax year to show her annual pay, tax, NI and statutory payments, she then keeps this for her own records.

P45 – When nanny leaves your employment, a P45 will be issued with her leaving date, tax code, if a student loan has been deducted and total gross and tax to date in that tax year, she then gives this form to her next employer.

Points to consider before signing a contract with your employee

Once you have decided to employ a nanny, and give them an offer letter, it is advisable to

include the key terms and conditions of the role, such as:

Job title,

Job description,

Days/hours of work,

Holiday entitlement,

Notice period,

Statutory payments,

Disciplinary and Grievance procedures

It is essential that all the terms and conditions of the employment are addressed in the form

of a contract of employment and this must be given to nanny to sign within 2 months of them

starting the position.

Once nanny accepts your offer of employment, you have entered into a legal arrangement,

(subject to satisfactory references) therefore the sooner a contract is drawn up between the

employer and the nanny, the better.

Qualifying Criteria for the Work Place Pension

Whether or not your nanny qualifies for the work place pension depends principally on your nanny’s age and their earnings. The new law requires every employer to automatically enrol workers into a work place pension scheme if they are aged between 22 and the State Pension Age, and earn over £10,000.00 per annum.

If nanny is automatically enrolled in a pension, they can opt-out up to 30 days after the initial set up has been completed and get a refund on the amounts which have been deducted from their salary. They must complete and return an opt-out form and inform their pension provider.

If your nanny does not qualify to be automatically enrolled they still have the right to join a work place pension. This is known as a Non-eligible job holder.

Non-eligible job holder is an employee who doesn’t have to be automatically enrolled into a work place pension, but can ask to be joined into a pension scheme if so wish. If they do, both the employer and the nanny will have to pay into the pension pot each month.

The minimum auto enrolment contribution rates are currently 8% of qualifying earnings. This is split between 3% which must be paid by the employer and 5% which must be paid by the employee.

DBS Check

The Disclosure and Barring Service (DBS) is a government body which processes criminal record checks that prevent unsuitable people from working with children and other vulnerable groups.

There are three types of checks –

Standard check shows spent and unspent convictions, cautions, reprimands and final warnings.

Enhanced check shows the same as standard and any information held by local police that’s considered relevant to the role.

Enhanced check with barred lists shows the same as enhanced check plus whether applicant is on the list of people on the list barred from doing the role.

These usually take around 8 weeks.

Cost of a DBS check –

Standard £26.00

Enhanced £44.00

Enhanced with Barred lists £44.00

Ofsted Courses

Paediatric First Aid

As a nanny you will be looking after and caring for young children. This course is aimed specifically for first aid in relation to children and will include –

Bleeding Cuts and Grazes, Broken Bones

Shock, Anaphylactic, Electrical

Choking, Resuscitation

Allergic reaction, Head Injuries

Common Core Skills for a Nanny

This course is aimed at helping nannies develop and enhance their work experience and knowledge of working with children and their families and will include –

Communicating with children, young people, their parents and carers

Child and young person development

Safeguarding and promoting the welfare of the child

Supporting transitions

Multi-agency working

Sharing information

Ofsted Registration Process

Nannies at present are not required by law to hold any childcare qualifications.

However if they wish to become part of the Voluntary Ofsted Childcare Register (OCR) they have the same requirements as a childminder, the only difference being is that they are caring for the children in their own home.

To register, a nanny needs to complete online application via the Government Gateway website.

https://online.ofsted.gov.uk/OnlineOfsted

It will cost around £103 and needs renewing every 3 years.

As a nanny you will also need a Paediatric First Aid certificate, The Common Cores Skills and Knowledge in Childcare, Enhanced DBS Check and Public Liability Insurance.

SSP Statutory Sick Pay

All nannies are entitled to Statutory Sick Pay (SSP), as long as they earn over the lower earnings limit of £118 a week and give you the correct notice.

SSP is paid to nannies on the 4^th consecutive working day off and the first 3 working days are classed as waiting days and any salary for these 3 days are paid at employers discretion, unless they have something specific in the contract regarding paid sickness.

If a nanny has more than one job then she is entitled to SSP from each employer should she qualify.

Nanny must provide a Doctor’s fit note if she is off sick for more than 7 days in a row, for first 7 days they can self-certify.

How much is SSP

For this tax year, 2019/20 SSP it is £94.25 per week. Nanny can get SSP up to 28 weeks.

As of the start of the 2014/15 tax year the Government abolished any compensation on SSP for small employers and this is now a cost to the employer.

Nannies do not qualify

If they have already had 28 weeks of SSP paid.

Have already taken 3 or more years ‘linked periods of sickness – where 4 or more days of sickness happen within 8 weeks of each other.

Receiving other statutory payments (SMP for example).

Nanny may be able to apply for Employment and Support Allowance (ESA) if she is not entitled to SSP with you or has had 28 weeks of SSP. In order to apply for this, you must give nanny a SSP1 form.