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The cost of employing a nanny

2015 May 6

You want to employ a nanny and you’re setting out your budget. Here are some costs you need to consider…

What you pay your nanny – this is known as the net wage. You may be able to get childcare vouchers which can go towards paying this amount.

Frequency – weekly or monthly (we recommend monthly to simplify reporting to HMRC)

What you pay on behalf of your nanny – this is tax, National Insurance and (depending on your staging date) work based pension contributions. This combined with what you pay your nanny is the gross wage.

Frequency – monthly (or quarterly if you pay less than £1,500 a month)

What you pay to HMRC – as an employer you are responsible for Employers National Insurance Contributions.

Frequency – monthly or quarterly

Payroll – many parents choose to use a specialise payroll agency to handle their nanny’s payslips and carry out all the calculations. Some payroll agencies also provide contracts and employment law support.

Frequency – annual, although some offer a pay as you go or monthly fee.

Employer’s Liability Insurance – although this may come as part of your home insurance you may need to take out a specific policy to cover your nanny working in your home. This is different nanny insurance which your nanny should pay for herself.

Frequency – annually, although monthly direct debit may be an option.

Mileage – if your nanny uses her own car then count 45p/mile driven on duty. You may choose to limit mileage or require authorisation for trips over a certain distance.

Frequency – weekly or monthly

Increased car insurance premium – if your nanny uses your car for work then you will need to insure her on your car. If your nanny is young or has recently made a claim on her won insurance then this may be significant.

Frequency – typically monthly, unless you pay your insurance annually

Additional food – your nanny will probably expect to eat at least lunch in duty, as well as any snacks through the day.

Frequency – weekly

Heating and lighting – as your nanny will be working in your home they will be using heating and lighting through the day. You can estimate this from the energy consumption while on maternity leave.

Frequency – monthly or quarterly

Kitty – most parents provide a kitty purse with money for day to day expenses such as toddler group entry and additional shopping.

Frequency – weekly or monthly

Gifts – you don’t have to be extravagant but it’s thoughtful of employers to mark Christmas (or your family’s or your nanny’s chosen religious festival), your nanny’s birthday and her work anniversary with a card and a token gift. You may also want to mark other significant events in your nanny’s life such as her engagement, wedding or birth of a baby.

Frequency – approx 3 times a year.

Emergency care – unless you are lucky enough to be able to work flexibly, have grandparents locally or a network of good friends you may find that you need to pay for emergency care in case your nanny is too ill to work. You will also need to take into account your nanny’s holiday, although you may take time off from work for that yourself.

Frequency – budget 4 weeks per year

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