What a Nanny will expect from you
The family/nanny relationship, of course, going to be a business relationship, too. You’re going to be a household employer. As such, you will want to be comfortable providing:
- Fair Compensation: Below are average guidelines for compensation based upon the current market climate. It is important to note that compensation may vary outside of this range, based upon the Nanny’s individual qualifications and on the requirements of the job.
- Average gross weekly salary for a full-time child care provider is $600 – $750.
- Average gross hourly wage range for a part-time child care provider is $14 – $20 per hour.
- Adherence to IRS regulations as pertains to Household Employer Tax, outlined below.
- Paid time off, which may include paid vacation, paid sick days, and paid holidays.
- Reimbursement for mileage when transporting children or running errands on behalf of the family.
- Annual review of performance and expectations, with opportunities for wage increase and/or additional benefits.
- In some instances, Health Insurance, or a contribution towards your nanny’s health insurance.
Household Employer tax information
A Household Employer is defined as someone who pays an individual to perform duties in or around their home. This includes both nannies and home managers. If you pay a household employee over the IRS threshold for a calendar year, ($2,000 as updated for 2016) you are required to fulfill state and federal tax obligations.
As a Household Employer, you should expect to pay payroll taxes of 9-11% of your nanny’s gross wages to cover:
- The employer’s half of Social Security & Medicare
- State Unemployment Insurance
- Federal Unemployment Insurance
- Potentially other state taxes
As a Household Employer you are also required to withhold taxes from your nanny’s paycheck. These include:
- Employee’s Half of Social Security & Medicare
- Federal Income Tax
- State Income Tax
- Potentially Other State Taxes (some states levy additional taxes to pay for things like Disability Insurance)
- Applicable city tax
Although is not required that Federal & State income taxes be withheld, it is strongly recommended in order for your employee to avoid a large tax obligation at year-end.
Help is available.
Since 1991, GTM Payroll Services has provided payroll and tax services to household employers. GTM process more than $1 billion in household payroll annually. Many CCP families use GTM for their payroll, and speak highly of their trusted client care.
Health insurance information
Although not required by law, some nannies look to their employers for a contribution toward their health insurance, and because health insurance is critically important, the Federal government uses incentives to encourage employers to provide coverage to their employees. Therefore, household employers can provide health insurance premiums that may be considered non-taxable compensation. This means the entire amount of the premium is tax-free to both household employer and employee — making it a great way to increase a nanny’s take-home pay without increasing cost.