Congratulations! You are the proud employer of a beautiful brand new nanny…. now what?! Many parents think that they understand what is expected on their end when it comes to having a nanny. They agree on a rate with the nanny, they agree on responsibilities, and then they think they are done! Most people don’t understand that when you employ a nanny, she is not an independent contractor, but a household employee. She works for you, in your home, on your hours. That means she needs to file a W-2, not a 1099. That also means that if you paid her more than 2000 in a year, you are expected to withhold and pay Social Security and Medicare on all of her wages. Many families choose to use a payroll service to make the process fast and simple.
Families with uncertain schedules or odd hours are often interested in paying their nanny on a salary basis, however, this too is illegal. Nannies are considered hourly employees and must be paid accordingly. However, many nannies will require guaranteed hours as one of their benefits. Below is a list of such benefits and who to navigate them.
Guaranteed Hours –
Guaranteed hours are not the same as being on a salary! When you hire your nanny you expect her to be available for the hours you need her (lets say that you need her 40 hours a week). She is setting aside those hours for you each week and in return should always be compensated for that time. If you decide to take the day or week off for vacation and ask her not to come in, you still need to pay her for her regular working hours. This is not the same as your nanny’s vacation time.
Many nannies will require 1-2 weeks of paid vacation time per year. This is particularly true with full time nannies. Though nannies often choose to schedule their vacation time when a family will already be traveling, it is not and can not be required of her to do so. When your boss goes on vacation, you aren’t also expected to use your vacation time then as well, right?
If your nanny is using her own vehicle to transport your children around town, you should be reimbursing her for gas and if you want to be extra competitive, then also for regular maintenance on her car! The IRS standard for mileage reimbursement is 53.5 cents per mile. Mileage reimbursement is considered non taxable income for your nanny!
Health Care Stipend
Offering a health care stipend for your nanny is a great way to make sure she will be as healthy as possible! I If you choose to pay her extra on top of her wages, or use a portion of her wages designated specifically for healthcare is up to you and your nanny. Either way it is a great option for adding to your nannies list of non taxable income.
Giving a holiday bonus to your nanny makes her feel appreciated and shows that you value her and her commitment to your family. It is also a way of thanking her for all of the love and attention she has given your children throughout the year. In the corporate world, a holiday bonus can help keep a great employee working for your company. In this way, it is the same with your nanny. The average Holiday bonus is 1 weeks pay.