You may have done your searches, met prospective candidates and offered a position to a perfectly matched nanny or still be in the process of finding one but before your chosen nanny can join your family, you must organise their payroll, ensuring it is done legally and in line with the requirements set out by HMRC.
This can seem like quite an overwhelming task, especially if it is your first time employing a nanny and you understandably might have questions about nanny payroll and how to do it correctly. Here at MyTamarin, we have written this handy guide that not only tells you what you need to know about employing and paying a nanny, but also about the nanny payroll solutions that are available if you would rather someone else take care of wages on your behalf.
What Do I Need to Know About Nanny Payroll?
Before deciding on whether to use a nanny payroll solution or not, it is a good idea to find out a little more about the ins and outs of employing a nanny in the UK and what your responsibilities are concerning this.
Becoming An Employer for a Nanny
Once a nanny earns more than £112 per week, government guidelines state that they must be put on an official payroll. This means that if undertaking the payroll tasks yourself, you will need to register as an employer. Failure to register or to declare employment and tax is a criminal offence so it needs to be properly.
In addition to registering as an employer, you’ll also need to provide wage slips and by law, also offer a workplace pension for your nanny.
The Difference Between Net and Gross Pay for Nannies
For any wage earner, their gross pay is the amount of income paid to the individual by their employer before any deductions such as tax are taken. Net pay is the earnings that are left after all deductions have been taken from gross pay, such as payroll taxes and pension contributions.
As your nanny’s employer, you will be responsible for calculating their gross and net pay, ensuring you retain, declare and pay the required NI, tax and pension contributions from their gross salary on their behalf.
Paying NI and Tax for Your Nanny from Their Gross Salary
In the UK, it is an employer’s legal responsibility to pay tax and national insurance on behalf of their employee. This can be paid weekly, monthly or in other increments depending on the payment arrangement you have in place with your nanny.
The NI contributions ensure your nanny’s entitlements to certain state benefits such as holiday pay, maternity pay and state pension. The national insurance rate that will need to be paid will depend on your nanny’s income. Currently, it is 12% of weekly earnings between £184 and £967 and 2% of weekly earnings above £967.
You'll also need to calculate and pay their income tax, taking into consideration their tax-free allowance, which is currently £12,570 per annum, the basic tax rate of 20% and the higher tax rate of 40% on any earnings over £50,271.
Paying Employer NI and Pension Contributions for Your Nanny
It is important to note that your nanny’s gross salary is not the final cost to you. Whilst you must pay their employee NI and pension contributions from their wages, you must also pay NI and pension contributions as their employer on top. Generally speaking, you can expect to pay 13.8% as secondary contributions to HMRC on all of your nanny’s earnings above their personal allowance.
For your nanny’s pension, as their employer you must make a minimum contribution of 3% of their total salary too.
How To Pay Your Nanny
How you pay your nanny will depend on their contract and the arrangement you have with them alongside your personal preferences. One of the easiest ways to pay them is via bank transfer but you can also use cash, cheques or standing orders. You will need to make sure you pay them according to the agreed schedule and make sure their payment reaches them on time.
Nanny Payroll Solutions
If all of the above sounds like a bit of a headache and you are concerned not only about the legalities but also all the admin, there are a range of solutions available that can take care of your nanny’s payroll for you.
Accountants help employers keep up to date financial records and often cover a wide range of services from bookkeeping to VAT returns for large businesses.
How much does an accountant cost?
You can use an accountant to calculate and organise your nanny’s payroll and the cost for this will depend on the exact nature of the services you require. You can, however, expect to pay anywhere from around £60 a month.
Outsourcing your payroll tasks to a payroll provider is also a possibility. In the UK there is a variety of payroll services that can be used for any nature of business but there are also companies that specialise in payroll for nannies and other childcare providers.
How to find a nanny payroll provider
An internet search is a good place to start for finding the right nanny payroll provider if this is the solution you think will be best for you. Online, you’ll be able to see exactly what each provider offers as part of their services and you’ll also be able to read reviews from other parents that have used them.
How much do nanny payroll providers charge?
As with accountants, the cost of using a payroll provider will depend on what is included in their service, but you can expect to pay anywhere between £250 and £500 per year.
Nanny Agencies and Childcare Specialists
Another option is using a nanny agency or childcare specialist such as MyTamarin. At MyTamarin, we work with you to define your job requirements and set the right salary bracket, as well as put together a contract of employment.
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