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Hiring a Nanny: What to Know About Pay, Benefits, and Laws 

You might think hiring a nanny for your child or children is pretty simple. In many ways, it used to be, especially because childcare providers and other domestic workers were paid under the table.  Now, that’s not the case and doing so can cause serious legal issues. 

There are things to consider, like wages and taxes, whether or not you should offer benefits, and you also have to pay attention to laws. Some of the laws that relate to hiring a nanny include labor laws, as well as what your rights are to have a nanny cam, versus what your nanny’s rights are. 

The following are some of the most essential things to know about hiring a nanny. 

Paying Your Nanny

If you’re hiring a nanny, then you need to pay taxes on their income, which is called the nanny tax. 

The IRS describes a nanny as a household employee, and if you attempt to pay your nanny in cash to avoid tax issues, there are a number of potential consequences. 

For example, if you pay your nanny the right way, you can actually get a tax deduction for part of the costs of childcare, but if you don’t and you’re audited, you may owe thousands in back taxes. 

It also helps your nanny. When you pay your nanny the legal way, they can build their Social Security credits, and if you have to let your nanny go for any reason, that person may be eligible for unemployment benefits. 

Both you and your nanny will need to complete forms when you hire that person. This includes the I-9 which is an Employment Eligibility Verification and the W-4, which is the Employees’ Withholding Allowance Certificate. 

The I-9 form is very important because this is how you show you’ve verified your nanny’s employment eligibility. Your nanny or nanny candidate should be able to show you they are legally allowed to work in the U.S. 

You might look at documents like their passport, green card, work permit, or Social Security card. You’ll need to make copies of these documents to keep in your files. 

In almost all cases, the IRS does consider nannies to be employees rather than independent contractors. 

Also, nannies are characterized as non-exempt employees. This means they are subject to both state and federal minimum wage and overtime laws. Even if your nanny earns a salary, you are still responsible for keeping a record of the houses he or she works, and you have to pay overtime. 

Nanny Compensation Package

Usually, when you hire a full-time nanny, you should offer a compensation package. This can include health insurance which may mean that you pay 50% for the first year, and after that, you might pay all of it. You might also offer paid time off and reimbursement for mileage if your nanny uses a personal vehicle to transport the children. 

It’s a good thing to offer paid sick days, not just for the benefit of your nanny. You also have to consider the fact that if your nanny comes to your home sick it can affect your children and you. 

Employee Agreement 

Going back to the topic of a nanny as a contractor—families tend to think they can pay their nanny as a contractor and legally there are a lot of issues with that. A contractor is someone who works basically whatever hours they want, as long as the work gets done. It’s obvious to see this is not what a nanny would do. A nanny would have a set schedule. 

Beyond that point, you should make an employment agreement. 

This agreement should outline the number of hours your nanny will be expected to work, how and when that person will be paid, and conditions for termination. 

You should both sign the agreement. 

You need to check on your state and local laws as far as having a domestic employee to make sure you’re not missing anything there, as well as taking federal laws into consideration. 

You may wonder why you would offer your nanny perks like paid time off, but the reality is your nanny is one of the most important people in the life of your family. You want that person to be happy with his or her job, feel appreciated and do their best everyday because they are caring for your children. 

It’s well worth it to families to provide what they can for their nannies.