Should we set up as one employer or two?
Generally, most families prefer to set up as two employers, so that they can keep their finances separate. If the nanny works for each family at different times, the two-employer method will always apply. Two employers means two separate employment contracts and two separate payrolls.
If the nanny is working for both families at the same time, doing the same work, then this could be set up as one employment with just one employment contract and one payroll.
There are various factors that will determine the best method for your particular nannyshare. A Joint Share (setting up as one employer) can sometimes make more sense in any of the following situations:
- The arrangement is short-term
- Neither family wants to use childcare vouchers or tax-free childcare
- The pay will normally be the same every month
- One family wants to take responsibility for paying the nanny, HMRC and pension
A Separate Share (two employers) normally makes more sense in any of the following situations:
- Each family wants the flexibility to pay what they want, when they want
- One or both families want to pay with tax-free childcare or childcare vouchers
- The families want to keep their finances completely separate
National Insurance savings
The ‘two employer’ method is often more cost effective, despite requiring two NannyMatters subscriptions, because the overall National Insurance bill is significantly reduced. However, you can’t deliberately set up as two employers just to reduce the National Insurance liability.
Other factors can come into play, such as National Minimum Wage legislation, and the impact on SSP, SMP and pension. For the best solution, each share must be looked at individually, taking the full picture into account. That’s where NannyMatters can help.
Free nannyshare illustration
NannyMatters offer a free service for clients or prospective clients who are considering a nannyshare or want their existing nannyshare arrangements reviewed. We will assess which method best meets your requirements, explain your choices and provide a proposal showing each employer’s costs, including our payroll fees, and the nanny’s expected net pay. You can then make an informed decision about whether to go ahead.
Transferring to a Gross Pay Agreement
Whatever the arrangement, you should never, ever enter into a net pay agreement in a nannyshare. In a share situation, you simply cannot run the risk of a dispute over who pays extra taxes, nor can you expect your share partner to pick up extra unexpected costs. If you do find yourself discussing a net pay rate to begin with, all is not lost. We will calculate the gross salary required in the hope of achieving that net, and it is this gross salary that is offered to the nanny.
Does the nanny need to contact the tax office to split her tax code?
Generally, no. Our proposal will ensure that the total costs, including tax and national Insurance, are shared fairly between the two employers, without having to mess up the nanny’s tax code.
If your nannyshare is for just a few hours a week, then we might advise a split tax code to ensure the nanny receives the benefit of the full tax-free allowance. This will normally only apply if both employers are paying below £12,570pa.
Nannyshare employment contracts
We have excellent specialist contract templates, written specifically for nannyshare situations. The template you require will depend on whether you decide to set up as one employer or two.
Three or more families
The situation doesn’t often come up, because not many nannies will attempt to juggle the requirements of 3 separate families, but we do have some and they work very well. Note that Ofsted may consider 3+ families at the same time to be childminding, not nannying, in which case the nanny will be required by law to register with them as a childminder. The general rule is that, at any point during the week, the nanny is only looking after two families at the same time (even though there might be 3 or more families involved).