Paying the National Minimum Wage & Living Wage

As an employer, you are legally obliged to pay a nanny aged 16 to 24 not less than the National Minimum Wage. At age 25, the higher National Living Wage applies. The gross hourly rates for this year (2020/2021) are:

  • £4.55 Age 16-17
  • £6.45 Age 18-20
  • £8.20 Age 21-24
  • £8.72 Age 25+

Calculating your nanny’s hourly rate

To establish your nanny’s gross hourly rate, you need to know the gross pay. Once you know the gross pay, you can divide it by the number of hours worked to arrive at the gross hourly rate.

In some cases, more than one rate will apply. The legislation is concerned with the total number of hours worked, and the total payment received; the average hourly rate must not be less than the statutory minimum.

Overnight stays

If your nanny is required to look after the children overnight, only the waking hours count as working hours. Often these hours are rewarded by a lump sum overnight allowance rather than pay per waking hour. The average hourly rate for the week or month in question will be calculated using wages plus overnight allowance payments.

Live-in Nannies

If you provide accommodation, this is valued at a fixed amount of £57.40 per week. Gross pay + £57.40 divided by hours worked must not be less than the NMW. A live-in nanny may have long hours, but in practice regularly works less hours, because extra time off is awarded. Provided the employee is achieving National Minimum Wage on average across the pay period, all is well.

Family Member exemption

People who live as part of a family do not need to be paid the minimum or living wage. Living as part of the family means sharing in tasks, leisure activities and meals on the same basis as other family members. This means that the relationship must be one where the individual is in fact treated as a ‘proxy-parent’ or a ‘big sister’ rather than an employee. Most Au Pairs fall into this category.

Important Warning

It is important to recognise that the thrust of the legislation is to ensure that everyone receives at least the minimum wage. Tribunals frown heavily on any attempts to circumnavigate the legislation. In addition, the burden of proof lies with the employer, so to defend a claim, you would need to produce records to show the actual hours worked in relation to amounts paid per the payslip. It is good practice to record actual working hours every week, even if you do not intend to vary the payment.

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