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First time employing a Nanny? Bad experiences with another Nanny payroll provider? Whatever your experience, paying a Nanny can be more complex than you think. Let us guide you through it. In this section you can find out about all aspects of setting up nanny pay.

Agree how much you want to pay your nanny

The amount you decide to pay will depend on many factors, such as experience, qualifications, availability and geographical location.

If you are unsure what to offer, ask your local nanny agency. Tinies Childcare  will have a branch near you, and will be happy to give you free advice about going rates and availability in general.

Do make sure you agree a gross rate, not a net rate.  Gross Pay is the amount before deductions, and Net Pay is the amount of pay the nanny actually takes home. That may seem obvious, but in some parts of the country, some nannies make the mistake of requesting a particular net pay.  If you agree that net rate, either you or the nanny could lose out significantly.  Here’s why:

  • A net rate means that the employer pays the tax and NI on top, no matter how high it might be. That means the employer could end up paying tax that arises from a previous year, before the nanny started. That’s why no business would ever agree a net rate.
  • A net rate means that the nanny misses out on any tax refunds, e.g. due to a period of lower earnings or a gap between jobs. That’s just not fair.
  • A net rate means that the nanny misses out on the increase in the personal tax-free allowance each year. The cumulative effect of this is that ‘net pay’ nannies can lose out on significant amounts over time. That’s not fair either.

Always negotiate a gross rate, and we’ll explain how much your nanny should take home net (or you can use our calculator).

In a hurry? Register now and we will get things moving the next working day.

Why a written contract is important

Having a written contract of employment in place is a legal requirement, no matter how informal the relationship feels. A good contract will ensure both parties know what is expected, preventing misunderstandings at a later date.

The document has to be given to the nanny on or before their start date. We provide our standard contract at no extra charge.  Just register your details and we will send this across to you within one working day. Our employment advice is unlimited, and all this is included in our annual subscription.

In a hurry? Register now and we will get things moving the next working day.

Your responsibilities as an employer

Our job is to help make sure you meet your legal responsibilities as an employer and your contractual responsibilities to your nanny.

HMRC need you to register as an employer as soon as your nanny starts, make monthly deductions from the pay and submit copy payslip information on or before each pay day.  We do all this for you. You must pay over the tax and NI deducted, along with Employer’s NI, either once a month or once a quarter. We’ll tell you exactly what to pay and when to pay it. Your nanny has various employment rights, such as paid holidays and the right to be paid the National Minimum Wage.  We’ll explain all these and guide you through.

Auto-enrolment pension legislation will also impact, normally requiring an employee letter after the first payday and a pension scheme within 3 months. Read more about pensions here

Last, but not least, your nanny has to be paid correctly, paid on time, and given a payslip. We’ll make sure this happens every time.

In a hurry? Register now and we will get things moving the next working day. 

Choosing a payroll provider

All good nanny payroll companies will provide you with payslips and tell you how much to pay HMRC, but many hit you with additional charges further down the line. Make sure you know what you are paying for before you sign up.

Watch out too for those that try to sell you add-ons that you simply don’t need, such as extra insurance. In most cases, your household insurer will provide you with adequate cover at no additional cost, so try there first.

We have a single annual subscription for our monthly payroll charged at £260 pa, with no additional or hidden costs, regardless of how many nannies you pay during that period. 

If your nanny is paid over £10,000 pa, they will at some point need to be enrolled into a pension scheme, so you should know how your payroll service will deal with this. Most require you to set up the pension yourself, with little or no choice of pension providers, and then charge you for administering it. NannyMatters solutions are far more helpful:

  • You can choose any pension provider you like, deal with them direct, and we won't charge you anything for calculating and deducting the pension contributions
  • Or, you can choose our fully-managed pension service, for £60 pa, and we will set up a NEST pension scheme for you, and deal with every aspect of it including the scheme set up.

Included in your £260 annual subscription:

  • Our range of excellent employment contracts specific to your needs.
  • Emails answered in 4 working hours. Try the others and see how long they take.
  • Calls answered in 3 rings. No electronic menu.
  • Access to our experts to cover any employment questions including employment legislation and unusual contractual arrangements.
  • HMRC registration and liaison (we talk to them so that you don’t have to).
  • Pensions Regulator liaison. Under the pension legislation, you have declarations to make and letters to issue to your nanny even if their salary is less than £10,000pa. These are all included.
  • Monthly payslips, monthly or quarterly HMRC bills, your choice of hard copies or email.
  • Unlimited advice for your nanny too, on your behalf.

We don't charge extra for....

  • Paying a second employee alongside, or paying a temp when covering sick or maternity leave.
  • Setting up or closing down your PAYE scheme.
  • Claiming tax refunds, or funding for SMP.
  • Backdated payroll problems.

We do charge extra for....

  • Weekly payroll, an additional £50 pa, and there is a very good reason for that: we want to discourage you from paying your nanny weekly because of the extra work created for you and for us, with much tighter deadlines for notifying HMRC if anything changes. Very few people are paid weekly nowadays; monthly pay is best practice. If you want weekly, we can do it, but do try to persuade your nanny to accept monthly pay instead. We can help by working out advances or loans to avoid any hardship issues.
  • Our optional pension management service, £60 pa

In a hurry? Register now and we will get things moving the next working day.

Setting up payments

Paying your nanny on time is a fundamental responsibility. We can help you find the best method for you and your nanny.

Monthly Pay

Monthly pay, in arrears, is by far the best and most common practice. You can pay 1/12th of the nanny’s annual salary each month, or you can pay your nanny according to the actual hours they will work, or something in between.  Our in-house experts will help you decide how best to structure your nanny’s pay, including term-time contracts and irregular hours, and make all the necessary calculations for you.

Pay Day

A month end pay day is recommended, e.g. the last working day in the month, or, if you prefer a fixed date, the 28th.  

Transferring the net pay

We’ll tell you how much to pay your nanny so that you can arrange a bank transfer from your account to the nanny’s account.  You retain complete control of your bank account at all times.

After the first month or two, the core net pay will normally settle at the same amount every month. At that point you may decide to set up a standing order to the nanny. Of course, we can still make adjustments as we go along.

Cash in Hand

There’s nothing illegal about paying an employee in cash, provided those payments go through a payroll.  However, ‘cash in hand’ payments, made without informing HMRC, are definitely not allowed.  A parent is breaking the law when they pay their nanny ‘cash in hand’ (and a nanny may also be breaking the law by accepting such payments). Contact us for free, confidential advice about your situation.

Tax-free Childcare

Provided your nanny is registered with the relevant authority, you can make the monthly net pay transfers and payments to HMRC using your tax-free childcare account. Ask for our free helpsheet.

In a hurry? Register now and we will get things moving the next working day.