If you employ a Nanny in the UK and you pay her more than £91 per week (tax year 2004/2005) the law requires you to:
- Register as an employer with the Inland Revenue
- Keep a payroll record and provide payslips on her behalf
- Pay Employee’s income tax and National Insurance Contributions
- Pay Employer’s National Insurance Contributions
- Provide an annual summary of all these deductions and payments
These obligations also apply:
If your Nanny earns less than £79 per week in your employment but more than £91 in total (e.g. if she has two part-time jobs)
- In short-term employment (i.e. a week or longer)
- To any employment taking place in the UK – irrespective of the country of origin of the nanny or employer
As an employer you are also responsible for paying Statutory Sick Pay and Maternity Pay – but the latter may be reclaimed in full from the state.
Remember that National Insurance Contributions go towards your employee’s entitlement to unemployment and state pension benefits. Nannies are increasingly aware of their rights as employees, and an employer who takes care of their Nanny’s PAYE properly will be considered a good employer in this respect and enjoy the increased confidence of their Nanny.
Net or Gross Wage?
When Nannies and Nanny agencies agree a salary with the parents they often talk about the net wage – the amount the Nanny has in her hand at the end of the week. But in reality the Nanny is always paid a gross wage (net wage + tax + NIC), and on top of the gross wage the Parents are obliged to pay employer’s NIC. Therefore there is a considerable difference between the net wage and the true cost of employing a Nanny. Parents are advised to find out the true cost before agreeing on a net wage.
Failure to register as an employer if you are paying your Nanny above the weekly threshold is an offence, which can potentially lead to heavy penalties and career-damaging publicity.