The latest salary figures available for families looking to hire a nanny. What are the costs? How much Employer National Insurance contribution will you have to pay? How much does the Nanny's PAYE and National Insurance cost? Is paying into a pension mandatory?
There are many other details to consider if you are thinking about hiring a nanny. In this article, we will specifically focus on the financial aspects.
1. Employer’s legal responsibilities
When you hire a nanny to care for your child you become an employer and as such you have a number of obligations to meet such as:
Register as an employer with HMRC.
Pay Employer's National Insurance contributions.
Deduct and pay your nanny's National Insurance and Income contributions to HRMC on behalf of your nanny.
Put your nanny into a pension scheme.
Provide your nanny with payslips.
Provide your nanny with a valid contract of employment (some payroll companies can help you with that).
Have an Employers Liability (EL) insurance (you may already be covered by another insurance policy you hold, so do check before subscribing).
2. Minimum wage and market rate in London
a. Minimum Wage in London
Since April 2022, the Minimum Wage in London is £9.50 gross per hour.
This is the minimum hourly wage rate a nanny can / should legally be paid.
b. Market rate in London
However, as reported by Nannytax in their 2022 Salary Index, the market rate of pay for a nanny in London is significantly higher, ranging from £15.03 to £15.75 gross per hour, depending on the location.
3. How much does a nanny cost in London?
a. Cost of a live-out nanny in London
Based on our experience and observation, the rate for a live-out nanny in London can vary significantly, from £12 per hour net (£16.40 gross) to over £16 per hour net (£23.14), depending on various factors such as the nanny's experience and qualifications, the tasks they are responsible for, and the location of the job.
The examples below illustrate the potential cost of hiring a live-out nanny in London based on their hourly rate
Full-time nanny (50h) £16.40 gross / h (£12 net)
Full-time nanny (50h) £18.00 gross / h (£13 net)
Full-time nanny (50h) £21.20 gross / h (£15 net)
b. Cost of a live-in nanny in London
A live-in nanny in London will usually earn between £10.04 and £16.01 per hour gross, which is lower than what a live-out nanny would typically earn.
As an employer, you must provide your live-in nanny with suitable accommodation, including a private bedroom and bathroom that can be shared with the children.
The weekly net salary for a live-in nanny in London can range from £400 to £600+ depending on the number of working hours, the nanny's experience, the specific needs of the family, the location and the employer.
c. Cost of a nanny-share in London
A nanny share is when two or more families agree to share the services of a nanny.
If you decide to opt for this type of childcare, it is important to note that each family is obliged by law to pay the nanny at least the National Minimum Wage each, which is £9.50 gross/hour.
A nanny share will allow each family to save an average of 30% on their childcare costs.
Nannyshare £19 gross / hour
£9.50 gross /hour (NMW)
£9.50 gross / hour (NMW)
4. Taxes and National Insurance contributions
Tax and National Insurance are deductions calculated as a percentage of your nanny’s earnings.
a. Employer tax :
National Insurance employer rate for 2021-2022 is 15.05%.
b. Employee taxes :
PAYE (income tax): 20% - 45% (depending on earnings)
National Insurance employee rate ranges between 13.25 - 3.25%, this is subject to earnings threshold.
All employers have to make sure that they have a pension in place for their employees (qualifying workers). Both nannies and employers have to contribute to it.
Employer’s contribution is 3% of the nanny’s gross salary
Employee’s contribution is 4% of the nanny’s gross salary
Two important points :
a. The nanny has to be a qualifying worker, which means she has to be over 22 and earn more than the tax fee allowance (currently at £10,000).
b. Even if she does not qualify she still has the right to join a pension scheme BUT depending on her age and salary you may or may not have to contribute to the pension.
6. Payroll Service
A payroll service has the advantage of providing advice and guidance on a variety of situations a parent may come across when hiring a nanny. Some payroll companies will also offer to handle all HMRC and pension payments on your behalf for an additional fee.
There are a number of companies that can provide this service.
We highly recommend:
A basic service fee of £276 (for monthly payslips) or £296 (for weekly payslips).
The Payroll Plus option for an extra £15/month (only available if you choose to pay your nanny monthly).
They also offer two other services that may be of interest to those who want a full service:
A Pension Service for £79/year and
An Employer’s liability insurance for £99.
Their payroll service starts at £179.99 (for monthly payslips).
Their payroll service starts at £144.
For more information or to start your search for a nanny, visit our website at https://www.kindore.co.uk. You can also contact us directly by email at email@example.com or by phone at +44 (0) 7869 864898.