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Nanny Employers to contribute 3% towards nannies pension - from Oct 2012 / 2017

(36 Posts)
nannynick Sat 30-Oct-10 12:21:31

I have just heard on MoneyBox that employers of nannies will not be excluded from the upcoming work pension scheme, so employer contribution will be 3%, employee contribution 4% and Government adds 1%.

Good that the BBC asked about nannies... it is something I tweeted to @R4Today when they discussed the work pension scheme, so looks like they took notice and asked the specific question.

It will apply if the employee is aged 22+ and earns £7475+ per year. It starts from Oct 2012, though will be phased in between then and 2017. (info from the link above)

What are your thoughts... will this make much of a difference to nannies salaries? Will it result in more employers of nannies not operating PAYE?

NomDeClavier Sat 07-Sep-13 09:52:28

Nanny tax say the earliest is 2015 and that only applies if you were employing a nanny before 2012, so I'm fairly happy to take their word for it. However there may be exceptions if you put nanny through company payroll, in which case the rules for the size of your company apply to them, or you have other staff. The staging dates depend when you 'set up'.

It is going to increase costs and well worth bearing in mind for anyone looking to employ a nanny, or even planning to give nanny a payrise. Good payroll companies will be alerting you to this but as a rough and ready calculation 3% probably isn't a bad idea.

nannynick Sat 07-Sep-13 09:26:15

What is the earliest date someone has found they have... any earlier than Jan 2015?

Not sure it's as simple as 3% increase on gross salary, there is something about the first x amount not counting isn't there? However it will be an increase in cost to employers which is probably more than pay rises they may have given their nanny in the past few years.

This site is quite useful and deals with the small employer question.

As I set up my payroll for the first time this year, it says that my 'staging date' (i.e. the date I have to operate auto enrolment) is 2017.

MissMalonex2 Tue 03-Sep-13 10:54:13

Employer contribution is additional. So unless nanny opts out, £10 per hr becomes 10.30?

Strix Mon 02-Sep-13 21:58:34

Well, 3 years on and I have long since joined the au pair / childminder world. Will definitely not be supplying anyone with a pension. I now very much enjoy NOT paying tax.

Pension? Surely you jest?

nannynick Mon 02-Sep-13 16:53:15

I wondered that as well Blondes. I suspect that as the personal pension scheme is personal rather than provided by the employer, it can't be topped up by the employer. Thus those of us with a personal pension will have multiple pension schemes. I already have two (I don't understand why) though only contribute into one.

Blondeshavemorefun Mon 02-Sep-13 16:40:59

What happens if I already have a pension?

Had one since I was 18 - daddy blondes is a bank manager so told me to start young

Can the employer add to that?

If they refuse/don't want to is there anything that us nannies can do about it?

oscarwilde Mon 02-Sep-13 16:33:46

NNick - It will always be a percentage. Even where there is a "free cash" element a surprising number of people refuse to opt into a company pension rather than pay in a percent or two. It's very common with people in their 20's.. Autoenrollment is designed to make it harder for them to do so, or at least by not enrolling they will have to be provided with a calculation of loss and future impact.

If they do opt out, then the employer doesn't have to contribute at all, is my understanding. Most large employers will provide a sliding scale - if you chose to contribute 2%, the employer will contribute 3, 3/5; 5/9% and so on. At a nanny level with a gross agreement in place, there will be a real impact on incomes on both sides. If a net agreement is in place, it will become punitive for the employer.

From the Nannytax website
Pensions - Anyone who employs one or two staff will be required by law to enrol staff into a pension scheme automatically, unless they specifically opt out, from May 2017. It is estimated that this will add around £750 a year to the cost of a full-time nanny.

Cindy34 Mon 02-Sep-13 14:46:53

If someone is under age 22, do they have to opt-in to the scheme?

Might that mean that employers choose young staff, if they don't automatically have to provide a pension scheme to them?

NomDeClavier Mon 02-Sep-13 13:54:05

2015, nick.

AmandaPandtheNightmareMonsters Mon 02-Sep-13 13:48:50

I don't currently employ a nanny, but anyone who does should be able to work it out using this tool if that helps?

nannynick Mon 02-Sep-13 13:42:07

Has any nanny employer (paye scheme started before april 2012) found out the start date for pension scheme? Would be interesting to know when this really starts for very small employers.

NoPhoto Mon 02-Sep-13 12:59:20

I'm about to hire my second Nanny and am sailing close to the wind in meeting her salary requirements. So glad to read these posts as this is something I had not budgeted for.

So, Nanny has asked for £10 gross. How would I then factor these pension payments in? I cannot afford any more than £10 ph, specifically when Nanny has expressed an interest in beginning her own family which has meant me having to ensure I could afford accrued holiday pay if on maternity leave. Argh.

AmandaPandtheNightmareMonsters Mon 02-Sep-13 12:38:05

I am not a pension expert, but the employer contribution will presumably be a direct additional cost to employers, even if they do agree gross pay? This is a percentage on top of gross pay. The employee contribution obviously comes off unless you have a net pay agreement (which naturally you shouldn't).

If you are hiring a new nanny, employers will obviously have to factor this in. Not sure what you can do with an existing nanny though? Employers could find quite a bump in their childcare costs - all I can think you could do if you and the nanny couldn't agree a reduction in gross salary is make the nanny redundant and re-advertise at the lower salary that you can afford (which would potentially be a fair dismissal if done correctly, though it could be a bit borderline).

nannynick Mon 02-Sep-13 11:29:24

It is something else to build into the cost calculations. Wonder how it will affect other forms of childcare.

Is there a link to the rules for how it works and timescales?

nannynick Mon 02-Sep-13 11:26:18

Why would net pay of the nanny be maintained?

Yet another reason employers should agree gross pay.

Is it always going to be a percentage of salary or is there minimum amounts?

martinpc63 Mon 02-Sep-13 11:24:07

Correction: Just read these minimum percentages apply only on what they earn over a minimum (currently £5,668 but will increase each year). For example, for a nanny who earns £20,000 a year, the minimum percentages apply to the difference between £20,000 and £5,668, which is £14,332. Thus the employer would pay £430 and the nanny £573, total £1,003.

martinpc63 Mon 02-Sep-13 11:12:49

The Government didn't decide to keep it simple! I am no expert but it looks to me like the minimum contributions are 2% (1% from employer and 1% from nanny) to September 2017 when they increase to 3% nanny and 2% employer and then increase again in October 2018 to 5% nanny, 3% employer (nanny will get tax relief at 20% so this 5% becomes 4%).

At 3% the employer contribution is 3% or £600. But to maintain the net pay of the nanny after tax and deductions, the combined cost from October 2018 is effectively 7% or £1,400 on £20,000 gross earnings.

There are going to be some interesting negotiations!

As an employer, by law you have to enroll the nanny and give (her) the option to "opt out" without pressure. But since it involves "free" money probably most will take it, which is of course the intention of the Government.

PowerPants Sun 01-Sep-13 22:58:35

I think this is going to be the end of nannies for anyone except the super rich sad

NomDeClavier Sun 01-Sep-13 00:24:01

It's definitely happening, and will coincide with the new tax free Childcare scheme being introduced in 2015....

Nanny payroll agencies are probably running their hands in glee.

Blondeshavemorefun Sat 31-Aug-13 22:40:46

So almost 3yrs on from when I last replied - but is this now happening

On a rough guide of a nanny earning £20k gross the employer will have to pay an extra £620ish a year into a pension - is that right?

martinpc63 Sat 31-Aug-13 17:16:36

Ft article today says anyone who employs a nanny will need to go register for pension auto-enrolment and this applies 2015 onwards. Some more info here

Strix Tue 02-Nov-10 18:20:27

If this happens, it will tip me over the edge and put one nanny out of work. I am having my third DC in mid ecember. Older two are in full time school. I am absolutely not paying for any pension contribution. So, if this happens (and I realise it is a long way off) I will get an au pair and a childminder and avoid the minimum salrary under which this has to be paid.

I think it will definitely result in more people paying cash in hand, or at least part cash-in-hand. People will put their nanny on the books for some £500 per month, call her an au pair and pay the rest in cash. Proper on-the-books Ofsted registered nannies will become a priviledge of the rich.

Treating parents like profitable business is outrageous. If anyone wants to start a protest I will gladly follow.

mranchovy Mon 01-Nov-10 22:04:54

Disscussed briefly here six months ago. It looks like my guess that the new government would bin this and the associated NEST quango may have been a little premature, but there is some time to go yet...

Blondeshavemorefun Sun 31-Oct-10 15:51:01

so nothing likely to happen for years

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