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69% of nannies still have a Net pay contract - how can we change this?(59 Posts)
Was chatting with @NurseryWorld magazine on Twitter and they said that their recent survey found that 69% of nannies were on Net pay.
Parents visiting Mumsnet will know from reading on here that it is recommended that nannies are paid Gross, as then tax calculations can be done and there are no sudden shocks if the nannies tax code changes.
Do you think that Nanny Agencies are part of the problem - in that many agencies still list jobs as Net?
How can this be changed? Should it be changed - as a parent, nanny, or as an agency, do you feel nannies should be paid Gross or Net?
By getting nannytax to change their tune for starters. Their flipping survey quoted net pay! Sample nanny contracts and nanny payroll companies should be encouraging people to quote gross.
The current ANA contract has before/after tax as options for expressing pay which is pretty shocking.
I think nanny agencies are a big part of the problem but they're probably responding to nannies saying 'but what's that net?'. Even if they advertise net they should be pushing gross in contracts (and then they could charge fees as multiples of gross salary and make more money - win win).
I'm a very strong advocate of gross pay. For the nanny it means they benefit from increases in the tax allowance, they can easily produce evidence of their income (therer are threads about mortgages and problems with net pay contracts on some nanny messageboards) and they don't have to worry about their tax code being split between jobs or changing if they lose one of their jobs. For the employer it means they can accurately calculate how much a nanny will cost them regardless of whether they're employing someone with a second job or not and they don't get any nasty suprises like student loan repayments on top of an agreed net salary and their calculations on tax/NI.
Oooh and having gross pay in a contract will benefit nannies because it will help prevent employers paying cash in hand and thinking it's okay. I have no idea how they justify it to themselves but I suspect it's something along the lines of 'well it says net in the contract so I never agreed to pay it so why should I'.
This is good for employers because then they don't run the risk of HMRC's big fines too.
As a nanny currently jobhunting, I've very, very rarely seen a job advertised as gross- maybe two or three times in the 6 years I've been nannying! I have no idea why this is but I've always thought in terms of net, to the point where I'm a little dubious of jobs offering gross.
I honestly don't know what the implications for me would be in looking for gross rather than net. Currently when asked for my rates I say I am looking for £450-500 net per week for a full time job (10-12 hours per day, five days a week), or £9-10 an hour net if thats what I'm asked for. I don't have any clue what this would be gross!
If this system were to change it would either take forever or require something major like a change in the law because I just never come across gross. There is one agency I see advertising gross, SNAP, but they are an agency dealing with special needs children and have different requirements to register so not many nannies would come into contact with them.
You're looking at £600-670gross to get roughly the net pay you want, assuming a normal tax code and no student loan.
However if you signed a net pay contract tomorrow with a figure of £500net you would lose out on the increase in the personal allowance which comes in April. If you signed a contract with £670gross (current equivalent) you would benefit from the increase.
If you say worked 50 hours a week and wanted £500 net, then that's £10 per hour net.
With tax code of 647L that's £13.42 per hour Gross. (Net to Gross calculation thanks to KISTAX.com) Your annual Gross salary would be £34,997 This is getting close to the Higher Rate tax - see Rates: Income Tax Your Net pay is £26,071
In 2011/12 tax year, the personal tax allowance increases to £7475 (was £6475). I don't think the tax calculator does this yet but as this change is £1000 that is quite a lot of income which becomes non-taxable. What difference does this make... well MrAnchovy did an example in this message thread where the difference was 2.75% Perhaps he will spot his name being mentioned and do a nice tax table for us.
2.75% may sound small. It is quite small but every penny counts and by agreeing a Net wage, you are in effect lowering your salary come April 2011 - as your Gross salary will drop, as it needs to keep the same Net salary. (Hope I've worked this out right)
So by agreeing a Net contract, I feel you are losing a couple of hundred pounds of salary, due to the change in personal tax allowance. Will be interesting to see what the actual figure is based on the figures I've used above.
>If this system were to change it would either take forever or require something major like a change in the law because I just never come across gross.
PAYE already requires that employers use Gross pay, doesn't it? MrAnchovy - is there tax law which says anything about salaries being Gross and then tax/ni deducted, rather than Net with tax/ni added on?
No change in laws needed in my view. Would be no point in having legislation specifically for nannies in my view... just complicates things and causes delays.
Samedi - have you ever had any other job? Try to think back as to when you first heard about Net wages. I expect it's either via an Agency, another nanny, or a employer/parent.
Calculator will show changes, nick.
Change the tax code box from 647L to 747L
Yes, I know that makes a change... I'm just not sure it's right as yet. Waiting for MrAnchovy to confirm the calculator will do 2011/12 tax year.
It won't change until a law is passed making it illegal to quote anything other than the gross salary for any employment.
It's so obviously pandering to domestic employers who pay cash in hand ie "This is what you can pay your employee if you're prepare to break the law; as opposed to this much larger amount if you insist on being legit".
A law change would remove a lot of the incentive to do this, as the amount saved would be reduced to the amount of employers' NI.
i blame the agencies - many advertise jobs in nett
i have only ever accepted gross in my contract... for the past 10 years.
really had to argue it with one family, who said "nannies are always paid in net" but i stood my ground too and was paid gross.
I nannied for man years and never once was I told the gross pay. I don't understand why a nanny would be.
'I don't understand why a nanny would be'
erm....for all the reasons listed above?!
I agree with the gross pay in contracts thing, but tbh I like jobs being advertised as net and I like thinking about my salary in net terms. It's easier on my brain and I don't begrudge paying my NI/taxes as much!
Maybe a net and gross figure could be given by nanny agencies/job ads?
Ooop north I always see gross pay so as such have always been paid gross, but I have lately been seeing net pay being advertised. I would also agree a gross wage.
>It's easier on my brain
Hope you are not saying that you are a bit thick and thus need things to be made simple for you? Other jobs are not advertised as Net, so why should nannying?
Even other jobs in Childcare are not advertised as a Net wage. Look at nursery jobs, they are Gross annual salary often. Example Job Search: Nursery Nurse
>Maybe a net and gross figure could be given by nanny agencies/job ads?
Yes, that could be a work around but has been used by some agencies for many years. Hasn't stopped other agencies only posting jobs as Net and hasn't stopped some nannies only thinking in Net terms.
The Net figure changes depending on someones circumstances anyway, so it wouldn't be the figure someone actually got... just an indication if there taxcode was the most typical.
'Hope you are not saying that you are a bit thick and thus need things to be made simple for you? Other jobs are not advertised as Net, so why should nannying?'
Yep. That's exactly what I'm saying . Maybe all jobs should be advertised as net?
'it wouldn't be the figure someone actually got... just an indication if there taxcode was the most typical.'
That's good enough for me...and it should be 'their' not 'there'
See you are not as thick as me
In my experience nannies ASK for their pay in net terms. It means they lose out from tax benefits but gain from higher taxes which, lets face it, we've had more of than reductions in the last 12 years I've been employing nannies...
Apropros of nothing, I've just increased my nanny's salary to reflect the outrageous cost of fuel...
We've always hired our nannies on the basis of a gross salary, but I've always had to work backwards from a net salary quoted by the nannies to get to that figure. It's all a bit a mystery to me how then when I put the (annual) gross pay in the contract, it get signed, as presumably it is not a familiar figure ?
To be honest all the rest of the workforce gets a gross annual salary and we all work it out by ourselves how much this will mean in net, nannies shouldn't be any different ?
I don't deal with agencies that quote in net, but that means that I can't use any of them... Once I quoted a gross salary to an agency (I stressed it was gross) and they told the candidate it was net, and much unhappiness ensued. I have found that generally agencies and nannies don't want to know about tax and expect me to explain it to them (so I have to be a tax consultant as well as the employer...)
What net pay is depends partly on your tax code and on your total income since April, including other jobs, which, as a part time employer, I may not know about. eg if the job is nanny's second job, then it is automatically taxed at 20%. That's a lot more tax than if you use the £6470 (or whatever) allowance. So, even giving an "approximate" net figure is difficult because I may be out by 20% (...and yes I know this is simplified).
If nannies want to be employed legitimately and have their tax paid, they should not just say "I don't know anything about tax" and leave the work to the potential employer, they should educate themselves and help the employers figure it out.
Agree. Forums like this educate both parents and nannies.
An agency being told a gross figure then advertising it as net is disgracefull. Agencies should know all about tax, many seem to recommend NannyTax (I do wonder how much commission is paid) though would be better to tell parents about several options, including doing PAYE on their own, as well as with help from payroll companies.
I have always worked in gross and will do to interveiws that offer net wages with a gross figure in mind. I also tell agencies i work in gross. and really think they should start educating the nannies on their books who don't understand.
With the internet and tax calcultors its really not that difficult!
I'm beginning to conclude more and more that it is the agencies that need to change. Do you agree?
Reasons why I think it is the agencies that need to change:
1. A nanny looking for their first job is likely (in my opinion) to approach agencies. At this point they first come across how nannies are typically paid.
2. Agencies advise parents. So a first time employer of a nanny is being told by an agency how to do things. Not all parents will question what they being told.
3. Agencies advertise jobs in magazines, newspapers and online. Those job ads are read by nannies looking for work, so if they keep seeing Net Pay figures they may assume Net Pay to be normal (where as non-nannying jobs pay Gross).
I can't imagine that there is any nanny that is able to say that they have:
never been to an agency
never seen a job advert by an agency
never contacted a parent who hadn't ever contacted an agency
I expect one, or more of those situations has happened. So if the agencies say Net Per Week, then nannies and employers assume that is how things are done.
Been a bit busy recently and for the next couple of weeks I think so no promises but...
I do need to update the tax calculator for 2011/12 - putting 747L will calculate basic rate tax correctly but NI needs changing as well as the higher tax rate.
Yea, I'll do a table
As to the law... tax and national insurance are calculated by reference to a gross salary, so if a contract quotes (only) a net salary, each pay day a calculation has to be performed to work out what gross salary will result in the right amount of deductions to leave the desired amount of net salary.
Every employee must be given a payslip on or before payday which states the amount of gross pay that week/month, the nature (tax, ni etc.) and amount of any deductions, and the resulting amount of net pay actually received (and if that pay is paid in more than one way, e.g part by vouchers, the amount of each payment).
That's about it for the law.
Do I think there should be a law attempting to prevent people from entering into contracts for net pay? No, I don't. Do I think that there should be a code of practice followed by nanny agencies that says that they will advertise gross salaries unless there is a good reason not to? Yes I do, but so many nanny agencies are not members of any professional body (such as the Recruitment & Employment Confederation) and don't sign up to even a very basic code of practice that I am afraid this wouldn't actually change very much.
Was just chatting with an nanny agency owner on Twitter and she said that Nannies need to be educated as it is nannies who ask her for the Net pay details, because the nannies could not calculate their take home pay.
She says that "I give them both verbally. A very slow training process to try and educate them!"
Unqualified nannies and those who have not worked in any other type of job she feels are the worst. Nursery nurses are already in tune with a gross figure, as they get a gross salary at nursery.
Random related question: how will all this work once pensions provision has to be made?
Presumably it would be administratively simpler when paying gross, or would it not be that different either way?
I think the net pay thing is much more common in London - certainly in Bristol you only ever see jobs advertised as gross and wages discussed in gross.
No idea about the pension thing but yes I would guess it will be based on Gross salary, not the net.
So like PAYE is done now, a Net figure has to be calculated each payroll run to get that payroll run's gross figure, taking into account all deductions.
Compulsory pensions - great question!
The (minimum) pension payments will be based on gross pay, but any payroll that currently handles the net-to-gross calculation can just incorporate the pension calculation in the same way so the arithmetical part is fairly simple.
But if someone on a net salary does not opt out of compulsory pension provision, depending on the wording of their contract their employer could have to pay both the compulsory employer's contribution (which rises to 3% of the gross salary), but also the employee's contribution which rises to 4% - and national insurance on top!
oh god when is that starting?
must sack the nanny before that
It begins in October 2012, but the arrangements for phasing it in are quite complicated. The Pensions Regulator has just issued an updated information leaflet but the detail is contained within a Pensions Bill which is currently before the House of Lords. Expect to see more information once it becomes law, I will try and get something together soonish
Hmm, they don't seem to have changed the dates for introduction so for employers with fewer than 50 employees, the earliest that they will be required to operate the scheme will be March 2014. The minimum employer contributions will remain at 1% until September 2016.
What do you all see as being the benefits to the nanny of agreeing a Gross wage?
One benefit I feel is that an employer can calculate how much it will cost them to employ the nanny.
If an employer offers the same Gross wage to two different nannies, they know how much it will cost to employ either nanny. Don't have to worry about a nannies individual tax circumstances.
As a nanny who recieves net pay I would quite like to go gross the employers never seem keen but whatever way you do it tax and NI still has to be payed
Nanny benefits from tax allowance changes, doesn't have to worry about splitting tax code for more than 1 job and can easily quote/provide evidence of gross salary when required.
It also makes it easier in a sense to compare different job options. One job is 50 hours, £500 gross straight, another is a complicated nannyshare where you end up with 3 different families paying into a pot, 2 at any one time, 1 day with only one on a lower rate etc and you have to reverse calculations to work out the best way to allocate your tax allowance and how much you end up with whereas gross you can just see it's £x or £y per hour regardless of who the main employer is which means you add up the options and figure out it comes to, say, £550gross all told. It just standardises things which is good when many nannies are faced with choosing between different combinations because FT jobs are hard to find.
Also agreeing a gross wage gives employers less wriggle room to dodge tax/NI or ask the nanny to handle it.
Absolutely SnapFrak - I wonder what percentage of employers paying £600 a week net actually hand over £300 tax and NI to HMRC each week?
And what percentage of employers paying £100 a week for a 1-day part timer with another job are registered for PAYE?
I believe that net salaries encourage PAYE fraud so should be discouraged in any statement of recruitment best practice.
Uh - we pay absolutely all tax and NI on nanny salaries and have done for 12 years
Plus give proper printed payslips
I think most people hiring nannies full time do, don't they? Wouldn't a nanny insist on it in any event?
>I think most people hiring nannies full time do, don't they? Wouldn't a nanny insist on it in any event?
My impression from 6 years of being an employer is that most people don't pay tax, and most non-British nannies don't care.
I've always hired english aussie or nz nannies and they have always wanted their tax paid
not that they have a choice, I pay it anyway
what is it about people that think tax is something that should be paid by other people? grr
The nanny agencies need to get on board, promoting gross wages.
The colleges need to get on board, making sure that the 'maths' involved in gross versus net wages are included on nannying courses.
Parents need to get tough and ONLY negotiate wages in gross terms.
Our current nanny was quite happy to negotiate a gross wage with us because she understands the implications of each one. She also was told at college about gross versus net.
It's true most unqualified nannies don't know and many non-Brits don't care. If you're here for 2/3 years then what does it matter someone paying your tax and NI or not seems to be the thinking. It's not like in France where working undeclared means you have no healthcare - there's no tangible benefit to declaring your income in the UK until you need SMP/MA or SSP. Even JSA doesn't rely on previous NI contributions.
It's tax evasion and it's wrong but in the long term if you're not staying it doesn't matter for many people so they'll happily accept CIH.
- parents want to do it to save costs, and because they feel that childcare costs ought to be tax exempt;
- nannies want to do it because they can then undercut competition, and they don't worry about pensions or mortgages because they don't intend to stay here forever. Also one nanny said to me that she wanted cash, to look unemployed, so they can claim benefits.
Totally agree with this thread. It was a nightmare trying to sort this out with the nanny we employed. I am not great at maths, and would grind through the figures and end up with a result only to hear 'so what's that net?' aargh! IMO the only possible reason for working in net figures is to avoid tax - i'm NOT saying that any nanny would voluntarily do this but while it is 'the norm' in the sector just to ignore gross pay, it's like a nod and a wink to employers that you needn't really think about it and that most people don't. God knows what the proportion of non-tax-paying employers is out there but it must be higher than in a lot of other sectors.
I haven't read through the WHOLE thread, but I think the salaries should be gross, as it makes it more straightforward for the Employer to work out in total what it will cost them.
To be honest, there are all sorts of things about paying nannies that I don't really understand (and would therefore want to see changed unless a good reason was explained to me). Eg:
Why are Employers expected to pay ALL the tax and NI of nannies?
Why can a nanny not declare herself self employed if she works on a freelance basis?
I will never get a job in my industry where I am not responsible for any of my tax and NI (ie my employer would pay it all), and there must be enough requirement in the market for part time ad hoc childcare that would make sense for nannies to take on a self employed status?
orangina, but in most circumstances nannies ARE employed, and they deserve the protections of employment. I'd agree that nannies working for several families during the week could be self-employed, but otherwise it's just a way for employers to duck their responsibilities IMO.
Because most nannies don't meet the criteria for self-employment even if they work for many families. They're usually contracted for set hours and do what the parents tell them to even when part-time.
As employees they're entitled to the benefits which come with being employed.
Just had a brainwave.... on todays thread discussing nanny agencys fees, it seems most nanny agencies charge fees as "X many weeks net salary"
perhaps this is why agencies are keen to work in net, so its easy for them to work out the fees they charge the parents?
But changing to gross gets them more cash...
3x gross is going to be more than 3x net. If anything that kind of fee structure is an incentive to move to gross for agencies!
true..... but which agency will be the 1st.... and suddenly be far more expensive then the rest?
There are already agencies which are far more expensive and people use them...
In many ways I think the relative amounts paid in fees aren't a top priority when choosing an agency. Obviously 4x net salary vs 20%annual is going to make a difference but half the time prices are quoted without VAT, agencies with fixed fees don't seem to be any more popular than agencies with fees which work on the multiple basis and the size if the fee is so dependant on the salary you pay your nanny that an agency changing from net to gross to calculate fee payments is going to be relatively insignificant.
Maybe ANA will make it a policy change?
If the big chain agencies changed to Gross, then others in my view would follow. So if you are registered with a chain agency, contact them and tell them you want to see job ads as Gross. Especially Tinies, who seem to me to be one of the biggest chains - they do Gross for nursery jobs, so why not Nanny jobs.
I totally agree that the practice of quoting net figures needs to stop.
What with the tax allowances going up so fast, anyone who has agreed a net wage, will really miss out.
If you find that your nanny is already using her tax allowance with another employer, she can apply to HMRC to split the tax code.
In case anyone is interested -
My newest employer uses PAYE for nannies to do the taxation and they have advised her, that from April 2013, it will no longer be possible to operate net pay agreements for nannies
See more info here: http://www.payefornannies.co.uk/parents/RTI.htm.
(Sorry, can't do proper links on phone)
That may be PAYEfornannies policy, but there is no reason why you cannot continue to operate a net pay agreement after April.
What you cannot do is pay different amounts each week net and tell your accountant/payroll service after the event and get them to sort out the tax - this must be done and reported to HMRC when or before the payment is made.
I think they're missing the word feasibly.
It's about to get nightmareishly complicated and payroll agencies may well be protecting themselves from the hassle. I'm not going to argue
This thread is 2 years old but I still standby my comment I made 2years ago
I blame the agencies
Looking at jobs on nanny job in my area last night and 99% still say the salary nett
One uses gross and some are coming round and saying gross which would be roughly xxx nett
Nannies also seem to like round figures - ie £8/8.50/9/10 nett where as gross would work out say 9.73 nett iyswim and nannies seem to not like this
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