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69% of nannies still have a Net pay contract - how can we change this?

(59 Posts)
nannynick Thu 03-Feb-11 14:04:21

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?

mranchovy Fri 04-Feb-11 21:44:35

Been a bit busy recently and for the next couple of weeks I think so no promises but... grin

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.

nannynick Sat 05-Feb-11 14:18:08

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.

onimolap Sat 05-Feb-11 14:29:30

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.

nannynick Sat 05-Feb-11 14:38:38

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.

mranchovy Sat 05-Feb-11 20:10:25

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!

freshmint Sat 05-Feb-11 23:18:56

oh god when is that starting?
must sack the nanny before that grin

(Joking)

mranchovy Sun 06-Feb-11 15:47:20

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 grin

mranchovy Sun 06-Feb-11 16:19:20

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.

nannynick Sun 06-Feb-11 16:30:11

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.

sunshinenanny Sun 06-Feb-11 16:31:12

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

SnapFrakkleAndPop Sun 06-Feb-11 18:18:02

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.

SnapFrakkleAndPop Sun 06-Feb-11 18:19:07

Also agreeing a gross wage gives employers less wriggle room to dodge tax/NI or ask the nanny to handle it.

mranchovy Sun 06-Feb-11 20:28:48

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.

freshmint Mon 07-Feb-11 09:37:30

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?

Novstar Mon 07-Feb-11 09:48:24

>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.

freshmint Mon 07-Feb-11 09:55:36

blimey
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

TooPragmatic Mon 07-Feb-11 09:58:17

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.

SnapFrakkleAndPop Mon 07-Feb-11 10:06:12

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.

Novstar Mon 07-Feb-11 10:07:32

I think
- 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.

mackereltaitai Mon 07-Feb-11 10:16:42

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.

orangina Mon 07-Feb-11 10:34:40

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?

mackereltaitai Mon 07-Feb-11 10:45:38

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.

SnapFrakkleAndPop Mon 07-Feb-11 10:53:53

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.

nannyl Fri 18-Feb-11 08:36:29

Hey Nick

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?

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