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Nanny Employers to contribute 3% towards nannies pension - from Oct 2012 / 2017(72 Posts)
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?
I don't currently employ a nanny, but anyone who does should be able to work it out using this tool if that helps?
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?
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.
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?
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.
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?
Employer contribution is additional. So unless nanny opts out, £10 per hr becomes 10.30?
This site is quite useful http://www.thepensionsregulator.gov.uk/employers/exceptions.aspx#modif 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.
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.
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.
I think the new pension scheme is brilliant for us nannies! I know full well my employer has a pension herself so why shouldn't I? Why because we don't work for a big company shouldn't we be entitled to a government led pension?
Everyone's entitled to this new scheme not just nannies!
It's so hard to do a pension alone. I think the government have made a fantastic choice bringing in this new scheme.
Abby are you happy for your net pay to be reduced as a consequence?
I am happy to put some of my nanny's pay towards a pension instead of paying it to her. (not sure she will be so happy about that however). I wouldn't be happy if she expects pension contribution as well as her current pay. As others have said, if nannies expect this then the result will be fewer nannies employed.
It's different for businesses with employees - they can count these costs as expenses/outgoings, counted against revenues, so it reduces the amount on which they pay tax. Whereas individuals who are employers are paying salary and pension contributions out of their net wages on which they have already paid tax.
for those organised nannies who have pensions - as an employer I would be delighted if my nanny told me which pension to pay my percentage into!
I have money purchase schemes for my own pension and until I became self-employed my employer paid into these as part of my work pension. When you say you have "personal pensions" is that what you mean? Also known as a defined contributions pension.
Abby, no other business has to pay the employer's taxes out of already taxed income. That's the difference. I am a GP, so relatively well paid. I work 3 days a week and my 2 day a week nanny costs over half my take home income. If I didn't have family childcare for one day a week it would be 80%. So forgive me for not jumping for joy over this.
minipie the employee's contributions will come out of her pay but you will have to pay the employer's contributions on top. I very much doubt that a tribunal would look kindly on attempts to make a nanny redundant and employ another one to avoid the pension. So this will cost you more unless your nanny opts out
dietcoke I had planned to give my nanny a pay rise - this legislation probably means she will get pension contributions instead of a pay rise. I can't afford both.
Yes I am sure there will be a lot of pension instead of pay rise issues.
I can't see why people are getting upset about paying proper pension contributions for their employees.
it isn't part of their current pay, it is for later on in life. It is in addition to current pay, not instead of it. It is completely fair, in my book. If you employ someone, you pay them properly, including salary, sick pay, holiday pay, and pension.
Yes but most ppl who employ someone are bringing in money to the business then paying expenses and wages then are left with a profit . Employing a nanny isn't a business which generates it's own money it's the employers own personnel money that pays Nannie so not really the same as other employed positions
But the nanny is allowing the parent(s) to work, instead of having to stay at home, unpaid, to look after the children. She is, therefore, indirectly boosting the total income of the family, just as other employees add to the profits of their company. It is therefore fair that a nanny should receive all the benefits that other employees get, including a pension.
No, her pension contributions are not tax-allowable but that is because, at the moment childcare costs in general are not tax-deductible.
It doesn't't have to be an exact analogy with a business to be fair.
I don't object to paying my nannys salary out of my taxed income. I object to paying her income tax and NI out of taxed income, that is double taxation at its worst.
I know employees already in the scheme where at present employers have to pay 1% and employees in return lose 1% of their salary. The employer pays the 1% on top of the gross salary. The employee loses 1% of their salary (less tax relief) for their contribution. I think it's not until at least 2016/17 for those employing fewer than 30 staff.
The simple answer for employers is no pay rise until the extra 1% cost has been covered from what otherwise would have been the pay rise.
Nanny employers are taxed almost 3 times - first they pay tax/NI on their pay; then out of that net pay they then pay the nanny's tax and NI; finally they also pay employer NI and do not even get the new tax break from £2k a year NI which other small employers are getting.
People need to stop seeing nanny pay as net pay plus tax and NI. It's a gross wage. There's an argument for exempting them from employer NICs and possibly pension contributions but the nanny's contributions to the system need to be paid and come from the nanny's gross wage.
As an employer of a nanny I think this is a great idea. Nanny employment is ridiculously insecure and most contracts offer the bear minimum in sickness benefit etc because families can't risk big duplication of childcare costs.
I think it is only fair and right nannies are protected with a pension.
And didn't the government just say something about a tax cut for small employers? We're nanny employers included in that? If so we are still better off.
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