MrAnchovy - your help needed!

[willow3006]

Hi

I've seen you answer these difficult nanny pay related questions before so hope you don't mind helping me out with this one.

As you may have seen on previous threads we were struggling to find a nanny because we just couldn't afford the rates in our area. We then decided that as my husband is a teacher we could offer a lower wage per month but as a kind of 'perk' to make up for it they could have all the school holidays and half terms off (except for 2 weeks in the summer). We got lots of applicants for this as lots of nannies wanted to do term time only which is good.

The question I have is how I go about doing this without breaking the law with regards to NMW? I suppose it must be the same as someone who pays less because the nanny is bringing their own child to work.

So we will be paying about £850 a month take home and then the NI/Tax and employers NI on top of that per month. Obviously if you looked at this on a week where the nanny was working (so term time) the hourly rate is below NMW but if you took into consideration that for 1o week of the year they won't be working but still getting paid then it makes sense. I realise I could just work out the number of actual hours over the year the nanny would be working and then divide up the money between them to see what her hourly wage is but how do you explain that on a payslip on a month where she has worked the whole month and then again on a month where she won't be working any (August e.g.)

Help please!!

Willow x

Don't forget that it's not 10 weeks of the year that she's not working but still getting paid - she is still entitled to paid holiday. For working a 40 week year I think it's about 5 weeks holiday. So it is only actually 5 weeks a year that she is not working but being paid.

The standard way it works for term-time only work is this:

You work a set number of weeks in the year (say 33).

You are entitled to 5.6 weeks holiday for a full year, so that is 5.6 x 33 / 52 = 3.6 weeks (you cannot round down in this calculation).

Total paid weeks for the year are therefore 33 + 3.6 = 36.6 weeks. You must pay an annual salary of at least NMW x number of hours per week x 36.6 weeks. Whatever GROSS rate you agree, divide it by 12 and pay each month.

So if you agree a salary of £11,280 that should end up as £850pcm in the nanny's pocket, plus £44pcm employers NI, and equates to £11,280 / £6.08 / 36.6 = 55.2 hours a week at NMW, although NMW will go up in October.

Oh and for the record, you cannot pay less than NMW beacuse a nanny brings her own child to work.

OP - are you wanting Term Time Only, or are you wanting to pay £850 roughly every month but have the nanny only physically work term time?

Aren't they the same thing Nick?

Also, just noted the OP said 10 weeks not working, so the calculations work out as:

You work a set number of weeks in the year (say 42).

You are entitled to 5.6 weeks holiday for a full year, so that is 5.6 x 42 / 52 = 4.6 weeks (you cannot round down in this calculation).

Total paid weeks for the year are therefore 42 + 4.6 = 46.6 weeks. You must pay an annual salary of at least NMW x number of hours per week x 46.6 weeks. Whatever GROSS rate you agree, divide it by 12 and pay each month.

So if you agree a salary of £11,280 that should end up as £850pcm in the nanny's pocket, plus £44pcm employers NI, and equates to £11,280 / £6.08 / 46.6 = 39.8 hours a week at NMW, although NMW will go up in October.

Yes, it's the same thing isn't it

What if the nanny needs to be working more than 39.8 hours a week? A nanny could easily be doing 50 hours a week.

Do we not need to know the working hours so that NMW for a working week can be calculated? Then multiply that by the number of working weeks plus the holiday entitlement? Then divide that by 12 to get the monthly pay figure to comply with NMW?

Do we not need to know the working hours so that NMW for a working week can be calculated? Then multiply that by the number of working weeks plus the holiday entitlement? Then divide that by 12 to get the monthly pay figure to comply with NMW?

Well yes, but we don't know the working hours so I worked the same calculation backwards to find that if it is more than 39.8 there is a problem.

Thanks for all this help! I would be useless at working out all of this stuff. I'm not sure what to do now as I think the working hours are going to be too much and my new job won't let me work any less. I'd need someone from 8am to 6pm (I may be able to change it to 8.30 to 5.30 but this would still be 9 hours a day). That comes to at least 45 hours a week rather than the 39.8 hours needed.

I looked at an online calculator to work out what we could pay and I think I did it right. Could you tell me if I'm wrong or if there is a way I can pay anymore and therefore be paying NMW. The gross amount for everything I can afford at a push is £1050 a month. On the calculator it looked like after I paid the NI, PAYE and the employers liability insurance the net wage would be 850. Is this right?

What about if I took 2 weeks holiday from my job to cover the 2 weeks that my Husband has to work in the summer holidays so that we could give these extra 2 weeks off also for the nanny? That would add some hours I guess but would it be enough to meet NMW?

Any help appreciated. I'm lost when it comes to all this and I'm really trying to find a way I can go back to work but every time I think I've cracked it, I seem to be doing something against the law!

Thanks again

Willow

Can you and/or your husband claim childcare vouchers through work? If so, both you and your husband could claim up to £243* each, which you wouldn't pay (lower rate) tax on, so if your nanny was Ofsted registered, you could pay her £486 a month which would have effectively only cost you around £390, so that would 'save' you £100 a month which you could put to a slightly higher hourly rate?

• I think the rules have changed if you aren't already in a voucher scheme - you don't get the higher tax rates if you join now, but it's still quite a good saving.

So it might be 45 hours per week for 40 weeks a year?

5.6 weeks holiday for a full year, so that is 5.6 x 40 / 52 = 4.4 weeks (I think... is it rounded up to 4.4?)

45 hours x 40 + 4.4 weeks = 1998 hours per year.

If the nanny is aged 18-20, then £4.98 NMW x 1998 hours = £9950.04

9950.04 / 12 = 829.17

If the nanny is aged 21+ then £6.08 NMW (changes to £6.19 in October 2012) x 1998 hours / 12 = 1012.32

Those would be the Gross salary figures, to which you would then need to add on Employers NI (which on £1012.32 I think would be around £54 a month).

So I don't think it is possible, unless the nanny is young and doesn't get older. Even with a nanny aged 20 or under, would they accept such a wage?

We got lots of applicants for this as lots of nannies wanted to do term time only which is good.

Did any of them ask you about salary, or give you an indication of what they expected to earn? What sort of age are they... any under 20?

As you are on a really tight budget, I'd also check things like car insurance etc... at only £850 net a month, your nanny may not have business insurance on her car, and you will need to get it for your own car if you nanny needs it to drive your child about..

I only mention it because it cost me another £40 a month more than our previous insurance on our own (small car) for our nanny, and Morton Michel aren't even able to insure our new nanny because she's under 25.

Do you only have one child? Is nursery or childminder an option? Is an aupair a possibility if your child isn't a baby?

nannynick I did laugh at you "nanny is young and doesn't get any older" comment... I wish that applied to me! x

Hi there

Nannynick - We put the exact figure for salary in our ad so all the nannies who applied know what they will be getting. Most are 21/22 with 1-2 jobs either in a nursery or in a nanny position but some are very experienced 10+ years nannies who have a child at school and want all the holidays off.

So - it looks like it could be done for about £1060 including the employers liability insurance if we were to give them all the holidays? That might be doable.

BBCessex - we don't need the nanny to drive anywhere as we live in the centre of town. I don't drive or have a car anyway. We have twins (which is what has caused the issue! We budgeted for 1 child and got 2!) so the cheapest cost for a nursery round here is £1700 a month and we just couldn't afford that. I'm literally going to work as it is to just pay the childminder and the rest of the mortgage that my husband's salary won't cover. We did think about an aupair as we have a very very small spare room but my twins are 6 months old so it's not an option.

It's all so tricky! I have worked out how much we can pay, I have applicants who are happy with that figure but I can't employ them because it's against the law! I wouldn't do it but am starting to see why so many people just pay their nannies cash in hand!

A live in nanny, if you had room for an AP, isn't necessarily subject to NMW. I don't know whether you've considered that option?

We have considered it but I'm really unsure the room is suitable - it's a box room really!

In my first job, I had the box room. Bed, bedside cabinet and chest of drawers. Anything that needed hanging up was in the baby's wardrobe!

I had very little experience, aside from babysitting and after school care of two children.

If it is girl from nursery background who wants to get into nannying, I am sure she'll be fine with this set up. After all, it is probably all she has at home!

Just advertise for a live-in nanny, they'll either be interested or not!

What about the other costs involved - activities such as toddler groups? What about food/drink for nanny whilst on duty?

Think I found your Childcare.co.uk entry... it gives a salary range (£800-£900 net) but nothing about hours of work. It also says "can offer nearly all school holidays off fully paid" but that won't be the case, as the calculations above are for Term Time only, plus statutory holiday - so a lot of the holiday time is unpaid. Though you would be splitting the salary across 12 months, so I suppose you could say it's paid all year round but I don't feel its "school holidays off fully paid".

You have presumable discussed it with some of the applicants though, so have a short list of people who would accept £800-£900 net per month, paid each month, for working 45-50 hours a week for some weeks and having time off on the other weeks.

The problem is NMW. To get around that the nanny needs to be very young, or it needs to be a Live-In nanny.

Where do the twins sleep? Could they have the box room?

Live-in Nanny though would increase your household costs - they would be eating 3 meals a day at your home, every day. They would be using your hot water for a bath/shower. So financially it may not be any better, plus it means having someone else living at home 24/7.

Nannynick - yes, that's our ad. I'm not sure what you mean about it not being fully paid. We're still paying the same salary every mnth even though there are some months/weeks they won't need to work. I'm not sure how else it could be worded? Anyway, we have interviewed and found some great nannies, all who know the salary and the hours and are more than happy with them as it appears nanny work for term time only is pretty rare. But you're right - the issue seems to be the NMW although it appears if we offer all the holidays off and 9 hours a day instead of 10, it works out ok (as you explained earlier) so we'll probably do this.

When it comes to other costs involved, we've budgeted a bit extra for the food shop so that the nanny can eat lunch from our house/snacks etc but at the moment they're only 6 months old so I'm not really bothered about them going to toddler groups, etc although there are 2-3 free ones near me. Once they get to the age they need to go to classes/activities the money situation is likely to be better so we'll probably be able to afford it.

We did have the twins in the box room but it was just too small for 2 cots so not really an option. If we have to go down the live in nanny route we will but it seems silly when we have so many great nannies who want the position and want to live out!

I'm not sure either. As long as the nanny is aware that they are working 40 weeks and getting 4.4 weeks paid holiday and that the rest of the time is unpaid holiday, then it's not a problem. They are being paid for working 1998 hours a year and are getting the payment split into 12 chunks, rather than being paid for work done as it is being done - if that makes sense.

What happens in October? How do we work out the minimum monthly pay amount needed prior to October and the amount needed from October onwards?

Willow - when would your nanny be starting?

Yeah - it does make sense. The nanny will either be starting in May (if I can get all this sorted out by then!) or September if they prefer as I have got someone that could help out until July and then my hubby can do the school hols so September latest.

So it sounds like it goes up in October so I guess from that month the whole pay structure will have to change again! I suppose it would be easier to work out what I need to pay from now as if NMW has already gone up so I won't have to change it all again.

I still think it's a bit weird that I wouldn't have to even worry about NMW if the nanny looked after the kids at her house (and so was classed as a childminder) or if she lived at mine! I wish there was some loophole!

OOPS - I gave the wrong calclulation here!

The correct calculation for pro-rating statutory annual leave is given by:

h = w / (52/5.6-1), or w x 0.1207, where h is the number of weeks paid leave and w is the number of weeks actually worked.