The Real cost of a Nanny

[ChrissieLC]

Have you worked it out?

I am an IFA and an employer of a nanny. I have come across so many people that are paying for nurserys nannies etc and not really realising how much they are forking out to go to work, and more worringly alot of them are actually working at a loss without realising!!

The HMRC is clamping down on nanies getting paid part in cash, so those days are over if you are still doing that, however the industry will take a while to catch up with this and whilst net salarys are still in contracts nannies will be expecting the same pay. One day it will be gross salaries and salaries will have to come down for nannys as people will cotton on to the fact they can't pay cash anymore...not even for housework duties whilst the kids are at school.

Ok so real cost. Well nanny costs vary of course. In my area £7 net per hour is a good wage, in london more like £9 or £10 (if you are paying more than that look o get a nanny to commute from places like bedfordshire , essex etc as £9nph is a very good wage for them and there are 8 nannies for every job)

So say on averge you pay £450 net per week for your nanny.

That actually amounts to £680 you pay out of your own net wage.

Plus add on petrol costs of the nanny, agency costs, ofstead registration costs, payroll costs, redundancy or maternity costs and your own cost of going to work (travel, suits etc). Well to clear that cost of the nanny with no profit for yourself you will need to be earning £45 to £50K per year to just cover the cost. So whats left after that is profit for you (after of course you pay your 40%)

So say you are earning £70K a year. Chances are all you are getting in your pocket for all that hard work is about £12k a year.

Is it worth it?

I do actually have a nanny myself, however worked out that working 3 days a week actually makes me better off than working 5 days as I put everything through payroll. But not everyone has the option of working less days.

Such a shame we cant pay for childcare out of our gross wage. Once cash in hand has gone, expect nanny wages to drop and nanny jobs to be fewer hours. It's time the government saw they are killing off 2 people who would be happy to work full time by not placing incentives for those who have to pay childcare.

Um a bit confused

I understand cash in hand to mean no paye operated, yes ?

Not necessarily, most of the nannies I know have had jobs where part of their pay was through payroll and part of it was cash , ie only part of their earnings were declared.

Some employers seem to think its ok to pay cash for housework whilst the kids are at school etc you see.

Bascially if you hand over any money to the nanny that is not declared through payroll then the HMRC will be after you! Or so they say given recent articles in the FT and BBC news etc

Well if not all earnings are declared through payroll then that is an offence anyway, surely ? Not sure why this is an issue tbh

Anyway, moving on to other points. A woman, living wirh an earning partner, why should childcare costs be calced out of her earnings rather than joint income?

And tben there's the deferred gratification thing - suck up large childcare costs, initially, continue accelerating career, reap benefits when children go to school

It is an offence but it appears that a very large proportion of nannies are being paid through cash so this will affect the market when they are forced to stop. I can understand why it has been going on, as with only £243 per month childcare vouchers that can be done out of the gross wage it is no wonder some people are looking at ways to reduce the costs.

The career thing is why I continue to work.

It is important however that people realise how much it is costing them as I have come across people that would not be working if they had known their childcare was costing them more than they are bringing in. They are genuinely surprised when they work it out.

At that point the joint earnings are somewhat irrelevant unless the person was so desperate not to loose their career that they work at a loss and have their kids looked after by someone else.

if this country want mums back at work, they really need to help out the tax side of childcare to reduce costs. I am not critising this particular government (who I am still voting for for lots of other reasons), but in general it has not been looked at since the £243pm was set and it needs to be

How can HMRC know who to pursue? If you declare a decent nanny salary how can they guess if you are one of the families also paying the nanny £X cash a week for cleaning etc? I just do not understand how the clampdown will work.

Exactly AubergineKenobi, just what I was going to say! All very well HMRC saying they're clamping down, but how is it any different to any other "cash in hand" type job, such as plumber, decorator, etc? If the individuals are declaring a reasonable amount, then how on earth are HMRC going to know who to investigate and how will they have the resources to do a proper job "clamping down on" the wholy nannying sector?

I've wondered that also, but having talked with a few tax accountants it sounds easy enough to trace. Apparently they are starting with the PAYE companies clients (so those that pay all of it in cash and declare nothing will probably be better off!!) and looking a trends and history of nany wages.

I guess if the nanny was previously earning more and now earning less they will then start checking employers hours against claimed working hours of the nanny, bank accounts all sorts. They will just ask you and the nanny at first and then if you declare less at that point, and are investigated, you could get into real trouble. It all seems like alot of effort for not much gain on their part given that there are other much larger forms of tax evasion going on with large corporates bt there you go!

I just decided it was easiest to play safe and go part time and declare it all cos if you get found out you are looking at big fines and potential prison sentances.

ps my guess is they will do a few token cases to make a point

ChrissieLC - why have you mentioned Net salaries... nannies are paid Gross... at least they are if employers are operating PAYE.

First thing that needs to change I feel is that Nannies, Employers and Nanny Agencies all need to start talking Gross salaries - Support the campaign: www.letstalkgross.co.uk

PAYE Companies may not be told how many hours a nanny is working... they may just be told an amount. A payslip does not have to show number of hours worked, to my knowledge.

Where are you getting your information from? All I can see that HMRC are doing is changing the frequency of reporting, which will then show quicker when someone's income changes.

Not necessarily, most of the nannies I know have had jobs where part of their pay was through payroll and part of it was cash , ie only part of their earnings were declared.
Some employers seem to think its ok to pay cash for housework whilst the kids are at school etc you see.

I've never known jobs like that. Maybe I'm just lucky and have not come across employers who do that sort of thing.

What about the nanny kitty? That's not income... it's expenditure. However at what point does that become income, as if it's given to the nanny at the beginning of the week, is it then part of the nannies income? Should expenditure be claimed in arrears?

Point taken that negotiating net hides the cost of a nanny. By doing calculations based on a gross figure that problem disappears. Then the other costs should be budgeted for which is quite a recurrent theme on here and nick has worked some excellent examples which demonstrate these.

Hmm. I see what you're saying but I think your argument is flawed...

Your original example showed around £1000 clear take home pay after deducting childcare and associated costs - that's not too bad in my book. Certainly still worth working for.

Also agree with poster who asked why you are taking a nanny's salary out of only the mum's earnings (presuming there are two people contributing). It may be that a nanny's costs (or any childcare) are a large part of one income, but surely you should be taking it out of family income?

Also - for many people, working is not just about earning - it can be about being challenged, motivated and satisfied.. those things often can't have a physical cost associated.

Nick - although nannies are paid gross every single one I've offered a salary to this time has tried to argue back in net or asked me to calculate the net for them which I'm not prepared to do as I neither know their circumstances and am not an accountant! I've told them I'm paying tax their NI and er NI on top and salaries for all other jobs are given gross but the response has not been overwhelmingly positive. I think the best reaction was the one who I offered what I considered a very respectable salary to gross, said she wasn't happy I asked her what she wanted and she said she wanted the same amount net. Since that came out to considerably more than her supposed hourly rate and my net salary she ended that offer effectively.

Jaded, moi?

Also I don't offer more than my salary and do calculate it out of my higher one and not dh's as if I stayed at home we wouldn't need a nanny. I'm prepared to sacrifice up to 90-95% of my take home pay for these few years as once the dts start school I can go back to cheaper childcare solutions so it is for a long term gain. I don't know how other people see it but the amount most nannies seem to want makes it very difficult for anyone not earning over £80k to work.

Nannies are really suited to families with more than one child. If you only have one child then a nanny, in comparison with a childminder or nursery, is very pricey. If you have two children it's more comparable, but still more expensive to have a nanny. If you have 3/4/5 + a nanny is good value even at £680 a week. A nursery here can be £60 a day, for 3 children you're paying £900pw. Bearing in mind all the other benefits of having a nanny over a childminder or nursery and I really don't think the cost of a nanny is particularly scandalous (in comparison to other forms of childcare).

The cost of childcare is too high that's the problem, not the cost of a nanny specifically.

Or is it the cost of living. My flat room is £120k which a single person would struggle to buy these days. Housing costs in areas where parents want nannies I expect are probably quite high. Food prices, fuel, it's all going up. Most nannies are single I suspect.

Tiggersmum - as I've not always been a nanny, I've never asked for a net salary. I wonder if having had other jobs, that's the difference as I was already used to having a gross salary.

Tiggersreturn I meant. It's early... making breakfast.

This is all sickening familiar. We were employing a ft nanny. Dh earnt 44k once travel was taken out he was clearing about £200 pcm. He gave up work temporarily as I am the higher earner. One of our biggest problems.was the whole gross/net pay thing total nightmare !

Chrissielc, excellent op. I couldn't agree more. All childcare costs should come out of gross earnings. I have been banging on about this for years on here. But, I suspect my resistance to the current system is futile.

However, I think the cih practice will continue. HMRC (and the BBC) may talk tough. But, if they were able to catch all the tax dodgers in a cost effective manner they would have done so by now.

Someone mentioned the 243 in childcare vouchers. I was made redundant last summer. And when I got a new job and signed up for childcare vouchers I was informed that I would be considered a new entrant to the system and only qualify for 123. Boy was I unhappy.

It is crazy, absolutely crazy, how much money parents have tp pay to go to work. We are working parents and not profitable businesses. But we are taxed like the latter.

Maybe we should start a campaign? It does seem silly that so many women are being driven out of the economy because their net salary won't cover another person's gross salary plus NI plus additional costs.

Point me in the right direction and I will gladly sign up. But, I don't think it is a woman's issue. Dad's ate parents too and some of them stay home whilst mum works because she makes more £.

obviously if you're paying gross, you won't be able to take advantage of the increased personal allowances which the last budget introduced.

(and as an aside, I have never known anyone to pay a nanny cash in hand)

How much is an average gross nanny salary for the home counties?

Is a mothers help roughly the same salary?

In a couple of years, I will need someone for 2 after school sessions a week and 2 full days in the holidays. I'm thinking ahead!

Sorry for thread hijack!

strix and tiggers return, totally agree with you. I think either childcare costs need to come down or better, costs get paid from gross salary. Otherwise you are just limiting the mother (or father!) in their ability to return to work, as lets face it, not many earn over £70K to make it worth while.

BobbFleckman - I agree that is the downside to paying gross. My point however was that we should pay the nanny out of OUR gross salary.

Bonnie - depends where in the home counties. Around Beds and north herts i wouldnt pay any more than £7.50 an hour gross (mainly because I know alot of good out of work nannys who have been hit by the recession and are being realistic in their prices). Around south herts more like £9ph gross. Surrey I am guessing more like £11 or maybe more

Not sure what the point is

i was always paid a gross salary
my whole salary was always declared

why would I want to not have my wages declared when i NEEDED my pay slips for mortgage etc?

I dont think part cash in hand is as common as people think, i know a few nannies who had their annual pay rise as cash in hand, but i most certainly did not.

Yes it costs a LOT to have a nanny... but then i spend almost all of my nannying career working for very wealthy families, with 2 very highly paid parents
One of the houses i worked at had more garages than my own house had rooms