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.

The point is, not everyone that needs a nanny earns hundreds of thousands, and there are alot of nannys out there looking for jobs.

If the government were to allow parents to pay out of their gross income, I suspect it would create more jobs for nannys

I dont know a single nanny that hasnt been part cash in hand. I suspect it depends of what part of the country we look at. Every nanny i interviewed both times I was looking for a nanny, had recieved part cash (large part cash). THis is becuase it was unaffordable to have a nanny otherwise I suspect. Hence the need for us to be able to pay out of our gross salary to ensure the nanny still has 1) a job and 2) the wage she gets now

I just think its madness, if someone is earning £70K a year, they will only walk away with £12K in their pocket. For me, its simply not worth putting your kids through it for that.My first nanny was great but she was on mat leave within a year, the second nanny was not great although she thought she was the bees knees, other parents (and other nannys!) told me she just sat gossiping at the park and my eldest hated her, third nanny was great although always late! Its never plain sailing, all too much for such a low take home.

Thanks Chrissie.

Chapter 2 of this Parliamentary report is an interesting read.

The tax relief described there is so little in relation to my childcare bill that it serves to do little more than patronise me. I want all of my childcare expenses to be paid from my gross income.

That option is discussed extensively in Chapter 2, including HM Treasury's view (that it would cost at least £300m a year and could not therefore be justified) and a reference to some of the many campaigns over the years including Teresa Gorman's private members bill, the campaign by the accounting body ACCA etc.

If anyone is thinking of starting a campaign they would be well advised to read it and follow up the references to understand what others have done before.

Thats really really helpful thanks Mr Anchovy. In all honesty I think we would be fighting a loosing battle but worth a look into, thanks

I don't know, every nanny I know of is under paye and everything declared.
I always negotiate net as that's what the agencies release figure in, but I am actually paid gross as all my tax, ni etc is paid through paye by employers.

As someone rightly said, the majority of nannies do work for wealthy people in wealthy areas. Even with a commute of some kind it is expensive to live in those areas. Nannies often work from very early until late, and I personally wouldn't want another hours commute on top if I'm leaving at 11pm, and back at 7am.

As a professional nanny I also spend a fair amount of time and money outside work hours making sure I am up to date and gaining new qualifications

Paying peanuts isn't going to help anyone

which is exactly why parent should be able to pay nannies from their gross salarys...to help subsidise the costs so that nanny rates dont need to suffer.

Its really not a case of not wanting to reward a nanny who is good, its a case of not being able to afford to do so due to the way the childcare system is set up

I don't think the majority of nannys do work for the extremely wealthy only, maybe in london, but you have to take the whole country into consideration, most mothers who employ a nanny will be on less than 100K.

There are an awful lot of unemployed nannys who have good qualifications in certain areas of the country.

I think the London nanny jobs are very different from what I have read here.

My nanny arrive at 8 (sometimes 9) and leaves at 5:45 and has 3 hours to herself, with the gym down the road, whilst youngest is at nursery, so you wouldnt really expect huge rates for that, and I dont think £7nph is exactly peanuts for it, esp with a 3 hour lunch break!!

Actually I am starting to think I am overpaying, this girl only wants £5nph!:

www.childcare.co.uk/profile/tash16

They would probably be wanting to bring their baby with them though - so may be why the pay level they desire is low. Also, they are 22 so pay could not be lower than NMW.

I'd feel bad about offering much less than my current nanny anyway as thats how much I can pay! Bringing cild to work obviously commands less money though I agree.

But it is a sign of the market around here, so many of the nannys I interviewed back in september are still looking for jobs now, and there were plenty of decent ones (as well as less good ones!). It's a shame, but sounds like it is not a UK wide situation

There are a lot of jobs where you need to be in a certain area of the country to work, and nannying is one of them. If you want good money and almost gaurenteed work, you need to be in London or surrounding areas. If you don't want to/can't live in London then you have the choice of working for less/trying harder to get a job/having less choice of job or doing something else. Pretty much all jobs are paid less outside of London, that's not a nanny or even a childcare problem.

*guarenteed

Sorry, I'm sure I'm being dim, but what you say you should be able to pay childcare out of your gross salary, do you mean you think it should be tax deductible?

*when you say

Bascially extend the childcare voucher system to mean that instead of 243pm getting paid out of gross income, the whole childcare amount should be paid out of gross income. Make it an allowable cost to encourage parents to work. It would create so many more jobs for nannys I reckon

With no limit ChrissieLC? Just all childcare costs, no matter what they are?

When you say gross income, do you mean the portion of your gross income that you pay in tax?

I imagine it would need to be something like your gross income - childcare costs = amount you then pay tax and NI on.

It simply wouldn't be cost effective and it doesn't work with the PAYE system very well. I work in a system where at the end of the year I complete my tax return, put down what I spend on a nanny or CM and then our tax bill is reduced by 50% of the amount spent (up to a certain threshold).

It just isn't practical in the UK.

Ah, ok, I see. Thank fraktal. I just couldn't get my head around the phrasing.

Yes, all of my childcare costs (which are incurred for th sole purpose of going to work) should be paid before my ni and tax are calculated on the remaining. The government won't do this because they think they need my money more than I do. Greedy bastards. Resistance is futile, sadly. I suppose there should be some level of cap. But the £126 I am entitled to is stupid. It should be about £2000 per month.

It's no wonder really that people choose tax evasion. I know several people who pay their nanny cash... And several who are above board.

There's an interesting epetition to increase the amount of money you can spend on childcare - from £55 to £75 pw - not enough, but a start at least...

Why not sign it??
epetitions.direct.gov.uk/petitions/31669

I find it is often the parents who want to pay in net and I have decided that in my next job I will stick to my guns and negotiate agross salary. I missed out on the increased tax allowance this year because my employer payes me in net. but I can assure all posters that I always make sure that my employer is paying the required paye on top of my net wage and insist they supply P.60s at the end of each tax year and P.45s when I leave.

If someone is taking cash in hand they are unlikely to tell everyone and make it traceable anyway. But there is a difference between being payed cash and declaring it and being paid cash in hand on the side.

Parents, if first timers, I find it easier to excuse than experienced nannies or agencies. They've probably read that nannies talk net do have painstakingly calculated everything on a net basis OR are being led down the garden path by a few nannies who've quoted net/other employers who talk about their nannies' net salaries and are utterly confused because they can't compare the prices different candidates put on themselves.

However parents can be educated with a few simple yet persuasive arguments mostly about tax codes and total cost.

What bugs me is when employers talk net and then decide they can't afford gross.

Chrissie, none of this is news to anyone who has been forking out for childcare. I don't know why you seem to think few other mothers have had the brains to work out that their childcare costs in some cases are more than they get paid. But there is a BIG payoff to staying in work and crucifying yourself with childcare costs, which is that children aren't little for long, and if you stay in the workforce you can continue travelling up the career ladder.

As many, many qualified professional women have discovered, if you become a SAHM for any length of time, you can generally kiss your career, or indeed any high paying job, goodbye. High childcare costs in teh short term are the price we pay for keeping open long term career choices and financial benefit.