Help please re net pay! And random question about RTI from April 2013

[Hopefully]

We have just employed a lovely nanny, having advertised at a net wage (as seems to be standard). It has just occurred to me, while setting up the payroll, that although we are employing the nanny for more than half of the week (3 days), the fact that she already has an employer for the other two days means that we will be the 'second' employer, so will presumably end up with a BR tax code rather than 810L.

Presumably this means that we will end up paying a far higher gross salary? I have no idea whether her first job uses up her entire personal allowance (I suspect it does, or fairly close to, assuming she is paid a similar hourly rate to what we offer and works full days, which I am fairly sure she does).

We'll suck this up if we have to, but is there any way of splitting the tax code between employers? Would I need the approval of her current employer to do that? Or would it be something for the nanny to do?

Also, I keep reading about RTI. Am I right in thinking that this will make it much more common for nannies to be employed on a gross salary? I am planning on putting a gross salary on our nanny contract from the beginning, will that prevent any issue there?

Any thoughts much appreciated!

always discuss gross for this very reason

doubt if other employer will happily share code as they have had all allowance and assume as nanny is talking nett with you, she did with them

Net wages are a pain and you will find that many of us on here have been trying to educate parents and nannies about how using Gross pay makes things easier for everyone. The association for professional nannies has a Lets Talk Gross campaign to try to highlight the issue to nannies and agencies.

You could end up with any taxcode... at any point HMRC could send you a coding notice. To begin with, if you are not given a P45 you ask your nanny to complete a P46 and from that you get the starting taxcode. It could well be BR, as your nanny has another job.

How has the salary been written in the contract? It is useful to have it as Gross in the contract, so changes in tax rates don't make as much difference to you as they can if you agree a Net wage.

MrAnchovy's PAYE Calculator can do Net to Gross conversion, though you should not use it for everyday payroll purposes - such as running the weekly/monthly payroll. It will help you to have a talk with your nanny about agreeing a Gross wage which you both feel is reasonable.

Tax codes can be split if the nanny contacts their local tax office and requests it. However does that need approval from the current employer - I don't know, but if they have agreed a Net wage as well then it will mean a rise in their costs.

Real Time Information I think is more about keeping track of when people change jobs, as it can take a while for the paper forms to get to HMRC, thus helping to keep the PAYE record more accurate. I would hope that it may mean more nannies agree a Gross salary but I'm not sure it will mean that happens. I don't think it removes the possibility of Net Wage Agreements.

Putting a gross figure in the contract is wise. So now you need to agree on the Gross figure, given that your nanny has accepted the job based on the Net figure.

Thanks for the replies. Lesson well and truly learned about gross salaries! I will encourage the nanny to accept a gross salary on the contract, on the basis that if she for any reason leaves her other job it would mean a significant net hourly pay rise for her (from us, not overall) if we were assigned the full tax code.

Hopefully it won't be a massively long term problem as we are hoping to require more hours in 6-12 months, so will either take her on full time or recruit a new nanny.

At least she is Ofsted registered and DH gets vouchers

The RTI question came up after reading this, incidentally, which implied that gross salaries would by necessity become more common. Shame it won't make net salaries redundant though.

Would be lovely if it made Net wage agreements redundant but it may take time before all nannies and their employers talk about salaries in Gross terms.

It may be that processing a Net pay agreement or doing weekly gross pay rather than monthly, will incur extra costs from payroll companies, thus employers will quickly learn to agree Gross salaries and to pay Monthly if they don't want to pay high admin costs.

Maybe RTI will see nanny agencies changing how they advertise jobs - we can but hope. I feel it's the agencies who need to change to advertising jobs as Gross, then it will cascade down to nannies and parents who don't use agencies.

Note that the post on payefornannies site is their own view of RTI and seems to be based on early assumptions about how it will work which have been superseded (e.g. the bit about tax codes not coming from P45s).

There is no technical reason why RTI should impact on net pay agreements, and IMHO no practical reason either. But as the OP has found out, net pay agreements are still a very bad idea.