Nanny net/gross pay nightmare - help me navigate this!

[MtnBikeChick]

I have just hired a fantastic nanny. This is my first nanny. she works 38 hours a week for me over 3 days. She works the remaining 28% of her time for another family. She has worked for them for a long time. Nanny wanted to be paid £10 net. I said that was fine but we would need gross pay rate in the contract, and from day 1 explained that the weekly gross amount was designed to result in her earning £10 net per hour based on current tax rates etc.

Other family have historically had a net pay contract and things were a bit notch potch - random payslips, no nanny pay company, etc etc.

The other family are now using a nanny pay company (same as us) but NO ONE seems to be able to figure out how to manage the pay so the nanny gets what she is expecting net. We have no benefit of her tax free allowance (yet). To complicate matters, she will be ending her contract with the current family in a couple of weeks and not starting the new one until the Autumn. We are the main employer as we employ her 72% of the time, but over the summer will be the sole employer.

Nanny is getting cross because she is expecting to receive £380 net a week but right now she is getting less from us because we are paying tax on everything we pay her.

I am losing sleep and I am desperately worried I will lose my nanny.

Should I just change to a net pay contract?

NO!

Your nanny needs to understand how the tax system works.

You should have agreed a gross wage from the start.

You need to work out what gross you can/want to pay and offer her that. It's up to her to resolve issues with the other employer. You can use 'MrAnchovy's tax calculator' to work it out (google it, I can't link on my phone). It's probably around 12ph gross.

Nanny contracts are always based on net pay though, it's not unreasonable for her to want that from you. Your nanny tax company should be sorting out all the amounts etc though, that's what they're for!

Nanny contracts are absolutely not always based on net pay. They absolutely should NOT be based on net pay.

That's even more reason to have a gross agreement cola!

Nannytax: Gross vs Net

Zest: Why it’s always best to “talk gross” when it comes to Nanny wages

Paye for Nannies: Net vs Gross

'However, as of April 2013 HM Revenue and Customs have made a fundamental change to the PAYE system.....As a result of these changes, we believe it is no longer possible for employers to effectively operate net pay agreements for employees. As we will not be able to exercise the same degree of control over tax codes and as all employee pay must be reported accurately to HMRC before it is given to the employee, your agreement with the employee will need to be in gross terms to avoid potentially serious anomalies occurring in individual cases which might then result in HMRC penalties.'

If you're going to be an employer you need to have at least a very basic understanding of what net/gross means and why nannies, like all employees, should be paid gross.

Agreeing a gross contract is not tricky. It's easy peasy.

The tricky bit is changing people's mindset, as is evident from this thread!

The fundamental issue is that despite numerous emails and several versions of the contract setting out te gross rate, all my nanny can think about is the net rate. So she doesn't even think about the gross/net issue - she wants £380 a week to hit her account. That won't happen until the tax allowance is allocated correctly. In what other job would you expect to get a contract specifying a net salary, the employer effectively agreeing to pay a theoretically uncapped tax liability?!

You're the employer, you tell her it's £12 gross and like everybody else she has to pay tax on that £12 gross and whether she gets £380 or not is not your problem.

I say this as a nanny!

It's a big problem with both nannies and employers. What other job would employers advertise and offer net pay?! None.

Could you send her the links I've put above. A gross agreement will benefit her as well.

If she can't be convinced/educated I'd find a new nanny.

Thank you everyone. Really don't want to end up with relationship breakdown over this but I feel i have to stand my ground.

I must admit I've never employed a nanny but I have worked as a tax advisor. If you're agreeing a net pay arrangement then what happens if tax or NI rates go up ? You just take the hit so she can receive the same ? That's barking mad ? How about another scenario.? Say nanny has other income which is taxed via her code such bank interest or dividends, or say has an underpayment of tax for a prior year which is also collected via her code. That means you would effectively be paying her tax bill on income that hasn't come from you ! Why would you agree to that ?
I can't think of any other industry where the employer agrees to pay a set net salary.
Like others have said - agree a gross basis and that's it.

Nannies certainly don't always have nett in contract. I have gross. I have done for years

You need to work out how much you can afford gross whether £12ph or more and this to be the amount you offer To your nanny

Another nanny here who agrees Gross pay agreement only. Her tax is not your responsibility.
I have two nanny jobs and am paying 20 percent tax on second job. But will claim back at the end if the year some of this; as all my allowance is not used on first job. I could split tax code but will not do this unless I know second job is permanent.
Your nanny will have to accept that her tax is her responsibility. I would advice you to pay the same gross rate as her first job.

I have drafted a gross pay contract (not signed yet). Her contract with her other employer, for 28% of her time, is net and they currently have 100 of her tax free allowance allocated to them.

To get 380 a week at least into her account the only thing I can think of is to calculate gross using BR taxcode.

Have you been issued a taxcode to use? Maybe you could change the gross figure everytime you get a tax coding notice.

Problem is you want to know how much it will cost you, which is why you agree a gross salary.

No other jobs do net pay, do they? So why do people still expect net pay agreements?

Nanny contracts are always based on net pay though, it's not unreasonable for her to want that from you. Your nanny tax company should be sorting out all the amounts etc though, that's what they're for!

I had a nanny for four years

Contract and discussions re pay were always gross

Why would she expect a net figure?

Sorry did I just post that again? Phone going haywire! Certainly sounds like trying to organise a gross salary would be a lot less faff all round but as someone said upthread, difficult to change mindsets if she's used to doing it the other way. (I'm a nanny on a gross rate, just fyi!)

I think you are wrong. You agreed to pay £10ph net and it's your problem to figure out how much tax you need to pay on that. It's not surprising that your nanny is unhappy that she is not getting the deal you agreed.

wilding they are not!!! My contract says i earn £xxx gross a week

'bangs head'

Sorry blondes, phone reposted something from hours ago! I'm a nanny on a gross contract too but all the other nannies I know, and all the agency jobs, seem to be net so I assumed that was the norm...

Work it out with a 500L tax code, that is assuming a 50:50 split of tax free allowance between you and her other family. For my nanny that works out as 12.08 gross per hour but it depends how many hours. Then tell her that is what you've done and put that amount gross in the contract. She can ring HMRC to formally split the tax code if she wants to (but you can't do that on her behalf).

For the past 10 years of nannying I have had Gross in contracts.
When I was a college student (so age 16+) my first real job (retail) the contract was Gross. I am not sure where the Net pay thing happened with nannies. Back in early 1900's nannies were predominately live-in, so pay then may well have been Net. At some point, daily nannies became more popular and maybe at that point the pay did not change, when perhaps it should have done so. Personally I feel some nanny agencies keep up the Net pay thing, not sure why. Some agencies often advertise Gross salary but some always do Net. If nannies go to an agency and the agency says the job pay x amount Net, then no wonder nannies keep asking for net pay. Agencies need to change, then more nannies will in my opinion.

50/50 split on tax code could work, nanny would need to request it by contacting HMRC and they might not agree to do it. Problem is that for a period of time you will be the sole employer.

MtnBikeChick - What is the gross pay per week you have currently agreed?

Looks to me that BR coding works out at 532 a week (14 per hour)
500L coding works out at 505 a week (13.25 per hour)
1000L coding works out at 475 a week (12.51 per hour)
So when deciding what gross pay figure to offer, which do you choose?
You could argue that you could hire a different nanny who would do 38 hours and no other work and thus you would be paying them £475 gross per week.
Why should you pay more? The nanny wanting a certain take home pay figure results in you paying more money.