Part time nanny question

[SarahAnderson]

Another nanny payment question... (Yes I know I just started a thread yesterday about a different nanny situation but that one now looks like it might fall through :( )

If I employ a nanny for two days and she is already working for someone else for three, am I going to get stung for loads more tax?

I know I need to agree a gross wage and that technically SHE is paying the tax not me.

However, the fact remains she will only do my job if it is worth it for her and so I do need to talk to her about net salary. She has been with her other family for a year and I don't know them - I very much doubt they would respond well to being asked to pay more for what she's always been doing. So I can't see any way that they don't continue to pay what they have always paid, using her tax allowance, leaving me with a very expensive nanny (or her with little net pay -- which would mean she wouldn't take the job).

What normally happens in this situation?

Your main cost is:

Gross salary + Employers NI + Payroll Admin

Her tax code changes how much of a deduction is made from her Gross salary, resulting in her Net pay.

If the other family has all her personal allowance (very likely if she earns over £11,000 gross in that job) then tax code BR is used for income earned with you.

www.listentotaxman.com will show roughly the net wage for a given gross wage (weekly, monthly or annual) for a specific tax code. So use code BR and enter likely gross wage she would have in your job to get the Net wage.

It is like any other job, the take home pay is less in a second job if the gross salary in each job is the same. Just the way tax is.

Yes - so doesn't that mean that she's unlikely to accept my job unless I pay a ton?

I understand the theory but how does it work in practice?

If she wants a certain net wage, as it is a part time job you have to say, sorry I can't afford that. There is always going to be a limit for what people can afford, everyone sets a budget so all you can do is offer a figure up to your budget and hope you get someone interested at that salary level.

Lets say they have two jobs, each of which are 20 hours per week and paid at £12 gross per hour.

Job1
£240 gross per week
£12,480 gross per year
1100L Tax Code
NI: £530.40
Income Tax: £296
Employers NI: £602.78

Job2
£240 gross per week
£12,480 gross per year
BR Tax Code
NI: £530.40
Income Tax: £2496
Employers NI: £602.78

The Income Tax is the bit that changes and it changes a lot.

If they were to have one job, 40 hours per week, £12 gross per hour
£480 gross per week
£24,960 gross per year
1100L Tax Code
NI: £2028
Income Tax: £2792
Employers NI: £2325.02

Job1: £12,480 gross per year, 1100L Tax Code, NI: £530.40, Income Tax: £296
Job2: £12,480 gross per year, BR Tax Code, NI: £530.40, Income Tax: £2496
Total: £24960 gross per year, NI: £1060.80, Income Tax: £2792

So compared to having just one job, with two jobs they pay less NI (£1060.80 compared to £2028) and pay the same Income Tax.

It is their choice to have two jobs and by doing so they do save themselves some money. How you explain this to someone wanting a specific net salary I have no idea, it is really hard.

We had a nanny who had a job with another family on our off days.
They had to fill in some form to notify HMRC - I don't remember the details exactly.

Believeitornot - perhaps they split their tax code between the jobs. Certainly possible to do, if HMRC agrees, but it increases cost for the first employer as it removes some of the personal tax allowance from that job and gives it to the second employer. This is assuming the first job is a Net wage agreement.

With gross wages, tax code changes make no difference to the cost to the employer. Just changes the amount of the deductions. With Net pay, the employer pays all the cost, as the gross has to be changed to give the same net pay as before.

I'd offer to match the gross wage in the other job. It'd be unfair for you to have to pay tons more to cover all the extra tax.

The thing is, any other job she takes will have the exact same issue. So either she wants to work that extra time and accepts that it's a slightly lower net wage, or she doesn't.

Don't try and match her current net wage.

I had this, it was a bloody nightmare. Originally nanny would only agree a net wage- I insisted on gross and had to go up a fair wack. In the end, she moved her tax code to us because we are giving her more hours but I think the other family must be quite annoyed. They must be paying a fortune...
That said, she's every pArebts dream so has us over a barrel

thanks all

I employed a nanny who would only talk in net, her current 2d/week family were paying her £10 per hour net using her entire tax free allowance. I explained that my gross offer would be based on half her tax free allowance as I wasn't subsidising someone else's nanny, and she could either take the hit on the tax or arrange to split her tax code and negotiate a higher gross wage with the first family - she did the latter.

Same thing is happening with my part time temporary nanny. She is trying to get a job replacing mine for 2 days at the end of August. New job want tax split but current 3 day a week job won't pay more. She is financially clueless - wants everything above board though. Not sure if it is becoming an impasse ?? (I am not too bothered by it as its paid out of our company and is only a few hours a week so we get other tax advantages that not everyone gets). I really wish the nanny industry just starts using a gross figure as a matter of course like everyone else and then no one would be as bothered.

Could she not change to being self employed? If she is working for more than one person this could be possible? Then she would be responsible for paying her own tax.
you have to be quite careful though as there is quite a fine line between employed and self employed in jobs like these but the biggest thing is you have to be available to work for another person (which she is)

I know a lot of self employed nannies

Smiley

I disagree. Simply working for more than one person doesn't make you self employed. Nanny will be doing one set of days for one and another set for another. She cannot choose those hours. She simply has two jobs. Also as she is currently an employee of family one, moving to become "self employed" for the same employer i s fraught.

Venys

You may get into trouble paying a nanny, who provides a personal service, through your company.

I called HMRC and they were crystal clear that working for two families does NOT make you self employed. Said it would need to be at least 4-5 families a week. They were very very clear on this

I dunno. My accountants sanctioned it - they are fairly reputable. We only hire a few weeks a year part time so not sure if that helps.

They way I've always explained it, ask what she wants net then gross it up based on (in your case a 2/5 split of the tax code if she works 3 days for the other family), then offer that as her gross hourly rate.

Only she can split her tax code with HMRC and then it is up to her whether to do it or not.

"I called HMRC and they were crystal clear that working for two families does NOT make you self employed. Said it would need to be at least 4-5 families a week. They were very very clear on this"

I wonder if that means they may start clamping down on it and looking more closely at those who are already registered self employed doing ad hoc childcare.

In my view a nanny job is employment. Occasional evening babysitting, occasional daytime care such as at a wedding or providing respite service, is self employment - it is a one off thing, with possibility of repeats but no ongoing contract.

Ah yes if only a few weeks that would have made a difference for sure.

Basically i was asking HMRC, 'so how come a music tutor is definitely self employed when you're saying a nanny is definitely employed?' And the answer was that although they are subject to the same amount of control, direction, inability to set own hours (once agreed), inability to send a substitute, not providing own equipment etc., the key and only difference was that music tutors relied on having income from several (more than say 4) families. If they only worked for 1 or 2 families then they would be employed too.

And yes ad hoc care - babysitting etc - also would be self employed as you're presumably doing it for a few families. If you did it regularly for the same family and only that family, you'd be getting into employed territory.