Paying Nanny’s pension - help!

[LittleLogOut]

We’re going to be having a Nanny, but aren’t the usual clientele of high earners/having an accountant etc.
I understand we have to pay pensions contributions, does this come out of the hourly rate or do we need to pay this in addition. I understand tax and NI comes out teh hourly rate and you can use companies like nannypaye etc.
Also employers liability insurance?
We are using all our savings from remortgaging for a year or two to cover help with a disability to avoid sending baby to nursery, so aren’t high earners to be able to afford it ongoing so trying to do as much as possible ourselves.

Or is nanny insurance taken out by the nanny? I thought it would have been us as employers?

Take on a nanny who is self employed and then she / he does all their own tax etc

you can't have a nanny who is self employed if you have her working fixed hours.

you get a company like NannyTax to do all the payroll and pension stuff for you. it costs around £300 per year, and then everything just works through their website.

definitely worth spending the money because there are a lot of legal issues if you get it wrong.

You pay pension in addition to hourly rate.

And if the nanny is going to work for you full time they can’t be self employed.

Nannys sometimes talk about net hourly pay so double check what terminology they use.

She will pay her tax, NI and pension from her gross wages.

You will then pay on top of that employers NI and pension contributions.

Yes you will need employers liability insurance.

You will also need to factor in holidays, or holiday pay.

@parietal why can't you have fixed hours with a self employed nanny? Just wondering as there's a self employed nanny local to me and when I asked her about if I'd have to pay via PAYE she said she's self employed so does all her own tax, insurance etc

that's illegal. If she is their full time nanny they have to employ her

There are organisations - one used to be called Nannytax - that will sort all of this out for you. At a cost obviously.

Here's one:
https://www.payefornannies.co.uk
I can't vouch for them

You will also have to pay her maternity leave etc if she falls pregnant. You have all the obligations of a corporate employer

Use a payroll company and they will sort it out. We employ help with our disabled children and use payroll.

An acquaintance had a similar situation. She used a childminder instead but funded a 1:1 for her child within the setting. I believe it was partly funded by medical funding and the parents topped it up

You don't need a payroll company.

HMRC payroll software is easy to use - and works out how much you need to pay HMRC every month/week depending on how you pay. Then set up a nest pension, that works out the pension payment each month and you just add the amount of pension to the HMRC payroll.

It sounds harder than it is.

If you could just decide to make your employees do their own tax and pension, Amazon & Tesco would have everyone down as self-employed.

Nannies aren't usually allowed to be self employed unless they do ad hoc work for different people.

Honestly, it’s worth using a payroll company - they will set up pension payments, contracts (I need HR advice more often than I would think), suggest insurance.
I pay the bog standard nanny tax rate.
Annual insurance.
HMRC
Monthly pension (Nest)
Monthly payslip (a legal requirement) which tells me how much to pay net monthly.
Potentially annual OFSTED payment (allows you to use tax free childcare)

>I understand we have to pay pensions contributions, does this come out of the hourly rate or do we need to pay this in addition.

Employer pension contribution is in addition to the gross salary.
Employee pension contribution is deducted from the gross salary and paid to the pension company.

Qualifying Earnings method can be used, so first £520 each month is not used for calculating pension contributions. Example: £2000 monthly gross salary, £1480 pensionable salary, £44.40 employer contribution (3% of pensionable salary).
www.nestpensions.org.uk/schemeweb/helpcentre/contributions/calculating-contributions/calculate-contributions-using-qualifying-earnings.html

>I understand tax and NI comes out the hourly rate and you can use companies like nannypaye etc. Also employers liability insurance?

Employers liability insurance is something you need to get. It may be part of your Contents insurance cover, check with your home insurer.
If you need to get it separate, it is often around £100 a year I think. Try providers like Mark Bates.

Employers liability insurance is to cover you against claims from the nanny, such as if they injure themselves in your home due to something within your control.

Thanks all. I naively thought when the nanny said X per hour, that was what we would have to pay and pay for holidays etc. not budgeting that we would need to pay an extra £3/4 per hour on top of this for the pension and ni.
She will be employed and not self employed and I understood that bit. I think for the first year we would use a nanny payroll company so not to get it wrong. If can make it work now.

Have you thought about how you will cover if she goes sick? You will have to pay sick pay and holiday pay still accumulates whilst they are off sick. And still have to find childcare.

Allow for nanny's food on duty as well, mileage if she uses her car, and activities kitty for taking the children swimming or to soft play.

Highly illegal and op could be done for tax evasion

as op sounds like she needs a nanny on Regular days and hours

always discuss gross @LittleLogOut or you may be caught out if they have another job

It's because employment status is determined by HMRC - otherwise they'd lose a lot of revenue.
You could get a SE nanny and then get a retrospective bill from HMRC for the tax/NI etc when they rightly determine that she's not eligible to be SE.

NannyPaye are excellent, they do payroll and pension for me. Well worth the expense because this stuff has to be correct, for you as employer and for your nanny.

What do people do about length of pay and notice periods for the nanny and parents to give? Also does that start straight way, or say after 12months etc and do you have a probation period wher either can terminate? Just trying to get this right.

I have 3 months probation with a week's notice and then one month for either party after that.

You don't want a really long notice period in my experience because I have tended to pay the month in lieu of notice because it's not working and 3 months pay (or putting up with a nanny you are not happy with for 3 months) would be worse.

Can I ask is your nanny going to be live in or out?

And did you find the candidate independently or through an agency?

HMRC have a tool called CEST (checking employment status for tax). If you’re unsure if your nanny may count as self employed you can run the facts of your individual situation through this tool and it will advise you how they should be treated.