gross employer earnings/net nanny wages - bit of maths advice?

[mrsbaldwin]

My DS (first child, hence the question) is due in March and I will go back to work sometime in summer 2009 at which point he may do nanny or nursery.

I've been doing the sums on the finances of these choices - but I'd really appreciate a couple of thoughts on whether I've got the maths right.

In an imaginary scenario I'd be paying a full-time live-out nanny £24Kish pa net (I'm in North London) or nursery about £12Kish pa net.

What do I need to earn gross to cover these sums?

I was estimating
*about £35K gross earnings to pay nanny (including her tax and NI)
*about £16/17K gross earnings to pay nursery

Am I about right?

Thanks very much.

MrsBaldwin

Do you mean you expect your nanny to take home c.£2000 after tax and NI? If so, her gross earnings would have to be more like £35,000, and yours more like £50,000.

I agree with Penthesileia's numbers - I thought I was well paid until we had a nanny. I think that an experienced full time live out nanny in central London would expect around £24k but there are cheaper ways to do it eg nanny share or a nanny with her own child. Also if you can get childcare vouchers at work that would save some tax.

£35k gross salary for a nanny sounds high to me.

Hmm. I think your messages may mean I've got my sums wrong!! Very helpful - thanks.

The North London nannies I've spoken to seem to earn £8-£10/hour. Is this before tax or after - I'm not sure. Clearly I need to understand this a bit better.

Anyway this means they might cost, say, £100, for a 10 hour-day.

That's £500 a week - yes, which is £2000 a month (as opposed to the local nursery which is about £1000 a month).

Childcare vouchers: I'm a self-employed consultant/company director - and me and the accountant have already done the sums on whether my little company should bother offering me childcare vouchers. I won't bore everyone with the complicated maths on that, but the Treasury have boxed the scheme off quite neatly - it's good for people who are employees in slightly larger or very large companies or organisations but not very advantageous for micro-businesses like mine (because participating in the scheme would cancel out tax efficiencies elsewhere on the books). But perhaps that's all for a different thread sometime.

On cheaper options: yes, I thought it might be easiest to understand the sums by starting calculations at the top end (ie native English speaking, experienced, live out) and then working backwards from there.

Readers of this thread will quickly be able to tell I'm not a consultant in the world of maths

The numbers the nannies are giving you will be net. Unlike the rest of the world the majority of nannies annoyingly only seem to understand their salaries in net terms. Have a look at the nannytax.co.uk website - they have a calculator which shows that £500 net per week = £747 gross, including paye and employers and employees NI. So £26k net = over £38k cost to the employer!

I do think that the job market for nannies is very poor at the moment. Our ex-nanny, who is very experienced and maybe a bit fussy about what job she will accept, took 6 months to find a new job after she left us. We paid her £10 per hour but I think that her peers will have to start considering jobs paying more around the £8 per hour mark.

Nurseries are definitely a whole lot cheaper for one child, as is a good childminder.

I worked in North London last year and was on £8.50 net live-out, if that helps!

I just checked the nannytax.co.uk calculator, and paying the nanny £420 net a week will cost you £616 - that's including her tax and your NIC. £500 net a week is £747.

Calculator here: www.nannytax.co.uk/parents/calculator.html

Aha - thanks all, this calculator is helpful.

So, an imaginary full-time wage of £500 a week in a nanny's hand would cost me £747.

Leaving vouchers out of it for a moment I'd need to earn £747 per week after tax to pay her this.

In order to have £747 per week after tax to pay her I'd need to generate £1000 a week gross (assuming 25% tax on that £1000 for sake of argument).

Penthesileia and BirdyArms are right then. In order to pay a full-time live out nanny £24K (in her hand) I would need to generate something like £50K in company profits.

The other night I went to visit a couple of particularly well-off pals, who earn £150-£200K between them. They have a £24K-type nanny. I was surprised when one of them said 'ever so expensive this hiring a nanny business' - but doing these sums correctly I can now see that even for them we'd be talking about 30% of their total income.

OK, now I understand!

Thanks very much all.

I am in zone 2 London and pay just over £9 net/hour for an experienced nanny. To be more precise, nanny gets £25000 gross a year for 40 hours/week. I pay, in addition, about £2000 NIC on top. So total cost to me is £27000, for which I have to earn £45000 gross.

That's only for 4 days a week. For 5 days a week, it would be roughly £31000, for which your gross income would have to be £52000.

From my recent experience of recruitment, £9 net/h seems average for an experienced/qualified nanny in London. Maybe it will fall. I hope it does.

flowery - if i work full time 5days a week then my salary is about 35k - but i am up the high end of the wage scale

so mrs b you would need to earn more than 35k to have a very good quailfied,exp nanny,but many nannies charge 8ph so instantly saving you £100 a week - 5k a year

other ways to save is to get a nanny share, or go the cm route or nursery

unfortuanally as agencies and ads quote nett, so do nannies, i generally go to an interview and say what i would like nett,and then what the total amount would be gross so that the family have a vague idea what the total cost will be

And don't forget the costs of feeding your nanny and children at home, cost of playgroups and playcenters, cost of transport for any outings, heating in the house during the day, nappies and wipes (all often though not necessarily included in nursery fees). Probably a few thousand £s a year extra.

Thank you also GreenBlack and BlondesHMF.

This is very helpful.