reducing nanny's hours, should we increase hourly rate?

[goldenoldie]

planning to reduce nanny's hours from 40 over 4 days to 30 over 4 days a week. Currently pay her ten pounds an hour gross.

Given she will have same travel expenses, should we up the hourly rate to soften the blow and hopefully discourage her from looking for a new f/t job? We don't want to lose her.

Or should we keep same hourly rate, - paying for 30 hours, but offer to pay for her monthly travel card?

What is in the contract? If you have stated that pay is x amount per month and you can afford to still pay that, then easier not to change anything.

If it is in the contract as an hourly rate, I'd say increase the hourly rate, so something you and your nanny agree. You need to have the discussion with your nanny, as you are renegotiating the contract.

contract states hourly rate.

Thanks nannynick. How much extra an hour do you think is reasonable, given we are not made of money and are reducing her hours partly to save money, but also don't want her to feel demoralised and look for another job?

Maybe increase it to £11 gross as it shows you have considered her loss of earnings or as you say pay for her monthly travel card.

is she due for a yrly pay review anyway? Maybe incorparate this raise into it.

How much money do you need to save?

If £11 per hour, I calculate that roughly this would mean your nanny loses £3640, your costs reduce by £4105 (these are rough figures, but based on data from www.listentotaxman.com)

If £12 per hour, I calculate that your nanny loses £1435, your costs reduce by £2346 (again rough figures).

Don't pay for her travel card, if she is using it for personal travel at all, including travel to work, then it's a taxable benefit and she will get a tax bill as a result. Which you could of course pay, but it defeats the object.

Sorry to state the obvious but everyone has bills to pay!

Have you thought about the fact that she may no longer be able to work for you as she won't even be able to take another part time job to make up the income as she will still be working 4 days a week. I'm a nanny and there is no way I could just take a big drop in my income, with no way of making it up.

I think nicadooby has a good point as she may well need to earn a certain level of money and losing 10 hours over 4 days it is unlikely she could find anything to fill them.

goldenoldie - It is nice though that you are aware of the impact on her and are willing to up her hourly rate as a softener. Do you have a friend with children that could do with a bit of 'me' time each week and could use your nanny for a few of the hours you are having to cut back on.

nicadooby what do you mean 'everyone has bills to pay'? At the end of the day the OP has to cut hours and is trying her best to make the financial impact as small as possible on her nanny. I don't think she is insensitive to the fact that it might mean her nanny has to leave, or that the impact will be great, or that her nanny might struggle with her bills.

Many thanks all for your comments.

Flowery - do I have to declare it if I pay for her travelcard?

Nicadooby - yes, I have thought about this, but I know she would like more time to study, during term time - she is doing an OU course.

Financially, it could be difficult for her, hence we want to make up some of the shortfall.

Worth bearing in mind that we origionally recruited her nearly 2 years ago, from another family because she wanted to work more hours.

nbee - good idea, I will put feelers out and see if anyone else is looking for a few hours childcare.

Nannynick - I will have a chat with her and offer 12ph and say I will try and help her find extra hours elsewhere - if that is what she would like.

Yes you do. As general rule, as an employer if you give your employee any taxable benefits, which would include things like personal use of a car, private healthcare, a travelcard or similar, you'd have to declare them on a P11D form each year. If you have a payroll company doing your payroll for the nanny they will be able to explain, or if you're doing it yourself HMRC will be able to advise you.

Basically the P11D goes off and if there are taxable benefits on it your nanny's tax code will probably change to make sure she pays tax on them.

your nanny will be losing 1/4 of her income, yet unlikely to find a new job around your hours as will still be working 4 days

i couldnt afford to lose 1/4 of my income and still work same amount of days and would have to seriously think about leaving if that happened to me

could you chnage the job to 3 x 10hr days, so she could maybe find a 2 day job

It isn't 1/4 of the income loss... I make it around 9% loss, if the hours drop to 30 hours and pay increases to £12 per hour.

Assuming Nanny has typical tax code, for 09/10 tax year:
Current £400 per week, £20800 per year, £16275.65 Net
Proposed £360 per week, £18720 per year, £14840.45 Net

So the loss for the nanny is £1435.20 of Net pay, or put another way about £120 a month loss.

Can the nanny still do the job if they take home £120 less per month? Some nannies may accept that rather than look for another job, whereas others will look for another job. Goldenoldie, you won't know until you talk with your nanny. Good luck with that chat.

i meant 1/4 if hourly rate didnt increase