Will nannies who agreed a net salary with their employers miss out on £££ from April 2011?

[Penthesileia]

Just wondering. I agreed a gross salary with my nanny, so this is not relevant to us.

But I know a few people who agreed a net salary (e.g. £8p/h) with their nannies. Will they be legally required to adjust that net salary in the light of the increase in the income tax threshold for low earners, or was it a risk taken by the nanny (and indeed the employer, should income tax have been raised) that income tax would not decrease for those on lower salaries, and their employers will instead get the benefit of decreased income tax for their employees by paying less tax to HMRC each quarter?

Does anyone know the law on this?

Obviously these changes will have no impact on those supernannies earning large salaries!

Don't know if there is any legislation on that. If only net is mentioned in contract then the employer would be keeping to the terms of that contract by not altering salary to reflect tax situation.
If the contract mentions both Gross and Net then I feel the Gross overrides the net, as the net would be an example of take home pay at the time the contract was agreed.

I think this is what net means. It is a security that nanny taking home x per month (or week) and not subject to changes in tax. Of course this means their pay will not be adjusted in either direction. Surely, no employee can expect to get changes that benefit them and pass on the ones that don't.

Nick, why would a contract say gross and net? Mine has a clear statement that says something like "Employee will be paid X per month gross in arears".

Ok, so the nannies wouldn't benefit from the increase in the threshold if their salaries are agreed/contracted on net pay? That's what I thought. Crikey.

This will presumably be a big wake-up call for the nannying world, particularly agencies, who will have done nannies no favours in continuing, bizarrely, to insist on the net pay agreement system.

The contract should not say both net and gross IMV but reading nanny forums there can be some strange contracts around.

You have to pay what is agreed in your contract. If the contract says net then any changes in tax are borne by the employer, for better or worse.

If the contract says both net AND gross and the parties couldn't agree on what to pay then it would be down to a court to determine what the parties intended when they made the agreement. FWIW Nick I am afraid that I don't follow your logic, you could equally well say that the gross would be an example of gross pay at the time the contract was made. In my view (which counts for nothing, it is the view of the court that counts), the result would be that the employer would have to pay the higher of the two possible amounts, because this way the salary would be both (at least) £X gross and £Y net; only in this way would both the relevant contract conditions be satisfied.

Contracts often say x net, y gross for some reason. Probably because most nannies don't understand gross and want to see their take home pay written in the contract. If that's the case them in my view it should say y gross (x net for tax year 2010-2011) or similar.

Nannies with net will continue to get net.

Far better then if contracts don't mention net pay at all.

my contract says gross and net. It's worded something like gross, "currently equalling xx net per week." The gross is probably more binding, but our nanny will only be thinking in net when we renegotiate on pay.
I still can't really work out how the changes will affect us though.

In terms of how much your nanny costs you, chandellina, the income tax threshold increase won't affect you at all. All it means is that your nanny's take-home pay increases, while you pay correspondingly less to HMRC in tax for her. So, the overall sum of money that your nanny costs remains the same.

However, I think NI contributions are going up, so, in this respect, your nanny will cost you more from April 2011.

This may be cancelled out, however, by the fact that the threshold for employers' NIC is also going up by £21 a week (I think).

I am so happy about this! Quite a few of our nanny's friends have realised they won't get the uplift she will. Hurrah.

Yes Employer's NI is going up but as per above unless your nanny is paying 40% tax or more should net out by increase of £21 a week.

It's a bit of a shame for them, though, K75. The net pay thing is such a weird relic.

frankly i'm hoping to include that uplift into a pay rise so i'm glad my nanny focuses on net.

If you have gross in the contract though surely her net will increase even if gross remains the same?