More women are returning to their careers after having children, with the number of stay-at-home mums having halved since the 1960s and 1970s, according to a report by Aviva, the insurance company.
The legal bit
Self-employment is not an option, because nannies do not meet the criteria. This means that when hiring a nanny you become her employer, so the first thing to do is register with HM Revenue & Customs which can be done online at hmrc.gov.uk.
Once you have found the right person for the job you will need to prepare a contract of employment, which should spell out all the terms and conditions of the role, including hours, duties and benefits such as holidays and wages.
Alison Hull, the director of Nanny Matters, says: “It’s very important to have a written contract of employment in place. It’s also important not to just use an old one as a template, since employment legislation moves on very quickly.”
Wages vary but estimates suggest a full-time nanny will cost about £300 a week. Mitch Young of Adler Shine, an accountant, says: “There are various other employer obligations you will be responsible for, including statutory sick pay or maternity pay. As an employer you will also need to take out employer’s liability insurance.”
This covers the cost of compensating employees who are injured or become ill through work.
You will need to pay your nanny through a payroll system. Every payday, an employer must calculate tax and national insurance and submit this online. This is under a relatively new regime called real time information (RTI). If your nanny gets paid on the last working day of each month, you must submit your tax calculation to HMRC on that day too. Even if a nanny is on unpaid leave or on maternity or sick leave, HMRC needs to be informed.
You pay your nanny directly from your bank account, although it is possible to pay all or part of the net pay using Childcare Vouchers, as long as the nanny is registered with the Ofsted Childcare Register (OCR). There is one allowance per parent so if both parents receive childcare vouchers, savings can be doubled.
In the future, parents will be expected to sign up their nanny for a pension, at a cost of about £600 a year. Every employer will have the responsibility of enrolling their staff in a pension scheme following rules which came into force for big businesses in October 2012 and are gradually being extended.
Companies to help
To avoid the hassle of organising an employment contract, running a payroll system and declaring a monthly sum to HMRC, there are lots of firms that can do this for you. Nanny payroll services will calculate what income tax and NI payments are due, and agencies such as nannytax.co.uk will do it for you; you can subscribe to the website for £276. Alternatively, nannyjobpayroll.co.uk charges £220 plus VAT for its service, and way2paye.co.uk starts from £195. Some nanny payroll services also offer employment contracts, either as an extra charge or included in the subscription. Nannytax.co.uk offers payroll and employer support rolled into one.
It is also worth asking your own employer if it can help, as some will have a scheme to allow you to use their payroll system to pay a nanny.
Lesley Fidler at Baker Tilly, an accountant, says: “Don’t forget that you will be taxed on this as a benefit in kind. Even so, it can be very costeffective.”
Share a nanny – and the cost
Thousands of working parents with young children are struggling to meet the cost of childcare. Joining forces with like-minded parents living nearby and sharing childcare is becoming more and more popular. Sharing a nanny is much more flexible than using a nursery and more cost-effective than having your own one.
Online companies, such as nannyshare.co.uk and tinies.com can help arrange a sharing service. You can use one of these sites to tap in your postcode and find a match with a local family also looking to share childcare costs.
Amanda Coxen, of Tinies, says: “Nannies used to only be affordable to the wealthy elite, but now parents are finding if they share a nanny it is often cheaper than a nursery.”
Miss Coxen says that the average cost of employing a nanny as part of a nanny share including tax and national insurance contributions is between £350 and £420 a week, which is then split between two families.