Always agree a gross wage
Nannies speak in net terms…..
Employers speak in gross terms…..
Always agree a gross wage. If you agree a fixed net salary you are committing yourself to paying all of your employee’s income tax, Ni and Pension contributions to make up their gross wage, irrespective of their individual tax code or tax position. (This can be a costly mistake).
Nannies and parents often agree a net salary (i.e. take-home) salary with their nannies, but in reality a nanny is always paid a gross salary, with tax and National Insurance Contributions deducted and paid to HMRC. (usually quarterly) Although many employers tend to look on this as an additional cost, it is actually part of the nanny’s gross wage.
You also need to be aware that if you are employing a Nanny on a part time basis and they have more than one employer, they may be on the basic tax rate, rather than the standard tax rate, which could cost the employer more in tax. Another important reason to agree a gross salary from the start.
You also need to be aware that a gross wage is not the total cost to you as an employer. In addition to this you have to pay an Employer’s National Insurance Contribution, which is not part of the employee’s gross wage and employers statutory Pension contribution.
To give you and idea, as of 2021, the average hourly net salary is £12 to 13 net per hour. If the Nanny works from 8-6 Monday too Friday and is paid £12 net per hour, this equates to a Net weekly salary of £6oo net per week. This is a gross annual salary of £42,670 per year and a total cost to the employer of £48,438.
The figures above can be found at the staff tax webiste: www.stafftax.co.uk:
The calculations explained
- These calculations are based on the tax year 2020-2021 (ending 5 April 2021)
- These calculations assume sole employment and are based on a standard tax code being used
- These calculations are rounded to the nearest pound and intended for guideline use only
- For a full list of the 2020-2021 tax rates and thresholds please click here
The total cost includes Employers National Insurance, current minimum Pension Contributions, Employee’s Gross Pay. This figure allows families to budget correctly for their employee.
Absolute Childcare and Stafftax assumes no responsibility for how these calculations are used thereafter.
Please do call us if you would like to fully understand the cost implications fully of employing a nanny, we are happy to help.
Tel: 00 44 208 1500017
Mobile: 00 44 7973435588