Employer Responsibilities

Paying your Nanny (PAYE)

PAYE

It is your responsibility as the employer (and not your nanny’s) to ensure their salary is calculated correctly and the relevant deductions for Tax and NI are paid on time to HMRC.

We can fully support you with the payroll process. Please get in touch for further information regarding our payroll service: 0208 1500 017

Non-compliance may result in the Employer incurring substantial penalties and fines.

Paying your nanny

As the employer you are required to provide your nanny with a pay advice every time they are paid. The pay advice must show their Gross Wage, the Tax and NI Deductions, as well as their Net Wage. Your nanny should keep their pay advices in a safe place, as they act as proof of earnings when applying for such things as a loan or a mortgage.

When you subscribe to Absolute Childcare’s nanny payroll service we send you via email, monthly pay advices showing all the correct deductions. Our service will also manage issues such as Maternity Pay, Sick Pay, Holiday Pay & Accruals, Overtime and Bonus payments. Handling both starter & leaving P45’s and the monthly RTI* submissions that must be sent each time the nanny is paid either prior to or on the day the nanny is paid BUT NOT AFTER or penalties will be enforced by the HMRC.  As your registered payroll agent we liaise with the HMRC on matters regarding your employers PAYE scheme including hosting HMRC compliance inspections.

It is important to point out that we do not process the payment transactions to the nanny or to HMRC, we purely facilitate the calculations and provide you with the accurate figures and reports to make the payments directly yourselves.

Pension

What is Auto-Enrolment?

Auto-Enrolment is a new law which requires all employers – including nanny employers – to make sure that they have a pension in place for their employee. Most nannies will need to be automatically enrolled into the pensions scheme, and both the nanny and the employer will have to contribute to it.

Are nanny employers included?

Yes, all employers must comply with the new legislation. This includes nanny employers.

What is a qualifying worker?

A qualifying worker, also known as an eligible jobholder, is somebody aged between 22 and State Pension Age (the age at which a person may start claiming the state pension, this is currently changing in the UK, to find out yours visit the Government’s State Pension Age Calculator) who earns above the tax free allowance (currently £10,000 per year).

What if my nanny doesn’t qualify?

Even if your nanny is not a qualifying worker, you must still make sure you have a pension scheme available. This is because your nanny has the right to join a scheme if they choose to. Depending on your nanny’s age and salary you may or may not have to contribute to the pension.

What happens if I don’t comply with the new legislation?

The Pensions Regulator (the governing body for automatic enrolment) has the power to issue steep fines, with a fixed fine of £400 plus a daily fine of £50 for every day that you are non-compliant.

Can I tell my nanny not to join?

No, this is illegal and carries a steep fine if you are caught.

Do all nannies need to be automatically enrolled?

Most do; nannies who are aged between 22 and State Pension Age and earn above the tax free allowance will need to be automatically enrolled.  A nanny who does not qualify to be automatically enrolled still has the right to ask to join a workplace pension.

My nanny is part time – will I have to set up a pension for her/him?

Yes – even though your nanny might not need to be enrolled she has the legal right to join a pension. That means that you need to have a pension in place for her to join.

What if my nanny doesn’t want a pension? Do I still have to enrol her/him?

If your nanny qualifies for automatic enrolment, you are legally obliged to enrol her/him. However, your nanny can always opt out of the pension scheme once they have been enrolled if they do not wish to take part.

How can my nanny Opt Out of the pension?

Once your employee has been enrolled into the pension they will receive a welcome pack. This pack will explain the simplest way for them to opt out of the pension. In addition your employee is able to call the provider to discuss this further with them and for more advice on opting out.  Your employee is able to opt out in a number of ways including via the website and over the phone. You as an employer must not tell them to opt out, this must be their decision to do this.

How much will I have to pay into the pension?

You will have to pay a percentage of your nanny’s gross salary into her pension pot. Pension contributions for both nannies and employers are being gradually increased:

Date Employer’s Contribution Employee’s Contribution Government Contribution Total
Present to 5th April 2019 2% 2.4% 0.6% 5%
6th April 2019 Onwards 3% 4% 1% 8%

If you have agreed a gross wage you should not have to contribute more than 3% of the value of your nanny’s salary into the pension. If you have agreed a net wage, you may also have to pay your nanny’s contribution into the scheme.

When will automatic enrolment affect nanny employers?

Automatic enrolment is being introduced gradually. The day the new legislation applies is called your staging date. The staging date is the date, set by the government, from which employers are required to automatically enrol eligible employees into a qualifying workplace pension scheme. The employers staging date will depend on certain criteria including when they started to employ and how many employees they have.

The costs of automatic enrolment for nanny employers.

Automatic enrolment pensions will create an additional cost for many nanny employers. If you employ a qualifying nanny, you will have to contribute to their pension.

Who pays the pension?

Three people should pay into the nanny’s automatic enrolment pension:

  • the nanny
  • the employer
  • the government

They all pay in a different amount, and the amount they pay in is increasing gradually:

Date Employer’s Contribution Employee’s Contribution Government Contribution Total
Present  to 5th April 2019 2% 2.4% 0.6% 5%
6th April 2019 Onwards 3% 4% 1% 8%

The contributions are a percentage of the nanny’s gross salary.

Is there a cheaper way to contribute to the pension?

The % contribution doesn’t have to be paid on the whole salary, it can be paid on something called ‘Qualifying Earnings’, sometimes called ‘Banded Earnings’.

How can using Qualifying Earnings make things cheaper?

Using qualifying earnings means that you only pay a pension contribution on part of the gross salary rather than the whole salary. The nanny’s qualifying earnings are the part of the salary between the Lower Earnings Limit (LEL- currently £118 per week, £511 per month or £6136 per year) and the Upper Earnings Limit (UEL – currently £962 per week, £4166.66 per month or £50,000 per year).

What does that actually mean and how does it work?

To explain, let’s go through two examples: one where the employer is paying a pension contribution on the full salary, and another where the employer is paying the contribution based on the qualifying earnings.

Scenario:

The employee is earning 1100 per month gross. Calculation A is paying the pensions based on the full salary, and Calculation B is paying the pension contribution based on the qualifying earnings.

The examples below are based on the contribution rates in April 2019 and all figures are per month.

Calculation A

Gross Salary £1100.00
Amount pension contribution is paid on £1100.00
Employer’s Contribution £33.00
Employee’s Contribution £44.00

Calculation B

Gross Salary £1100.00
Amount pension contribution is paid on £1100.00 – £511 = £589.00*
Employer’s Contribution £17.67
Employee’s Contribution £23.56

*because the salary is below the Upper Earnings Limit, but above the LEL, we take away the LEL to leave the pensionable pay.

Calculation B means that you would be contributing less to the pension as a result of qualifying earnings.

Have you agreed a gross or net salary?

If you have agreed a net salary with your nanny, you will be responsible for paying in both the employer contribution and the nanny contribution. That means you would eventually be paying an extra 7% of your nanny’s salary!

Employment contract

When you employ a nanny it becomes your legal responsibility to provide your nanny with an employment contract or a written statement of the terms within 8 weeks of their commencement date.

A contract of employment is included with all permanent placements through Absolute Childcare.

Parents

We know that your children are your number one priority, finding the perfect Nanny for you, is ours.