Full-Time Nanny Cost
The Cost of Having a Full-Time Nanny
While it’s assumed that full-time nanny care is the most expensive childcare option, this assumption is often incorrect. For families who have two or more children requiring childcare and for parents who work long hours and require flexible coverage, full-time nanny care can be the most cost effective childcare option.
Unlike in daycare centers where parents pay per slot, nannies are paid per family. While families may slightly increase their salary as the family grows, approximately 5% upon the birth of a new child, when hiring a nanny, the salary ranges are generally the same for families with one, two or more children. Since parents are the employers of the nanny, they have more flexibility over scheduling and won’t be subject to late fees that can run upwards of several dollars per minute at daycare centers.
According to the International Nanny Association 2012 INA Nanny Salary and Benefits Survey, full-time nannies in the United States earn on average about $700 gross per week. A nanny’s salary will vary depending on location, hours, duties, responsibilities, experience, education and special skills or training.
Since nannies are non-exempt workers and covered under the Fair Labor Standards Act, nannies must be paid at least minimum wage for each hour worked. Live-out nannies must be paid an overtime rate of 1.5 times their hourly base salary for all hours over 40 worked in a 7-day-period. In some states live-in nannies are also entitled to the overtime differential.
In addition to the nanny’s salary, as a legal employer parents have tax obligations. These out-of-pocket tax responsibilities equal approximately 10% of the nanny’s gross salary. These tax obligations, commonly referred to as the nanny tax, include FICA, which is Social Security and Medicare and total about 7.65% of the nanny’s gross wages and FUTA which is the federal unemployment tax. Employers may also have state tax responsibilities. In addition to these taxes, nannies are responsible for their portion of FICA. As a courtesy many full-time nanny employers withhold the nanny’s share and process the payment for her. Fortunately, for nanny employers who pay legally, the tax breaks and credits can offset the additional out-of-pocket expense.
The costs associated with hiring a full-time nanny should be viewed as an investment. A child’s formative years are vital in establishing essential skills that will prepare him for life. Nanny employers not only get to hand select their childcare provider, they can ensure that their child is being raised according to their parenting philosophies and practices.
10 Hidden Costs of Having a Full-Time Nanny
For parents who require childcare, high quality nanny care is the most customized and personalized type of childcare available. As parents consider the financial investment that employing a nanny requires, they should be careful not forget these 10 hidden costs.
- Food. While live-in nannies are guaranteed room and board, live-out nannies may or may not share meals and snacks with the children, depending on the family’s requests. If you opt to provide food for your nanny, your grocery budget may increase.
- Utilities. With another person in the home throughout the day, more electricity, water and gas will be used.
- Cell Phone. Some parents may wish to provide their nanny with a cell phone. For those who do, they could quality as a pre-tax benefit.
- FICA Taxes. All employers must pay employment taxes to the federal government. This is due to the passing of the Federal Insurance Contributions Act and is a tax that is used to provide Medicare and Social Security.
- FUTA Taxes. Employers must also pay the Federal Unemployment Tax Act (FUTA) tax that goes toward funding federal agencies. Part of this tax is what funds the Unemployment Insurance (UI) fund and also provides money for state agencies that help the unemployed find work.
- Unemployment Taxes. Employers also must pay unemployment taxes to the state on each person in their employ where required.
- Help with Taxes. Because people need to make sure that they are paying the correct amount in taxes for their nannies, they may decide to hire a nanny payroll and tax form to simplify the process of paying their nanny and handling their taxes.
- Insurance and Gasoline Costs. Children often need to be driven places and picked up as well, and the nanny will need a vehicle for this purpose. Employers sometimes provide a car for them to do this. Others insist that the nanny use her own and if she does, parents must reimburse her in accordance with the IRS mileage reimbursement rate. Employers and nannies should also verify that the insurance policy covers transporting children for work.
- Health Insurance Premiums. Nannies may expect to receive a health insurance policy through their jobs. Employers of nannies may choose to make partial or full payments towards a nanny’s health insurance premium as a pre-tax dollars benefit.
- Overtime. If the nanny works any overtime, this will always need to be calculated into her paycheck. All live-out nannies, and some live-in nannies, are entitled to overtime pay. Parents have so many things to consider when thinking about hiring a nanny.
Parents should consider the additional costs and be sure that they fall within their childcare budget before committing to hiring a nanny.
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