Nanny Employment and Redundancy

There is a common misconception that a nanny is not covered by legislation relating to redundancy or that ending a nanny's employment when the children go to school and no longer need a nanny is not making them redundant. Both these assumptions are incorrect and a nanny receives the same redundancy benefits as any other employee. If a redundancy situation arises, PAYE for Nannies will advise the client on the financial effects and will calculate any redundancy pay for the nanny.

Nannies are covered by the redundancy legislation in exactly the same way as other workers and the basic rules are set out below:

If an employer ends a nanny's employment because she is no longer required, she will be entitled to a redundancy payment in addition to her final pay, if:

- she has at least two years' continuous service after the age of 18
- she is under the age of 65 when made redundant

The payment is calculated as half a week's GROSS pay for each complete year of continuous service between the ages of 18 and 21, one week's pay for each complete year of continuous service between the ages of 22 and 40 and one and a half weeks' pay for each complete year of continuous service between the ages of 41 and 65 up to a maximum of 20 years' service. However, the a cap of £310 (as from 1st February 2007) has been set on the amount of a week's pay which can be used in this calculation. Any pay over £310 gross per week is disregarded. This figure is reassessed every year.

The employer must consult the nanny in good time before the redundancy occurs and should inform the nanny of the reasons and timescale. If an alternative position is available, this should also be discussed with the nanny.

A nanny will still be entitled to a redundancy payment if she leaves by agreement with the employer, within the minimum period of notice the employer has to give (either by contract or by law). However, this period of notice must have started by the time she leaves. If she leaves voluntarily before this, she will forfeit the right to the redundancy payment.

Redundancy payments of up to £30,000 are not assessed for tax and NI purposes and are therefore paid tax-free.