How the National Minimum Wage applies to a Nanny

A non-residential nanny is covered by the National Minimum Wage and employers must pay at least the National Minimum Wage for all hours worked by a nanny. (In some circumstances, where they "live as part of the family and share in leisure activities with the family", for example eating with the family at mealtimes, residential nannies are not covered by the minimum wage regulations.)

PAYE for Nannies monitors all new government regulation in such areas and will normally advise clients where it appears they may inadvertently contravene such rules in respect of their employment of a nanny.

Employer's should note that the National Minimum Wage sets out the minimum GROSS hourly rates not the net pay rates agreed by many nannies.

Currently, the average rates of pay for nannies in all parts of the country are above the National Minimum Wage rates so this will not normally be of concern to employers.

The amount of the NMW is determined by a nanny's age.

From October 2008, a nanny of age 22 or over must receive the "main rate" of at least £5.73 per hour gross. A nanny aged 18 to 21 must receive at least the "development rate" of £4.77 per hour gross.

These rates will increase further in October 2009 to £5.80 per hour for the main rate and £4.83 per hour for the development rate.

If a nanny is provided with accommodation, an Employer can offset some of the cost of this against the nanny's wage for national minimum wage purposes. It should be noted however that the maximum allowable offset is £4.46 for each day accommodation is provided (£31.22 per week). If a nanny is residential, the minimum wage does not apply, so it is not necessary to use the offset.
IMPORTANT: Providing accommodation for employees outside the employer's home may well attract a very substantial tax charge. Employers are advised to take advice on this before offering an employee any such accommodation.