Employer's Responsibilities

The legal position is:

If a nanny is paid more than £90 per week, you are required by law to register with HM Revenue and Customs as an employer and submit and Annual Return to HM Revenue at the end of each financial year. If you pay more than £105 per week you must operate a PAYE (Pay As You Earn) scheme and pay tax and NI Contributions to HM Revenue and Customs every three months.

You must pay income tax and National Insurance Contributions on behalf of your Nanny to HM Revenue based on her gross wage, as well as employer's NI contributions. If you fail to operate such a scheme, you are committing a criminal offence.

Your legal responsibilities include provision of proper payslips, P60 end of year summaries, a P45 when the nanny leaves your employment and, if the circumstances arise, payment of Statutory Sick Pay and Statutory Maternity Pay.

Even if your nanny is only part time and you pay her less than £91 a week, you will still be required to operate a PAYE scheme if she has another job taking her above the tax-free thresholds.

Temporary nannies employed for more than a week are not exempt from PAYE and you must still register with HM Revenue and deduct tax and NICs. Permanent nannies do not meet the HM Revenue criteria for self-employment and they are therefore not allowed to be classed as self-employed. Their pay must be operated under a PAYE scheme. Only Maternity Nurses or nannies who only ever do short-term temporary work of a few weeks at a time are an exception to this rule. It is no defence to say that you were unaware of this requirement as HM Revenue will always look to the employer for remedies and it is you who may be prosecuted and incur the liability for unpaid tax and NI contributions, not the nanny.

You should note that your financial liabilities to HM Revenue will be based on the gross wage of the nanny, before any deductions of tax or NIC's. As all nannies tend to discuss pay in net ("take-home pay") terms, your contributions and overall employment costs will be considerably higher than they might at first appear. You must not forget this when negotiating pay with the nanny. It also makes the calculation of tax and NIC's considerably more complicated.

The Government is constantly adding to the burden of the small employer with increased regulation and obligations. Recent additions to employment legislation include the requirement to deduct Student Loans. The current manual which tells employers how to operate the Statutory Sick Pay scheme is 27 pages long with a 28-page supplement and that for Statutory Maternity Pay is 32 pages long with a 24-page supplement! These documents are usually updated each year, in line with changes to legislation and form only two of the numerous documents any employer must familiarise themselves with.

In addition to the summary of your legal position as an employer offered here, we have also compiled a series of employer fact sheets to answer questions about more technical areas of employing a nanny, such as Unfair Dismissal and the Minimum Wage. These are available free of charge by following the links from our homepage. Alternatively, our experienced and knowledgeable office staff are always available to offer advice and information to clients on the telephone. We can also make available a specimen contract if required. Please contact us for more details.