PAYE (Pay As You Earn) is the UK government's system for collecting Income Tax and National Insurance from employment. When you employ a nanny, you are responsible for registering as an employer with HMRC and running payroll to deduct these taxes from their wages.
This is something we do directly with HMRC as part of our service. Once registered, HMRC will provide us with a PAYE reference number and an Accounts Office reference, to use when operating the payroll.
Payroll should be run every pay period, which can be weekly, or monthly, depending on the agreement with your nanny. Each time we run the payroll we must report the details to HMRC.
You need to provide your nanny’s personal details, proposed salary, tax code, National Insurance number, and any deductions or benefits they receive. This ensures accurate tax and National Insurance calculations. When you call us to register, or if you sign up online, we will email you a link to our registration form. This is an interactive form you fill in online and it will ensure we receive all the information we need to get your payroll up and running.
If nothing has changed and the employee has earned the same gross amount as the previous month or week, then nothing! We will automatically run the payroll and send you a payslip for the usual gross amount. If something has changed, just drop us an email.
These are payments you are required to make by law. They include Statutory Maternity Pay (SMP) if your employee becomes pregnant, Statutory Sick Pay (SSP) if an employee becomes ill and cannot work, Statutory Paternity Pay (SPP) if your employee's partner becomes pregnant and Statutory Adoption Pay (SAP) if your employee adopts a child. You will also need to pay redundancy pay if you have to end the employment after two years or more because there is no longer a job for the employee to do. We calculate all these payments (and more) on your behalf.
SMP is a regular payment made to the employee by the employer that provides financial support to employees on maternity leave. Employees are entitled to SMP if they meet the qualifying criteria, including continuous employment and earnings thresholds. It is wholly refunded to the employer by HMRC so costs the employer nothing. We apply for the refund on your behalf.
We do this for you. SMP is calculated as 90% of the employee’s average weekly earnings for the first six weeks, followed by 33 weeks at a lower rate. SMP is paid through the payroll system and we reclaim the payments from HMRC. SPP and SAP are calculated, paid and reclaimed by us in a similar way.
SSP provides financial support to employees who are off work due to illness and are not entitled to the normal pay they would get if they were not sick. It is paid to the employee by the employer. Employees are entitled to SSP if they are off sick for four or more consecutive working days and meet the earnings criteria.
SSP is paid at a fixed weekly rate (subject to change annually). We calculate a daily rate of SSP based on the number of days your employee normally works each week. SSP is payable at this daily rate, starting from the fourth consecutive day the employee is off sick. Unfortunately, SSP is NOT reclaimable from HMRC and has to be paid in full by the employer for up to 28 weeks.
All workers are entitled to a written statement of employment particulars (in essence, a contract). This must be provided to them on or before their first day of employment. From an employer’s point of view, we would regard it as essential that the employer puts a full contract in place as soon as possible to ensure that there are no misunderstandings on either side.
We will produce a bespoke contract for you at no extra charge if you subscribe to the Silver or Gold services. If you have subscribed to the Bronze service, we can produce this for a small extra charge.
Employers should realise that they are exposing themselves to potential risk and possible additional expense if a contract covering the items set out below is not fully in force from the start of employment.
All employers must have Employer’s Liability Insurance. It is a criminal (not a civil) offence to employ someone without having this insurance in place. Many employers will already have such insurance as part of a household contents policy but if you do not, or are unsure, PAYE for Nannies has sourced a suitable insurance product that has been designed specifically for individuals who employ people in their home. The policy provides a unique range of covers that will protect your position as an employer of individuals whilst in the course of their employment by you. For further information, please see Home Help Insurance under the "Other Services" main menu item.
Even the smallest of employers who may only have a single employee MUST now offer a workplace pension. Even if the employee earns very little or even if they have expressly said they do not want a pension, you must at least offer one, and must be able to provide documented proof to the Pensions Regulator that you have done so. HMRC automatically notifies the Pensions Regulator when a new PAYE scheme is set up, so the Pensions Regulator will be expecting you to confirm you have fulfilled your duties. They will charge you a substantial penalty if you have not. The PAYE for Nannies Pension Service (provided at no extra charge as part of our Gold and Silver services) will set up a workplace pension scheme on your behalf with NEST (the National Employee Savings Trust - the pension provider set up by the Government), will take care of all aspects of this and will ensure you are fully compliant.
All employees are entitled to a minimum of 5.6 weeks of paid holiday per year. This is typically based on their normal working week, so employees who work 5 days a week will get a minimum of 28 days paid holiday. Those with a shorter working week will get less. e.g. 3 day per week workers will get 3 x 5.6 days = 16.8 days per annum. Employees with variable working schedules or those with part-year working arrangements may need to use an alternative calculation method. Calculations can get quite complicated so we are always very happy to help employers with this.
All small employers need to make sure that HMRC receive, in full and on time, the income tax and National Insurance that the employer had deducted from the employee's gross pay. PAYE for Nannies will make all the calculations and notify the employer of the amounts to be paid, how to make the payments and the deadline for the employer to make payment. Unless the employer has subscribed to our Gold service, it is the employer's responsibility to ensure HMRC receive the payment on time. Late payments, even by 1 day, will attract HMRC penalties.
PAYE for Nannies strongly urges all new employers to negotiate pay only in gross terms, although many nanny employees will almost certainly give a net hourly figure as a starting point for negotiation. Employers should NOT under any circumstances confirm they will pay a net figure to the employee and then say something to the effect “but we will put the gross equivalent in the contract”. This can result in very serious negative financial implications for the employer. We suggest that before committing to a figure, the employer calls us to discuss how things might work in practice as an inexperienced employer can inadvertently agree to something which can cause severe problems later on.
If your employee is paid above £10,000 gross per annum then you would need to automatically enrol them into a pension scheme regardless of whether they have expressed a desire to be enrolled or not or even if they have categorically said they do not wish to be enrolled.
After having been enrolled, your employee can opt-out of the pension scheme but this cannot happen until after the enrolment process. If they opt-out within 30 days of enrolment, any pension contributions deducted from their pay will be refunded.
If your employee is paid between £6,240 and £10,000 gross per annum, you must offer to set up a pension for your employee. If they then wish to be enrolled into the Workplace Pension, they can make this request and you cannot refuse it. At this level of pay you would need to make employer contributions to the pension.
If your employee is paid below £6,240 gross per annum, you will still be obliged to offer to set up a pension. If the employee requests it, you must enrol them in it. However, you would not have to make any employer contributions at this level of pay.
Regardless of the level of pay, you would need to liaise with the Pensions Regulator, submit a declaration of compliance and issue your employee with the relevant statutory communications. If you have subscribed to our Gold or Silver services, PAYE for Nannies will handle all this on your behalf.
It is unfortunately not the case that you can ignore the pension regulations because your employee’s pay is below £10,000pa.
Setting up a nannyshare and employing a part-time nanny who is already employed by another family are two quite different employment arrangements and PAYE for Nannies Ltd operates both types of these arrangements for many of its clients and can advise on particular circumstances.
A nannyshare is where the same nanny looks after children from two families at the same time in the house of one of the families. The advantage here is that the arrangement will usually cost a lot less per hour of childcare for each family. The main disadvantage is that the arrangement may be difficult to sustain in the longer term if the circumstances of either family vary.
A part time nanny only works for one family at a time but for less than a full five days per week. The nanny may have a completely separate job working for a different family for some or all of the days where they do not work for your family.
If the nanny already has another job and this employment is topping-up their working week, their tax allowances will already be allocated to the first employment and employers who agree a net wage for the nanny should be aware that total pay costs for the second employer can be as much as 50% more than the agreed net wage.
However, in many cases PAYE for Nannies can calculate gross pay rates for both the first and second employers which will share costs equitably between the two employers and will give the nanny the amount of net pay they are seeking. Please contact us for more details.
Some employers may wish to provide accommodation for their employee.
With some types of job, it can make the employer's life much easier if the employee is always close to hand.
If the employer has accommodation available close to, or even within their own residence, this may seem to be a very low cost option for the employer.
However, employers need to be very careful that they investigate the tax implications which might arise before entering into any arrangement. The amount of tax payable by the employee can vary a great deal depending on the nature of the job and also on the type of accommodation offered.
In some cases a tax charge of several thousand pounds a year can arise.
Employers also need to be aware that if the employee becomes pregnant during the course of the employment, the employer will probably need to allow the employee to continue to occupy the accommodation even though they are on maternity leave and are not actively working. Legal advice might be required.
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T: 01485 533322
E: admin@payefornannies.co.uk
Address (visits by appointment only):
PAYE for Nannies Ltd, Macclesfield House, 8A Saxon Way, Dersingham, Norfolk, PE31 6LY.
