Tips on Creating a Contract For a Nanny

We set out below some tips which should be borne in mind when drawing up a contract.

Fairness

Try to be fair and equitable in the contract terms. This will be one of her first insights into dealing with an employer on a business level and if the contract seems oppressive or one-sided to the nanny, it will get the employer/nanny relationship off to a very bad start. It is very expensive to replace a nanny who leaves because this relationship breaks down!

Ensure contract terms are fully understood

Take some time to go through the contract, term by term, with the nanny and explain what is meant by each clause. Explain why the clause is there and the intention behind each one. This avoids any misunderstandings at a later date.

Net or Gross Pay

Although nannies will always tend to expect any discussion about pay to be in net terms, we would warn you that every effort must be made to convert this to a gross salary early in the discussions. We believe that net pay agreements have become impossible to operate following the changes made by HM Revenue and Customs in April 2013. Net pay agreements can result in payslips being generated showing gross pay below the National Minimum Wage or even negative gross pay. It would be unlawful to report such figures to HMRC as a truthful representation of the nanny’s remuneration and could lead to severe legal repercussions for the employer. (See HM Revenue RTI.) We would recommend that if the nanny opens discussions by stating that she wishes to achieve a particular rate of net pay, you explain that an agreement in these terms is no longer feasible after the HM Revenue changes and that you need to agree a gross pay calculation which will normally result in the net pay she is looking for. You MUST make it clear to her that once gross pay has been put into the contract, neither of you can talk about pay in net terms again and that any change to the normal working hours or standard pay may well result in a figure different to any net amounts worked out on a previous net pay basis. This means that, as long as nothing changes, the nanny will get the amount of net pay discussed at the interview but that the employer is protected if circumstances change.
Please note that we can advise employers of the gross equivalent of any net pay figure as part of our service.

Holidays

All employees are entitled to 5.6 weeks paid holiday per year INCLUDING any bank holidays which fall on normal working days(the equivalent of four weeks plus all 8 bank holidays for a five-day-a-week employee). This means that a part-time nanny working three days a week would be entitled to 16.8 days paid holiday INCLUDING any bank holidays which fall on normal working days. This will often work out to a slightly higher figure than the previous allowance of 4 weeks plus bank holidays.
Although an employer is legally entitled to specify the dates of all holidays a nanny takes, the convention is to allow the the nanny to choose two of the weeks and for the employer to choose the remainder. The contract should also specify whether any bank holidays are likely to be regarded as working days or if they will always be treated as holidays. It is also a good idea to specify that during the first year of employment holiday can only be taken once it has been accrued. (e.g. for a nanny working 5 days a week, holiday is accrued at a rate of two and one-third days per month worked). Employers should also note that the contract should specifically state that holiday taken in excess of an employee’s entitlement at the date of leaving will deducted from final pay. If this is not specifically mentioned, an employer has no right to make any deduction from the employee’s final pay.

Sickness

It is worthwhile trying to strike a balance between financial protection for the employer in the event of serious or long term sickness and fostering a relationship of trust with the nanny. To limit sick pay to Statutory Sick Pay only can cause resentment with the nanny as this would mean that a day off with a cold etc would be unpaid. (SSP only applies from the fourth working day off sick.) This is quite a harsh sanction on a nanny’s rate of pay. At the same time, an employer must limit any sick pay paid at normal rates, as long term sickness could prove to be very expensive. Our clients typically tend to pay one or two weeks sick pay at normal rates for any sickness within a 12 month period. If more days than this allowance are taken off sick in any one year then only SSP would be paid. Employers should note that since April 2014, any SSP paid is no longer reclaimable from HM Revenue. The rules are very complex (70 page manual!), but we do all the calculations and reclaims as part of our service.

Copies for both parties

Have two copies of the contract. Both parties should sign both contracts and each should keep a copy.

We have a specimen contract which sets out a basic contract structure and terms. This is available electronically to our clients.