As childcare for newborns and young children becomes more expensive families may find they can hire a nanny (or nanny share) for a comparable cost as daycare. Parts of a nanny or nanny share are very convenient – location, child to caretaker ratio, no stressful waiting list etc. However, the paperwork involved in hiring a nanny or family employee can be more challenging. Even from an employment law background some of the considerations surprised me. This post focuses on some of the questions I had when conducting a nanny search, and should hopefully provide some guidance.
Most of your typical nanny service are really “placement” services; they are not the Nanny’s employer. If the family places ads for a nanny through services such as care.com or even Craigslist, then likewise those services are not the employer.
Most frequently, the family is the employer. This may seem daunting if the parents do not have a clear idea on how to draft an employment contract, set up appropriate accounts with necessary government agencies, arrange for reporting, taxes, payroll etc. It is not as easy as just agreeing to a monthly pay amount and writing a personal check. The rest of the article tries to provide some general guidance on a family taking on its first employee – the nanny.
The Employment Contract:
It is possible to find basic contracts online; however, those contracts may be as much help as reading furniture assembly instructions in a foreign language. Sure you might get some of the details right, but you wouldn’t want your kid climbing on it. I would say the same for my own contracts if they were handed over to a client with no explanation. The contract itself is an excellent time to educate yourself on basic employment conditions, pay practices, and scheduling. Some common questions to ask yourself and address are:
- Hours of work? Is overtime going to be an issue?
- Rate of pay? How is overtime going to affect that rate of pay?
- Holidays? Will the nanny have paid holidays or not?
- Paid Time Off? Will the nanny accrue paid time off?
- How do breaks work? Can the Nanny even take a break?
- Driving or child transport? Does the nanny have access to a vehicle?
- What does your insurance (home, renters, vehicle etc.) have to say about an employee such as a Nanny now working for the family?
- Is this a nanny share? If so, how are the different families going to address differences in scheduling or rules?
This is not an exhaustive list, but does show a good sample of common questions. Of course the most important question is if the nanny is actually good at taking care of your child/children.
Once you have a good idea about the terms of employment, you get to address the much more daunting task of actually being the employer.
How to Comply with Employment Reporting and Tax issues:
First, you should not pay your Nanny “under the table” (not reporting the employee or pay). It is also quite risky to try to pay your Nanny as an independent contractor instead of an employee. You may be fined or penalized for failing to report, misclassifying the nanny as a contractor, and in some cases it may count as a crime. Further, having an unreported employee may invalidate many protections you actually have via your own personal insurance. If your proposed nanny insists on being paid under the able, please rethink hiring him or her.
Second, payroll and payment of employment taxes becomes the next, and ongoing, issue. Luckily there are several options of varying levels of self-sufficiency. You can find these services online with a simple search for payroll processing services. Not surprisingly, the greater the help provided, the more the option typically costs. On one end of the spectrum you can pay a monthly or quarterly fee and have a service produce paychecks, account for taxes, produce W-2’s etc. with your input of hours worked. On the other end of the spectrum, you can set up your own accounting system that tracks hours worked, and calculates the appropriate tax and withholding.
However comfortable you are in doing it yourself, it is best to be set up before that first paycheck is due. Do not get behind, and do not hesitate to call your friendly neighborhood attorney with questions.
What can an attorney do to help?
Given how expensive childcare is and in a vain effort to keep costs down, I would be hesitant to heavily involve an attorney in all but the most complicated situations (such as custody issues). However, I do see the value in working with an attorney in the beginning to set up the contracts, explain the employment process, explain insurance considerations, and set your family up for success.
 This post is not legal advice but merely a general conversation on some potential legal issues to contemplate and address after seeking legal advice.
 The discussion of what constitutes an independent contractor vs. and employee is beyond the scope of this article.