Reprinted with permission from 4nannies.com
A nanny's wages/salary can vary considerably; some factors which can effect the wages a family will need to pay include:
Nannies are to be paid on an hourly basis according to the Fair Labor Standards Act. Generally a nanny will agree to a fixed weekly wage for a specified number of hours, with overtime to be paid for hours outside the agreed work week.
To avoid misunderstandings, be clear that the wage offered is gross or net (take home amount) and state what deductions, if any, will be made from the offered salary. If offering a net wage, be very specific as to whether you are paying US social security/medicare taxes ONLY for the employee (s/he is responsible for US Federal and state income taxes) or whether the net includes your being responsible for all nanny income taxes also. You may wish to consult a US Employment tax advisor for guidance in these areas. Additionally, in the United States nannies are subject to Federal (and generally state) minimum wage rules.
The following are some general weekly gross wage guidelines assuming a 45-50 hour work week and one or two children. All figures are in US dollars and representative of Year 2008 wages:
Part Time Nannies: In addition to hard to find, these jobs command a premium wage. These positions are almost exclusively live-out and paid on an hourly basis. Often there is a weekly guarantee, needed to retain dependable help. Hourly rates start at $12 per hour and are as high as $20 - 25 per hour in affluent areas such as the San Francisco Bay Area, Westchester (NY), Fairfield (CT) and Montgomery (MD) Counties. We have observed that affluent areas not well served by public transportation have the highest prevailing hourly wage.
These figures are just guidelines, local job market and specific employment conditions cause considerable variation. Specifically, CA (Bay area & Silicon Valley), DC Metro, greater Boston, and the NY/NJ/CT metroplex salaries are quite a bit higher than national averages. Be aware that these are "gross wage" figures, before payroll taxes have been deducted. You can use the payroll tax calculator at HomeWork Solutions Inc., a nanny payroll and tax service, to compute take home pay and, if desired, print pay stubs.
Canadian Employment: The employer of a live-in care giver is required by Canadian federal law to register as an employer with Revenue Canada Taxation and is required to make the proper deductions for income tax, employment insurance and remit these amounts to the proper federal authority.
The nanny will typically expect to be paid either every week or every other week. A full time nanny will expect to be paid her regular base wage for 52 weeks a year, even if the family takes additional holidays without her. Families can pay the nanny in either cash, personal check, or using a payroll service with Direct Deposit. The nanny's paycheck should NEVER be delayed or forgotten.
A typical nanny or housekeeper/household manager compensation package today is not limited to her pay check. Many household employees ask for and receive the following:
A recent trend in developing the nanny compensation package is to offer Flex Days or PTO days in lieu of separate banks of paid vacation and sick days. The Flex Days are paid days to be used at the nanny's discretion. We usually see 10 - 15 days in a full time worker's agreement, and they can cover sick days, personal days, and vacation (pre-scheduled according to your agreement).
PTO time, vacation time, and sick time all typically accrue, or accumulate over time. Many families restrict the use of paid time off at the beginning of employment, generally 60 to 90 days. An employee who is offered 10 paid days off per year (2 weeks) will accrue, or earn 0.1923 days per week, or slightly less than one day per month. Typically, a worker who is both beyond the probationary period and voluntarily separating from employment is paid their unused accrued PTO and vacation time (not sick time) at the time of separation if there is a positive balance in their account. In some states payment of accrued vacation time is mandated under state employment law.
Another area which is often misunderstood involves payment for days not worked. Your nanny will expect to be paid for all days she is prepared to work, even if you decide to take your family away for a portion or all of any given week. The nanny will also expect to receive and to be paid for the following federal holidays: New Years Day, Presidents Day, Memorial Day, July 4th, Labor Day, Thanksgiving and Christmas. Most families also include the Friday after Thanksgiving. If you are uncomfortable with any of these expectations, however, let the nanny know in the Work Agreement how you will handle holidays and regularly scheduled days which are not worked due to no fault of the nanny, so that this does not come as an unexpected surprise, three months into the job.
Some families offer their nanny an incentive payment after the first (and subsequent) year's employment - variations include a bonus for signing on for an additional period of time (not necessarily another year - sometimes six month stretches) or the payment of a portion or all of a tuition payment for an evening or weekend class at a local community college. Bonuses generally reflect the family's appreciation for continuity of care for their child(ren) and the fact that they will not have to spend additional moneys recruiting a replacement.
Other incentives include health club membership, airfare home, and payment for all or part of health insurance premiums. Remember, most bonuses and non-cash compensation are taxable income to the employee and should be reported as such.
In the United States, hours worked in excess of 40 per week, typically, must be compensated at time and a half. The Federal Fair Labor Standards Act applies this rule to domestics who do not reside with the employer ("live out" or "come and go"). Domestics who live in with the employer must be compensated for every hour of work, but the time and a half rule does not apply. (Note: in some states, the overtime requirement for time and a half applies to live-in nannies as well); however, your nanny may interpret overtime to mean hours worked in excess of those originally agreed upon (regardless of whether those "originally agreed upon" hours were 20 per week or 50 per week. It is a good policy to clarify what is meant by this term from the very beginning, especially since occasional overtime needs is often one of the reasons a family has arranged for a nanny.
NOTE: Nannies are covered by the Fair Labor Standards Act. This means that nanny wages must meet minimum wage tests, and live out employees are entitled to the overtime differential (time and one-half) for all hours in a week over 40. Hypothetically, if a live out nanny works 50 hours per week, her salary cannot be below $398.75 weekly (Federal minimum wage = $7.25/hour as of 7/2009). Mathematically, this is calculated as follows:
First 40 hours [40 * 7.25] = $290.00
The US federal minimum hourly rate is $7.25 per hour effective July 24, 2009. Minumum Wage By State
The reality is that very few families will find a competent, reliable nanny willing to work at the minimum wage.
The Work Agreement should specify the frequency of pay days - each Friday, etc. and you should be prepared to pay your employee early if you will not be home on pay day or if you and your family will be out of town on the scheduled pay date.
The nanny who is required to provide transportation for your child in her vehicle needs to be reimbursed for her mileage. This is not purchasing a tank of gas, but rather providing true mileage reimbursement to allow the nanny to recover the cost of gas, wear and tear, maintenance, and depreciation of her vehicle. The IRS business mileage reimbursement rate as of January 2008 is $0.505 per mile.
The nanny may have other out of pocket expenses that she incurs in the course of her job. This can be picking up bread and milk at the grocery, cab fare, providing the child with school activity fee money, or entertainment such as movies or a McDonald's lunch. Most families find that a 'petty cash' fund of $20 - $50 that is replenished by the family regularly works well. The nanny should be required to provide documentation of all expenses - the grocery receipt or just a log of expenses. Family and nanny should discuss in advance expenses the family is comfortable with (a weekly lunch out may be one) and expenses they wish to approve in advance ($30 Circus tickets may be an example). If nanny pays for family expenses from her personal funds, she should be promptly reimbursed by the family.
Reviews and the opportunity for increases in compensation provide an incentive for a nanny to continue to strive to do his or her best. Families are advised to consider their ability to set a schedule for review and salary adjustment and let the employee know when he or she can expect to be considered for an increase in compensation. The nanny should expect at a minimum an annual review. Salary increases for good performance average 5% annually. The outstanding employee may merit a greater increase or a bonus in addition to an increase. Of course, if the nanny is not meeting your expectations, please don't wait a year to address the problems. If the family maintains good open lines of communication with their nanny, performance problems will either go away or the family will replace the nanny. Poor communication between the adults is a common cause of nanny turnover.
Families go to considerable effort to secure a quality care giver - don't forget the need to make sure that the employee knows how much the family values him or her and want to keep them!