5 Nanny Payroll Mistakes to Avoid

Making sure you avoid costly payroll mistakes for your nanny

So, you’ve employed a nanny to watch your children. Hallelujah!

Just don’t forget to pay them...and pay them properly.

This may seem like a silly thing to say. Unfortunately, the nannying industry is ripe with payroll mistakes. Everything from wages to payslips has room for error. Payroll mistakes are much easier to avoid than they are to fix. With that in mind, here are 5 Nanny Payroll Mistakes to avoid when hiring in Australia.

1. Not deducting the correct amount of taxes

Taxes are something you need to get right.

Both underpaying and overpaying government taxes will have negative consequences for your employee. Let’s say you hire a nanny for a year, and over the course of her employment you accidentally withhold $1,000 extra. When either of you notice this discrepancy, the nanny will immediately need to be paid the $1,000 you took from her. This can be a hefty expense.

Or, worse, if you deduct too little from an employee’s payslip, they may be in trouble with the ATO. While it might be argued that it’s their responsibility to pay the due taxes, this will likely damage both your relationship with your employee and your reputation in the industry.

In both cases, it’s unprofessional and costly.

2. Not providing a payslip

Payslips are a basic requirement for proper accounting and it’s also a legal requirement. If you do not provide your nanny with a payslip, there is no legal proof that you paid him or her. The nanny can therefore raise a dispute against you in court.

Payslips also prevent tax accidents, as mentioned above. When two people have eyes on the deductions of a payslip there is a significantly lower chance of error. Payslips can be a handful to create manually; thankfully, there’s software and services available to streamline the process.

Payslips contain a great deal of helpful information for both employer and employee. Things like:

Gross vs. Net pay
YTD Gross and Net pay
Sick leave balances
Annual Leave balances
Pay for public holidays
Superannuation information

3. Not paying Supernannuation Contributions

Helping your nanny retire someday is the right thing to do. But it’s also the law. Per the ATO, employers must make KiwiSaver deductions at the default rate of 10% of a nanny’s wages (and set to increase). Your Nanny can then make voluntary contributions as a salary sacrifice from their wages

If your nanny is earning less than $450 p/month or works less than 30 hours per week, you won't have a statutory requirement to pay super. This is a specific rule for domestic employers in Australia. However, you can still make employer contributions and, where feasible, encourage employers to do it.

Australia is one of the only countries in the world to offer such a robust retirement plan for its citizens. Let’s help each other all take advantage of it!

4. Not tracking leave entitlements

Not properly tracking your nanny’s leave entitlements may result in him or her missing vacation time that is legally afforded to them. This can be cause for a significant amount of legal trouble, even if it’s merely a case of not paying attention.

Under the Miscellaneous Award, your nanny is entitled to four weeks of paid vacation per calendar year. This applies even if she is a part-time employee. Annual leave accrues from day one of employment so not tracking it from the outset can make it complicated.

Your Nanny is also entitled to 10 sick leave days per annum. They can use these when they, or those in their care, are sick or need care.

It is the responsibility of the employer, not the employee, to properly track and relay leave entitlements.

5. Paying cash

But wait, isn’t it legal to pay my nanny in cash?

Yes. But not cash in hand. By this we mean you still need to deduct the proper taxes and provide a payslip if you want to pay your nanny’s wages in cash. Cash in hand payments are not only illegal, they put your nanny in a difficult situation if she ever needs to prove her income for tax purpose, to put a down payment on a house, or receive a loan from the bank.

Generally, it’s best to avoid paying in cash. Even with adequate pay slips, it’s far easier to make mistakes at the expense of yourself or your employee if you’re paying in cash.

In conclusion

Nannying is domestic work. Oftentimes we have somewhat close relationships with the nannies we employ - they do, after all, live in our houses and watch our children!

Unfortunately, this closeness is the reason why the industry tends to be associated with payroll mishaps. It only takes one payment slipup to have serious consequences for your employee’s wellbeing and your professional reputation.

Take your nanny’s employment seriously. Provide payslips, deduct the proper amount of taxes, monitor their leave entitlement, contribute to Superannuation, and do not pay them in cash. It’s better for everyone involved.

About Pay The Nanny

Our mission is to make it as simple as possible for households to manage payroll for their nannies.

Pay The Nanny provides friendly, accurate and flexible nanny payroll services to nanny employers. We take care of everything to do with PAYG, Workers Compensation, holiday pay, sick pay, maternity leave and Superannuation.

For more information, check out our website at www.paythenanny.com.au. Make sure you give us a like over on our Facebook page too.

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