Employing a Nanny Through an Agency vs Directly: Payroll Implications

When it comes to finding the right nanny, parents often face two main paths: using an agency or hiring directly. Both approaches can work beautifully, but they differ significantly when it comes to payroll, tax obligations, and compliance responsibilities.

Let’s explore the differences and how you can make sure your nanny is paid correctly under Australian law.

1. Hiring Through a Nanny Agency

Agencies can simplify recruitment, reference checks, and trial coordination. But when it comes to payroll, there’s an important distinction: not all agencies employ the nanny.

Some agencies simply connect families with nannies, while others act as the employer of record (handling payroll, tax, and super).

When the agency is the employer:

The agency manages payroll, superannuation, and PAYG tax.
Families pay the agency a total service fee that includes the nanny’s wage and the agency’s margin.
The nanny receives payslips and entitlements directly from the agency.
GST is typically charged on top of the nanny’s wages making it more expensive

When the family is the employer:

The agency helps you find and screen a nanny, but you become the legal employer.
You are responsible for payroll, tax, super, and leave, or you can outsource it to a service like Pay The Nanny to handle compliance for you.

Tip: Always ask your agency who the legal employer is before engaging a nanny. This determines who must meet Fair Work and ATO requirements.

2. Hiring a Nanny Directly

When you hire a nanny directly, you take full responsibility for their employment. This includes:

Registering as an employer with the Australian Taxation Office (ATO).
Managing PAYG withholding for income tax.
Paying superannuation (currently 12% in 2025).
Providing paid leave entitlements if they are permanent or part-time.
Maintaining accurate payroll records and payslips in line with Fair Work legislation.

Using a payroll service like Pay The Nanny removes the complexity by handling everything from tax and super to leave tracking and payslips.

Related article: How to Employ a Nanny in Under 10 Minutes

3. Casual vs Part-Time Arrangements

Families often ask whether their nanny should be casual or part-time. The key difference is how regular their hours are.

A casual nanny has no guaranteed hours and works irregularly. They receive a higher hourly rate (usually with a 25% casual loading) to make up for not receiving paid leave.

A part-time nanny, on the other hand, works set hours each week and is entitled to paid annual leave, sick leave, and public holidays.

If your nanny works consistent days or hours each week, even as few as 10 to 20 hours, they are generally considered part-time under the Miscellaneous Award 2020.

4. Handling Variable or Zero-Hours Schedules

Some families prefer flexibility and hire a nanny when needed. However, zero-hours contracts can be tricky under Fair Work rules.

Casual nannies can work irregular shifts but must still receive the correct casual loading (usually 25%).
Part-time nannies should have predictable hours and written agreements.
Frequent roster changes or “as needed” work should be treated as casual employment.

To stay compliant, ensure your nanny’s contract matches the way they actually work. Pay The Nanny can manage both fixed and flexible arrangements with accurate payroll each week.

5. Leave, Superannuation and Tax Implications

Whether hired through an agency or directly, every nanny in Australia is entitled to:

Superannuation: Paid on all ordinary earnings, including overtime for full-time or part-time employees.
Annual Leave: 4 weeks for permanent staff, pro-rated for part-timers.
Personal Leave: 10 days per year for part-time or full-time staff.
Public Holidays: Paid if the day is normally worked.

Agencies that act as employers must manage these correctly. If you employ your nanny directly, using a registered payroll provider like Pay The Nanny ensures all entitlements are processed correctly and reported to the ATO via Single Touch Payroll (STP).

7. The Bottom Line

If you hire a nanny through an agency that employs them, payroll is handled for you but often at a higher ongoing cost with GST included on top of the wages. If you hire directly, you gain more control, lower cost and flexibility but take on legal obligations as the employer.

Using Pay The Nanny gives you the best of both worlds. You remain the employer while we handle all payroll, tax, and super obligations accurately and on time.