Simplifying Nanny Payroll: 5 Easy Steps for Stress-Free Payments

Hiring a nanny brings invaluable support for families, but it also comes with the responsibility of managing payroll. Many parents in Australia are unsure where to begin when it comes to nanny payroll, especially with legal obligations like tax, superannuation, and overtime. Fortunately, the process doesn’t have to be complicated. This guide will walk you through five easy steps to simplify nanny payroll and ensure you remain compliant with Australian laws. 

1. Determine Your Nanny's Employment Status 

Before you start setting up payroll, it’s important to understand whether your nanny is classified as an employee or an independent contractor. In Australia, most nannies working regular hours in your home will be considered employees. As an employer, you are responsible for managing their wages, superannuation, taxes, and entitlements like annual leave. 

To classify your nanny correctly: 

• If you set their working hours, provide tools, and they work exclusively for you, they are likely an employee. 

• If the nanny works for multiple families, sets their own rates, and provides their own equipment, they may be a contractor. 

Once you've established that your nanny is an employee, you can move forward with setting up a proper payroll system. 

2. Register as an Employer with the Australian Taxation Office (ATO) or sign up to Pay The Nanny 

If you are using Pay The Nanny, you can ignore this step. We make the process of working with the ATO super simple by filing all your nanny’s records directly with the ATO. This means you don’t need to worry about managing anything with the ATO.  

As a nanny employer, you'll need to register with the Australian Taxation Office (ATO) to meet your tax and superannuation obligations. You’ll be responsible for withholding income tax (PAYG) from your nanny's wages and paying it directly to the ATO. 

Here’s how to register: 

• Obtain an ABN (Australian Business Number): If you don’t already have an ABN, you’ll need one to register as an employer. You can apply for an ABN through the ATO’s website. 

• Register for PAYG Withholding: This allows you to withhold the appropriate tax from your nanny’s wages. The amount you withhold depends on your nanny’s earnings and tax file number declaration. 

Once registered, you’ll be ready to withhold and report PAYG tax, ensuring your nanny’s taxes are correctly handled. If you are using Pay The Nanny 

3. Calculate and Pay Superannuation for Your Nanny 

Superannuation is an essential part of nanny payroll in Australia. If your nanny works more than 30 hours per week you are legally obligated to pay super contributions on their behalf. Superannuation contributions must be paid at the current rate of 11.5% of your nanny's ordinary time earnings (OTE), and these payments must be made at least quarterly. 

To simplify the process: 

• Choose a Super Fund: If your nanny hasn’t nominated a super fund, you’ll need to set one up on their behalf. Make sure the super fund you choose is compliant with Australian regulations. 

• Use the ATO’s Small Business Superannuation Clearing House (SBSCH): The SBSCH is a free service offered by the ATO to help small employers like you make super payments in one go. 

By keeping up with your superannuation contributions, you’ll stay compliant with the law and ensure that your nanny receives the benefits they’re entitled to. Again, if you’re using Pay The Nanny, we’ll manage and pay your super on time, every time, for your nanny. 

4. Track Overtime, Leave, and Other Entitlements 

Your nanny is entitled to the same rights as other employees in Australia, including leave entitlements and overtime pay. It’s important to keep accurate records of your nanny’s hours worked, as well as any overtime, sick leave, and annual leave accrued. Most nannies are paid under the Miscellaneous Award in Australia. 

• Overtime: Nannies are entitled to overtime pay for any hours worked beyond their agreed-upon schedule. Overtime is generally paid at 1.5x or 2x the regular hourly rate, depending on the number of overtime hours worked and the applicable award or agreement. 

• Annual Leave: Full-time and part-time nannies are entitled to four weeks of paid annual leave each year. Be sure to keep track of leave accruals, so you know when your nanny is entitled to time off. 

• Personal Leave: Your nanny is entitled to sick leave and carer’s leave. Personal leave accrues at a rate of 10 days per year for full-time employees, pro-rata'd based on their working pattern 

Having a clear record-keeping system in place for your nanny’s hours, overtime, and leave will ensure that payments are correct, and entitlements are fulfilled. 

5. Automate Payroll with Pay The Nanny 

If everything is feeling overwhelming, or stressful, fear not – we've got your covered. 

Setting up and managing payroll for your nanny can be time-consuming, but it doesn’t have to be. By using a dedicated nanny payroll service, you can automate much of the process, ensuring your nanny is paid correctly and that all tax and superannuation obligations are met. 

With a service like Pay The Nanny, you can enjoy the following benefits: 

• Automated PAYG Tax Calculations: The system will automatically calculate the tax to withhold from your nanny’s wages. 

• Superannuation Payments: Contributions are calculated and paid directly to your nanny’s nominated super fund. 

• Payslips and Reporting: Each pay period, your nanny will receive a payslip, and you can easily report to the ATO. 

• Leave Tracking: The system tracks your nanny’s leave accruals and overtime, ensuring accurate payments. 

By automating the process, you’ll reduce the risk of payroll errors and free up more time to focus on your family. 

Use a Payroll Service you Can Trust 

Managing nanny payroll in Australia may seem daunting at first, but by following these five easy steps, you can ensure that your nanny is paid correctly, your legal obligations are met, and you can enjoy peace of mind. From registering with the ATO to automating payments with a payroll service, taking the time to set up an efficient system will save you stress in the long run. 

If you want to make the process even easier, consider using Pay The Nanny to take care of your nanny’s payroll. With our automated service, you can ensure that taxes, superannuation, and entitlements are handled correctly, leaving you with more time to spend with your family.