How to Employ a Nanny in under 10 Minutes

Being a busy parent can feel like a juggling act. You have so many balls flying through the air, the fear is that you might drop one, adding to the stresses of family life.

One reason you decided on a nanny was for the extra support you need: smart move. But, when you employ a nanny, there are legal obligations.

Don’t lose the benefits of hiring your new chief sidekick by getting bogged down in nanny payroll issues. Read on to find out how to sort it all in the time it takes to sip a café latte.

What’s Involved When You Become an Employer?

The short answer? A lot.

Australia has one of the most highly regulated employment systems in the world. There’s a complex framework of requirements that can even differ between states and territories in certain respects.

When hiring a nanny, you will become their employer. There’s no way out. Long gone on are the days when you could slip your nanny an envelope of cash once a week, no questions asked.

The difficulty is that if you get anything wrong, no matter how well-intentioned you are, the consequences can land you in a load of very hot water. There are penalties that can run into 1000s of dollars for any contravention.

These days, nannies will rightly expect that they’ll get paid properly, on time and receive a payslip. Like every other employee in Australia, they have rights that it is your duty to protect and uphold.

Hang On, Can’t My Nanny Be a Contractor?

This is a common misconception that confuses many employment relationships. It can lead to households not meeting their legal obligations as employers. Added to this, there are potentially severe repercussions for non-compliance.

The Australian Taxation Office (ATO) offers guidance. It can give you the lowdown on the differences between a contractor and an employee. It is very rare for a nanny to meet the criteria needed to be a fully-fledged contractor.

Nannies get paid an hourly rate for the time they work. They have little say over when they work, their hours or their duties. That makes them employees in the eyes of the law.

If you pay your nanny as a contractor when you should be paying them as an employee you could find yourself in all sorts of trouble.

How Pay The Nanny Will Help You

So, is there an easy way out of this huge administrative headache?

Yes, there is and that’s to outsource your tax and nanny payroll obligations to a third party, like Pay The Nanny.

The Relationship With the ATO

When you use Pay The Nanny, we become what we refer to as the “employer of record” for the purposes of the ATO. This removes many of the risks to you associated with employing a nanny.

So, for tax purposes, the relationship is between Pay The Nanny and the ATO. As a parent, you are effectively in the clear.

We act as a co-employer of your nanny. You'll still be in charge of managing your nanny. You’ll also have to make sure you stay compliant with relevant employment legislation. However, Pay The Nanny will take on the liability and responsibility for filing and paying required employer contributions and taxes.

We have tried and tested processes in place related to deadlines, timesheets and nanny payroll periods.

That means your nanny can feel part of a household that takes their professional well-being seriously. They will know they’ll always get paid accurately and on time with payslips and proof of income as standard.

PAYG and Medicare

PAYG or ‘Pay As You Go’ is a federal income tax that needs filing and gets paid on behalf of your nanny with each payroll. PAYG gets deducted from your nanny’s wages and we’ll then pay it directly to ATO.

This makes sure that you and your nanny meet your tax obligations. For the ATO, nannies become the “tax employees” of Pay The Nanny. This means we will assume the responsibility of ensuring that pay and taxes get calculated correctly.

As a rule of thumb, the PAYG amount an employer withholds from a nanny's wages includes what’s necessary to cover the Medicare levy. Medicare is the universal health insurance scheme that guarantees employees access to a variety of health services at a low cost.

What About My Nanny’s Leave?

If your nanny is permanent, they have certain leave entitlements. These include paid annual leave as well as sick, compassionate and carer’s leave.

Making sure your nanny gets the right payments for leave is complex. There are extra payments related to Public Holidays to consider too.

Your nanny’s hours are likely to vary. It’s therefore relatively easy to under or overpay them. Pay The Nanny takes care of all the calculations for you so you don’t need to worry about getting everything right. 

What About Super?

There’s no statutory requirement to pay Superannuation if your nanny works less than 30 hours a week. However, even if your nanny technically works under the 30-hour threshold, we’d still recommend you pay Super, if possible.

First, it acts as an incentive to attract the best nannies. Over time, it’s also quite easy to inadvertently creep over the 30-hour limit. You could therefore suddenly find yourself liable for Super without even realising it.

Super Rates and Workers’ Compensation

We will take care of Super payments ensuring the necessary compliance. The current rate for Super is 10 percent but that’s set to increase to 12 percent.

As your nanny’s employer, you will have to pay Super on top of their wage if your nanny works for you 30 hours a week or more.

Regardless of the number of hours they work, your nanny can also choose to make voluntary contributions. These would be on top of your legal obligations. If they decide to do this, we’ll get it sorted,

We'll also make sure that workers’ compensation gets dealt with too. This covers you in case your nanny gets injured or becomes ill due to their work. This kind of insurance varies between states and territories. We’ll ensure you have the right product for wherever you live.

The Risks and Pitfalls of DIY Payslips and Tax Returns

If you’re not a DIY expert around the house, the worst that might happen is a wonky tile or a leaky tap. When it comes to nanny payroll and tax issues, the devil is in the detail and the consequences of not getting something right can be very serious indeed.

If you’re thinking of paying your nanny cash under the table, please don’t. Doing so puts both yourself and your family at risk. You could face a hefty fine, a criminal record and a penalty of up to 150 percent of the tax owing. It’s not worth it.

It’s Too Easy to Slip Up

The difficulty of doing things yourself, even with the best of intentions, is that if you’re not careful you could take your eye off the ball and make a costly error. Accurate payslips, for example, are not a luxury you can choose to generate, they’re a legal requirement.

It’s all too easy to slip up on the latest guidance or rules changes made by the ATO. Doing things yourself means you’ll need to:

●     Track leave and overtime entitlements

●     Pay taxes, Super and Workers’ Compensation

If you’re not used to these kinds of issues, dealing with them can feel like a full-time job. It’s also human nature to prioritise and get hungry kids their next meal rather than focus on how much Super you should be paying your nanny in the coming months.

A Case in Point

The Fair Work Ombudsman (FWO) takes paying nannies fairly and accurately very seriously. It cites on its website an extreme case of a Sydney-based couple who underpaid their nanny. The consequences were serious.

“We will continue to take court action to ensure employers get held to account. Workers with concerns about their pay, hours of work or entitlements should contact us,” the FWO said in conclusion.

Clearly, there are plenty of well-intentioned families who simply do not have the time or expertise to ensure all their “T's” get crossed and “I’s” dotted.

Sign Up and Sort it!

We offer an end-to-end service to cover you in all areas of tax-related compliance. We know employment obligations can feel complicated for busy parents. They’re just one more thing families could do without, but, for us, dealing with them is second nature. It’s what we do day-in-day-out.

We can even offer an employment contract template. That means you can start the formal relationship you’ll have with your nanny on the best possible terms.

Team up with Pay The Nanny and you’ll become part of a well-oiled machine that takes care of all your nanny tax and payroll obligations.

Join the hundreds of other families who’ve discovered how to Pay The Nanny the simplest way. Sign up here and join Pay The Nanny right now.