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How Much Should You Pay Your Nanny?

Posted On
5/6/2020
By
Chris Bibey

Once you decide to hire a nanny, it won’t be long before you start to think about how much to pay a nanny.

A woman holding a baby.

Nanny wages can vary drastically based on a variety of factors, so there is no right or wrong amount. However, you’ll come to find that offering a competitive wage goes a long way in attracting and retaining a highly reliable and talented nanny.

Wage Factors

According to PayScale, the average hourly rate for a nanny nationwide is $14.98. While it’s good to understand the average hourly rate, this isn’t the only thing to consider when deciding how much to pay a nanny. Other factors include but are not necessarily limited to:

  • Location. Nannies in larger cities tend to receive higher wages compared to those who work in smaller areas. As examples, according to PayScale, the average hourly rate for a nanny in Chicago is $15.17, while a nanny in Buffalo averages $14.68.
  • Number of children. More children equals more responsibility for your nanny which usually leads to higher wages. Not sure what’s fair for multiple children? Some parents go by the practice of paying 1.2 times the current rate when another child is in the mix. As an example, if you pay your nanny $20/hour for one child and need to increase to include a second, you would pay $24/hour for both children.
  • Additional responsibilities. Do you ask that your nanny picks up your children from school or drive them around for activities and appointments? As this requires more work than just watching your children at home, it would be fair to pay your nanny a little more to accommodate all of the additional tasks.
  • Travel and expenses. Does your nanny have to travel far to watch your kids, or are they expected to purchase their food/admission on outings they have with your children? If any of these are the case, you may pay your nanny a little more.
  • The type of nanny you hire. In our blog post on the differences between babysitters and nannies, we discussed the different types of nannies you may choose to employ in your household. Because there are different types there is the question of how much do you pay a full-time nanny vs. a part-time nanny or a live-in vs. live-out nanny? The nanny wages will vary a lot in these situations simply because of the responsibilities and type of nanny you hire.

Overlooked Wage Factors

It’s easy to get so caught up in the nanny pay rate that it can be easy to overlook some nanny expenses. If you make this mistake, you may be in for a big (and costly) surprise down the road.

Some of these overlooked expenses can alter nanny wages. Keep an eye out for:

  • Payroll taxes. As a household employer, you are responsible for paying the nanny tax. Failing to abide by the rules set by the IRS, can cost you up to $25,000 in fines. Being aware of these expectations before you hire your nanny can save you a costly mistake in the long term.
  • Overtime pay. If you ever have to work later hours or handle a last-minute errand, there may come a time where your nanny has to work more hours than you may have initially agreed upon. Typically, overtime requires paying their standard hourly rate plus an additional half. However, you’ll want to go by the rules of exempt and non-exempt employees to understand if this applies to your nanny.
  • Annual Raises. If your nanny is going to be with you for more than a year, it’s fair to treat them like any other employee and give them an annual raise. When cost of living changes, it’s fair to assume that your nanny will be expecting some type of salary bump.
  • Bonuses. Similar to annual raises, bonuses are common and likely come in the form of a year-end bonus. Depending on your cash flow, splitting the bonus up every quarter, or twice a year, may work better than one lump sum. While you aren’t required to give your nanny a bonus, it’s a nice gesture and builds loyalty.
  • Paid time off. While no federal laws are regulating paid time off, it’s something that can make working in your household more attractive to a nanny. Offering paid time off includes sick days and vacation days.

By accounting for these expenses upfront, you never have to worry about busting your budget when you least expect it.

Bottom Line

As you begin your search for a nanny, have a clear idea of how much you can afford to pay. By sharing this information with candidates upfront, you can guarantee that you’re on the same page in regards to nanny wages from the start.

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This website contains articles posted for informational and educational value. SurePayroll is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, SurePayroll. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant. If you require legal or accounting advice or need other professional assistance, you should always consult your licensed attorney, accountant or other tax professional to discuss your particular facts, circumstances and business needs.