The Payroll Blog

News, tips, and advice for small business owners

How Much Should You Pay Your Nanny?

Posted On
5/20/2019
By
Chris Bibey

Once you decide to hire a nanny, it won’t be long before you’re asking yourself an important question: how much should you pay your new household employee?

Wages can vary drastically for nanny roles, so there is no right or wrong answer to this question. 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 is $14.72. While it’s good to understand the average hourly rate for a nanny, this isn’t the only thing to consider when deciding as to how much you should pay. Other factors include but are not necessarily limited to:

  • Location. Nannies in larger cities tend to receive higher wages compared to nannies 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 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. A full-time live-in nanny may a little less compared to a full-time live-out nanny, but that is because they are overall receiving a value of having somewhere to live.  

All of these things can and should alter how much you offer to pay your nanny.

Hidden Wage Factors

It’s easy to get so caught up in your nanny’s hourly rate that you overlook hidden expenses. If you make this mistake, you may be in for a big surprise down the road.

Some of these hidden expenses can alter how much you pay your nanny. Here are some hidden expenses that should never slip through the cracks:

  • 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 in the long run.
  • Overtime pay. There may come a time where your nanny has to work more hours than you may have agreed upon. Typically, overtime requires paying hourly time and a 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. With cost of living changes, it’s fair 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.
  • 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 pay from the start.