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Employ Your Nanny the Right Way

Lionshare Partners > Blog > Employ Your Nanny the Right Way

Many couples will end up paying for childcare in one form or another. This is especially true for households where both spouses are working and almost certainly true for dual attorney households. At attorney levels of income, especially for partners, most people avoid the second income trap (producing low net income after taxes, child care, maid, transportation, etc) and especially in duel attorneys’ homes it usually makes financial sense for both parents to work. Aside from being a stay-at-home parent or having relatives watch your child, the two most popular childcare choices are enrolling your child in a daycare center or hiring a nanny to watch your child in your home. Here are some tips and tricks to consider if you currently have a nanny or are considering one:

Follow the IRS Rules
Many attorneys pay their nanny in cash. This is a bad idea and clearly not consistent with IRS rules. Having a nanny means you are an employer. You should keep your nanny “on the books” and then pay taxes on your nanny’s salary. You can also take advantage of tax breaks via the Child Care Tax Credit and/or dependent care flexible spending accounts.

If you pay a domestic employee more than $2100 a year the IRS says you need to treat them like an employee, not a contractor. You will need an Employer Identification Number (easy to get from the IRS) and a way to calculate payroll. You’ll need to produce an I9 form proving that the nanny is eligible to work in the United States. You will be responsible for employer taxes and unemployment insurance. You will need to file a Schedule H with the IRS. None of this is particularly complicated but it all needs to be done and there can be consequences for those who ignore these rules. There are online services like HomeWork Solutions figures this all out, cuts your nanny a paycheck with a paystub and retains all of the tax information.

I know it’s easy to just cut a check and Venmo payment and it’s definitely the better route for the nanny looking to maximize their take-home pay. It’s just not legal after certain thresholds. Plus, the cash arrangements are bad for the nanny if they are trying to build employment history, get injured on the job, file for unemployment assistance, or want to collect a nice Social Security check in retirement.

Seek Help for Finding Nannies
Many sites like Care.com and SitterCity can perform background checks on the nannies they list for a low cost. In some cities, there are nanny placement services although these can be fairly expensive. There also exist some higher-end websites and placement agencies. The nannies coming through these services are the type who are going to perform full-service house management and have a gourmet dinner on the table when you get home in addition to having Junior in a clean romper. Expect to pay a significant premium if you enter these waters but for some very high-income attorneys, this may be money well spent.

Establish Clear Expectations and Have a Contract
Want your nanny to do dishes and household laundry? What about dog walking and grocery shopping? Will he or she be willing to work when your toddler is puking her brains out? These are all things to decide before the first day on the job. When hiring a nanny, you should discuss sick time and vacation days and create an agreement or a nanny contract. Also, as the employer, you should give your nanny feedback and have open conversations about her work. Simple nanny contracts are available online and you can edit these to suit your needs. Review by an attorney doesn’t seem to be necessary but would likely be relatively inexpensive. Be clear and straightforward, be as specific as possible. “Nanny will perform 3-5 household errands a week as requested” is far better than “Nanny to help as needed.” “Dishes done and countertops clean each day” is superior to “Light housekeeping expected.” Expect some negotiation especially if you are hiring an experienced nanny. It is better to that before work starts than to try to change gears in the middle of the race.

Use Technology for Ease and Convenience
Do your scheduling through a shared google calendar with hours sketched out well in advance. This allows you to track hours and our nanny to plan her life. Have your nanny carry a credit card for household purchases rather than petty cash. You can immediately reimburse them electronically for any expenses. All of the financials are online as well; your nanny experience is paperless and seamless. While there are surely many lovely people out there who do great child-care and are still using flip phones and pocket calendars, enjoy the added convenience of a smartphone system.

Weighing the Pros and Cons of Daycares
Daycare helps build social skills that can help your child in school and throughout life. Day care centers must follow state regulations around safety, staffing, sanitation, and space issues. Ask about the center’s most recent state license and if they have been accredited by the National Association for the Education of Young Children (NAEYC). The price of daycare tends to be more affordable than a nanny since you are sharing the cost with other families. The price varies based on location and type of facility. An in-home daycare center, also known as family care, is usually less expensive than a traditional daycare.

While there are many daycare pros, every pro comes with some sort of con. Daycare centers run on specific hours so if you are late picking up your child, it is probable that you will be subject to an extra charge. If you have a job where you cannot leave at a specific time each day, you may need more flexibility than daycare can offer. Daycare centers have strict sick policies so if your kid falls into their “sick” category, you have to take off from work or find other childcare arrangements when your child has an illness. Further, if your kid gets sick at daycare, you will have to pick them up and keep them home until they are free of the illness.

The right nanny makes your life work. There is nothing quite like getting home from a tough deposition and seeing your baby giggling with delight as a caring, professional nanny sings and plays with her. When choosing a childcare situation for your family, sit down and make a list of what is most important to your family. Be honest with yourself about your needs and wants and think about things that may upset or frustrate you. Remember that no decision is permanent and you can always change your situation based on your needs or your child’s needs.