What are the Benefits of Legally Paying Your Nanny?

Apr 25, 2024 | Hiring an Employee, Household Payroll & Taxes

The benefits of legally paying your nanny ensures fairness and protects both parties. It’s a win-win situation for both you and your nanny. You’ll gain peace of mind, reduce legal risks, and potentially qualify for tax breaks. Your nanny will benefit from financial security, social security contributions, and a professional working relationship.

Are you a busy family considering hiring a nanny?

Nannies are amazing – they provide in-home childcare, flexibility, and personalized attention for your precious little ones.

But before you jump in, there’s an important legal consideration: your nanny is an employee, and there are responsibilities that come with that.

We’ll explore the benefits for both you, the employer, and your nanny, the caregiver.

From reduced stress and peace of mind to financial security and a stronger working relationship, there are many reasons to do things the right way.

Here’s why legally paying your nanny is a win-win for everyone involved.

Why pay your nanny legally

Having a nanny is a huge help for many families. Nannies provide in-home childcare offering parents flexibility, customized care, and even a partner in raising their children.

But it’s important to remember that your nanny is an employee, and you have legal obligations as their employer.

It’s easy to get caught paying under the table.

All it takes is your nanny filing for unemployment if they lose their job or a workers’ compensation claim if they get hurt while working. If you haven’t been paying your taxes, there could be some financial ramifications.

Or your nanny becomes disgruntled over pay … maybe they’re not getting minimum wage or overtime … and that can become a big issue for you.

Benefits of legally paying your nanny

There are significant advantages to legally paying your nanny, benefiting both you and your employee.

Employer benefits

Reduced legal risk

Avoid hefty fines, penalties, payment of back taxes, and potential lawsuits by paying your nanny on the books.

Peace of mind

Knowing you’re complying with tax regulations and fulfilling your employer obligations.

Safeguarding your career

Getting caught evading taxes can stall career mobility in many professions and jeopardize security clearances.

Access to tax-saving benefits

You may qualify for tax credits related to childcare expenses that can significantly reduce or eliminate your tax obligation.

Work with a professional caregiver

Many of the best nannies out there won’t work for families that pay under the table and you only want the best for your children.

Employee benefits

Financial safety net

They may be eligible for unemployment insurance if they lose their job through no fault of their own and workers’ compensation benefits if they get hurt on the job.

Social Security and Medicare contributions

These build towards their retirement and healthcare benefits. Without them, they may need to work past retirement age to be financially secure as they age.

Legal employment history

This allows them to apply for credit, qualify for car loans and mortgages, and demonstrate proof of income when looking to rent an apartment or buy a home.

Additional benefits

Professional working relationship

A relationship built on fair and legal pay fosters trust and strengthens the employer-employee bond. Which means a professional work environment for you and your nanny as well as optimal care for your children.

Attracting qualified candidates

Competitive legal compensation and the benefits that can come with it will only help you find and retain the very best nannies.

Bottom line, legally paying your nanny ensures fairness and protects both parties. It’s a win-win situation for both you and your nanny. You’ll gain peace of mind, reduce legal risks, and potentially qualify for tax breaks. Your nanny will benefit from financial security, social security contributions, and a professional working relationship. By following the law, you’ll ensure a fair and healthy employer-employee dynamic, ultimately leading to the best possible care for your children.

GTM can help

If you’re avoiding legal pay because it seems like a big hassle and too confusing, GTM Payroll Service can help. With automated payroll processing, free direct deposit, and all withholdings taken care of for you, we make nanny taxes and payroll easy for thousands of families across the country. We’ll also take care of your workers’ compensation insurance and have a suite of health care and other employee benefits to help you attract and retain your best caregivers. To learn more, get a complimentary, no-obligation consultation with a household employment expert at (800) 929-9213, or schedule time with us at your convenience.