Two terms are unique to the household employment industry: guaranteed hours and banking hours. While interrelated, the first is an industry standard, and the latter is illegal.
To understand banking hours, let’s first explain guaranteed hours.
What are guaranteed hours?
If your nanny works the agreed-upon hours – or if you as the employer tell them they can work less hours– they still get paid the same. Any hours worked over their guaranteed hours would be paid on top of their typical pay, including an overtime rate for any hours worked over 40 in a workweek. Guaranteed hours are a guarantee of income, not a cap on hours.
Guaranteed hours for a nanny may be more convenient for you when paying them each week and preferred by your caregiver. Many nannies – especially more experienced ones – may ask for or expect guaranteed hours from the beginning of employment.
You can think of guaranteed hours for a nanny as you would if you were sending your child to a daycare facility. If your child does not go to daycare for a day – or even a week if you are on vacation – you still pay the same fee. The daycare facility was available to care for your child – just like a nanny – you just chose not to use them.
Read What are Guaranteed Hours for a Nanny? for additional information.
What is banking hours?
Banking hours occurs when a family requires their nanny to make up unworked hours that were paid under guaranteed hours outside of the agreed upon schedule.
Let’s use this example.
Your nanny has guaranteed hours of Monday-Friday, 9 a.m.-5 p.m. at $20/hour. That means each week your nanny is paid $800/week as long as they work 40 hours (unless you as the employer has them work less)
Let’s say grandma and grandpa want to take their grandkids out for an afternoon. You do not need your nanny during those five hours, so you let them go home early. Under guaranteed hours, they would still get paid 40 hours because they were available to work, and you chose not to use their services.
With banking hours (again, illegal, which we’ll get to in a moment), you could ask your nanny to “make up” those five unworked hours the following week, outside the agreed-upon schedule, or at some other time in the future. The banked hours would be unpaid.
In this example, your nanny could conceivably work their normal 40-hour workweek, return on Saturday for date night, and work five unpaid hours.
Why is banking hours illegal?
While you won’t find the term “banking hours” in federal labor laws, the Fair Labor Standards Act does state that “covered employees must be paid for all hours worked in a workweek.”
Also, “the workweek ordinarily includes all time during which an employee is necessarily required to be on the employer’s premises, on duty or at a prescribed work place.”
Nannies and other household workers are considered “covered employees” under the FLSA.
Back to our example above. If a family would like their nanny to work extra for a date night or some other reason, those hours must be paid (at an overtime rate if the hours exceed 40 in the workweek) even if the caregiver had “unworked” hours from a previous pay period.
Can I “bank hours” for later in the pay period?
Let’s say your nanny has guaranteed hours, and you let them go early on Tuesday afternoon because you came home from work early. Can you ask your nanny to stay late on a different day that same workweek to “make up” the hours missed? Legally, that may be ok, but it could depend on your work agreement. If your work agreement states that guaranteed hours are 9 am – 5 pm Monday- Friday, you likely can’t require your nanny to stay late or come in early on a different day. They may do so as a courtesy, but they may not be obligated to agree to your request.
What if I pay my nanny every two weeks?
If you pay your nanny guaranteed hours every two weeks, you wouldn’t be able to move unworked hours from one week to the next. That’s because of the FLSA rule that nannies must be paid for all hours worked in a workweek. The timing of their pay isn’t a factor.
What happens when my family goes on vacation?
If your nanny has guaranteed hours and you go on vacation, your caregiver still gets paid as if they worked a full week. They were willing and able to work, and you chose not to use their services.
Another option — if agreed to by both parties — is to have your nanny perform other duties while your family is away. They could house sit, pet sit, pick up the mail, clean and tidy the house, or run errands. Remember that your nanny is a professional child caregiver and may not agree to do household chores, but it may be worth exploring with your employee.
You could also take your nanny on vacation with you.
Other considerations when banking hours
You shouldn’t bank hours because it’s illegal and will open you up to a wage claim by your employee.
Banking hours can also damage your relationship with your nanny. If they’re working more hours during a week because of banking hours, it’s likely on the weekend, early in the morning, or at night. That cuts into their downtime and disrupts their schedule, especially if banking hours is extensive or happens frequently. This can cause resentment, frustration, and burnout on your nanny’s part. If you find an exceptional nanny, treat them like a professional to maintain a positive working relationship.
GTM can help
GTM Payroll Services handles guaranteed hours for hundreds of families and can help you comply with federal and state tax, wage, and labor regulations. Call (800) 929-9213 for a free, no-obligation consultation with a household employment expert to discuss hiring a nanny and paying them the right way. Or schedule time with us at your convenience.
Hiring a nanny?
Download Your Guide to Hiring a Nanny. In this guide, we lay out the steps on how to hire a nanny the right way and maintain a strong relationship with your employee.
Get your free: