Can You Pay Your Nanny a Salary?

Jun 8, 2018 | GTM Blog, Household Payroll & Taxes, Tax & Wage Laws

nanny salary

Paying your nanny a salary is against the law as they are a non-exempt employee who needs to be paid at least time and a half for overtime.

The short answer is “no.” You can’t pay your nanny a pre-set, flat-salaried amount for all hours worked in a week. You could pay them for guaranteed hours, which is different from a nanny salary.

Here’s why.

Exempt v. non-exempt employees

There are basically two types of employees – exempt and non-exempt. Exempt workers do not need to be paid for overtime hours. To be considered “exempt,” an employee must perform executive, administrative or professional duties and be paid a salary (not hourly). A nanny’s duties don’t fall into one of these exemptions. This means they are a non-exempt employee and entitled to overtime pay. It would be illegal to pay a nanny by salary.

Coverage under FLSA

The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, and recordkeeping rules. Under the FLSA, non-exempt employees, like nannies, are entitled to at least the federal minimum wage and receive an overtime rate of not less than time-and-a-half for hours worked over 40 in a week.

What are guaranteed hours?

Offering guaranteed hours to your nanny may seem like the same as offering a salary but there is a significant difference.

A salary is a pre-set, flat amount paid to your employee regardless of hours worked in a week. Your nanny would make the same amount of money whether they worked 30 hours or 50 hours. This, of course, is against the law as a nanny needs to be paid overtime for hours worked over 40 in a week.

With guaranteed hours, you would set an hourly rate, an overtime rate, and the typical number of hours you would need your nanny each week. For example, you need a nanny for 45 hours a week and would pay $20 an hour with time and a half for overtime.

Your nanny’s compensation would be $950/week ($20 x 40 regular hours + $30 x 5 OT hours). The nanny would be paid this weekly rate as long as they didn’t exceed 45 hours. In this example, hours worked over 45 would be paid at time and a half above and beyond the guaranteed compensation.

Use GTM’s nanny compensation calculator, to determine your nanny’s hourly and overtime rates based on a weekly compensation figure.

Remember to always state compensation based on gross wages, which is your nanny’s total compensation before taxes and other deductions.

Guaranteed hours may be more convenient for you when paying your nanny each week and preferred by your nanny. In fact, many nannies – especially more experienced ones – may ask upfront for guaranteed hours. They have bills to pay like everyone else and having a consistent paycheck each week helps them with budgeting and their personal finances.

In your nanny’s work agreement or contract, you would need to clearly explain your nanny’s compensation in FLSA-compliant terms, stating a gross, guaranteed weekly compensation broken down by hourly wage, hours in a workweek, hourly rate, and overtime rate.

GTM can help

GTM Payroll Services handles guaranteed hours for hundreds of families and can help you remain compliant 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 your situation.

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