Below are a few common topics that we get questions on. Although every situation is different we provided the typical recommendation for most situations. If we didn't cover your question, give us a call.
We have compiled a comprehensive agreement by combining a few our clients have given us. We recommend that you use this for a template for you agreement with you nanny our household employer. We also compiled questions to ask you nanny during the interview process. These documents are HERE in Word format to allow for cutting and pasting to create you own document. If you don't have Word call us and we can send them in a different format.
Our Experience / Recommendation:
We believe that it's best to withhold the required taxes from your employee Along with state and federal income taxes, although state & federal income tax are not mandatory. If you don't your employee will potentially have to make quarterly payments for income taxes to the state and IRS. Call us we can assist in determining the best arrangement for you and your employee.
Our Experience / Recommendation:
If you're considering hiring someone that you know, or find out is not legally residing or able to legally work in this country, don't hire them. First, we can show you in many cases legally hiring a household employee can save money, after taxes. Most importantly if your employee is a nanny and you are trying to raise the best child that you can, hiring someone illegally just seems to fly in the face of that objective….(I will get off my "soap-box" now).
Our Experience / Recommendation:
If you do offer heath insurance for your household employee and they are relatively young, in good health and they typically don't see a doctor. Consider offering a policy that covers catastrophic medical cost. Many household employees are younger and see the doctor infrequently. The type of policy that covers all doctors' visits is typically not warranted. What is necessary, is coverage so a week in the hospital does not financially ruin them. This is just something to consider if you are thinking of offer health insurance and you might be surprised how affordable this type of policy is.
Our Experience / Recommendation:
In the agreement with your household employee and we do recommend that you signed agreement with your employee (see our example) be careful on how you state the amount and how they are being compensated.
Example:
You want to hire an employee to work from 8:00 AM to 6:00 PM, 10 hours a day Monday through Friday, a total of 50 hours a week. Your intent is to pay the person $500 per week:
If you state that you will pay $10 per hour. In most states this would equate to $10 for the first 40 hours and $15 per hour for the remaining 10 hours or $550 per week. $50 more than you wanted or ~$2,500 per year.
If you word the agreement that you will pay $500 per week for working 8:00 AM through 6:00 PM Monday through Friday then $500 is what you would pay. Based on typical overtime law this equates to $9.10 for 40 hours and $13.65 for the 10 hours overtime.
Also, beware that overtime maybe based on an 8 hour work day not a 40 hour work week. That means if a nanny works two days a week 10 hours a day they would be entitled to 4 hours of over time because they worked over 8 hours in a one day period.
Our Experience / Recommendation:
It's been our experience and the experience of our clients that if you're hiring a full time household employee / nanny it may be easiest to pay a flat salary per week. If you find a good nanny / household employee it's best to keep them happy, it's been our experience that if the household employee can rely on a specific amount in their pay check this helps to keep them happy, many people live paycheck-to-paycheck. Also, we find that a good nanny won't mind to stay a little longer some nights and if you let them leave a few hours early every now and then it usually equals out in the end.
The job that household employees are hired to do, we find, it's not typically worth each week going through a "time sheet" and trying to remember specifically when they worked. Also, remember if you set a salary it needs to be more then what the state minimum wage is based on regular and potential overtime wages…with the going rate of household employee / nanny ($9 - $15 per hour) it's highly unlikely that this will occur. Most states do not allow a household employee to be exempt (salary) but as long as any potential overtime rate is covered in the set payment the state shouldn't challenge the amount paid.
If you choice to pay based off a net (take home pay) amount (say $10 per hour) then you the employer will pay the associated taxes (line #2). If you want to set a wage based on amount the employee will receive we can setup your account to increase the amount you pay your employee to offset the taxes that are withheld from their check. Instead of the normal way of reducing the employees check/wages by the withheld taxes (line #1).
Example:
METHOD Hours Rate Gross Taxes* $ Take Home
1) Hours x rate - taxes withheld 40 $10 $400 $75 $325
2) Hours x rate 40 $10 $505 $105 $400
*taxes are estimated and include mandatory withholdings and employee state and federal income taxes withheld.
The approximate, final amount you, the employer would pay, for line #1 would be $400 (wages) + (employers portion of taxes) ~$40 = $440 or $11 per hour.
For line #2 you the employer would pay $400 (wages) + (all employee taxes) $105 + (employers portion of taxes) ~$40 = $545 or $13.60 per hour. This is given as an example, sometimes it's just easier to discuss with a household employee a salary based on ~take home amounts. If you want to be more specifics give us a call.
NOTE: For line #2 the paycheck will include a line labeled "reimbursed employee taxes" instead of details for withheld taxes (because you aren't withholding the taxes).
