### Author Topic: Actual cost of paying a nanny?  (Read 4270 times)

#### webguy

• Bristles
• Posts: 302
##### Actual cost of paying a nanny?
« on: August 08, 2017, 10:00:06 AM »
Hey guys,

My wife and I made the mistake decision to have two children close in age (4 months and 21 months). We don't have family nearby and so we've been using a nanny during the summer to help us part time during the mornings just to allow us to get some stuff/work done (I work from home). She is in highschool and is going back to school soon so we're trying to find a replacement. We've been paying her \$15/hour cash, as she is under 18 and it's only 16 hours/week.

We've found a suitable replacement but she is a "professional" - meaning she does this as her job and has childhood education qualifications etc. For this reason, and to be in compliance with tax rules, we'll need to pay her as a household employee. This complicates things, and makes it difficult to figure out what the actual true cost per hour to us will be. She would like to be paid \$18/hour as an employee. We don't really want the cost to us to be more than we're paying our current nanny (\$15/hour). This is where I'm at so far on the calculation:

Current nanny (working 16 hours week - 4 mornings):
\$15/hour cash

New nanny (would be working 20 hours a week - 5 mornings):
\$18/hour
\$18 * 20hrs * 52weeks = \$18,720
*7.65% (Social security/medicare) = \$20,152
+\$420 (6% unemployment tax on first \$7,000) = \$20,572
-20%/\$1,200 Child and Dependent Care Tax Credit = \$19,372
\$19,372/1,040hrs = \$18.63/hour

So my questions are:

1) Is this correct?

2) Am I missing anything? What about things like PTO or sick pay? Our current nanny doesn't get paid if she takes a day off, but as the new one would be an "employee" would we have to negotiate things like PTO and sick days, etc?

3) Am I correct in assuming we qualify for the Child and Dependent Care Tax Credit? I run my own business and my wife and I are both employed through it so we both have earned income. Our adjusted gross income is more than \$43,000/year.

4) Is \$18/hour reasonable for a qualified nanny. We live in the west suburbs of Minnesota, USA. She's around 23-25 years old (that's a guess), comes with great references, and has relevant qualifications. She was getting paid \$17/hour by her current family but she just graduated with her childhood education degree and so now wants \$18. She was working full time for that family, but their children are going to be going to school in the morning time but they want to keep her for the afternoons. She would be working for us in the mornings and the other family in the afternoon. She would be looking after our 4 month old and 21 month old 3 mornings a week, and our 21 month old and a 2 year old (family friend) for 2 mornings a week (while my wife looks after the 4 month old). We kind of feel like we'd be making her life easier as by nannying for us in the mornings as it means she wouldn't need to leave her current family and find a full time position with another family. We only live about a mile from the other family she nannies for.

Any thoughts, opinions, or other information would be greatly appreciated!

#### historienne

• Bristles
• Posts: 376
##### Re: Actual cost of paying a nanny?
« Reply #1 on: August 08, 2017, 10:14:51 AM »
Hey guys,

My wife and I made the mistake decision to have two children close in age (4 months and 21 months). We don't have family nearby and so we've been using a nanny during the summer to help us part time during the mornings just to allow us to get some stuff/work done (I work from home). She is in highschool and is going back to school soon so we're trying to find a replacement. We've been paying her \$15/hour cash, as she is under 18 and it's only 16 hours/week.

We've found a suitable replacement but she is a "professional" - meaning she does this as her job and has childhood education qualifications etc. For this reason, and to be in compliance with tax rules, we'll need to pay her as a household employee. This complicates things, and makes it difficult to figure out what the actual true cost per hour to us will be. She would like to be paid \$18/hour as an employee. We don't really want the cost to us to be more than we're paying our current nanny (\$15/hour). This is where I'm at so far on the calculation:

Current nanny (working 16 hours week - 4 mornings):
\$15/hour cash

New nanny (would be working 20 hours a week - 5 mornings):
\$18/hour
\$18 * 20hrs * 52weeks = \$18,720
*7.65% (Social security/medicare) = \$20,152
+\$420 (6% unemployment tax on first \$7,000) = \$20,572
-20%/\$1,200 Child and Dependent Care Tax Credit = \$19,372
\$19,372/1,040hrs = \$18.63/hour

So my questions are:

1) Is this correct?

2) Am I missing anything? What about things like PTO or sick pay? Our current nanny doesn't get paid if she takes a day off, but as the new one would be an "employee" would we have to negotiate things like PTO and sick days, etc?

3) Am I correct in assuming we qualify for the Child and Dependent Care Tax Credit? I run my own business and my wife and I are both employed through it so we both have earned income. Our adjusted gross income is more than \$43,000/year.

4) Is \$18/hour reasonable for a qualified nanny. We live in the west suburbs of Minnesota, USA. She's around 23-25 years old (that's a guess), comes with great references, and has relevant qualifications. She was getting paid \$17/hour by her current family but she just graduated with her childhood education degree and so now wants \$18. She was working full time for that family, but their children are going to be going to school in the morning time but they want to keep her for the afternoons. She would be working for us in the mornings and the other family in the afternoon. She would be looking after our 4 month old and 21 month old 3 mornings a week, and our 21 month old and a 2 year old (family friend) for 2 mornings a week (while my wife looks after the 4 month old). We kind of feel like we'd be making her life easier as by nannying for us in the mornings as it means she wouldn't need to leave her current family and find a full time position with another family. We only live about a mile from the other family she nannies for.

Any thoughts, opinions, or other information would be greatly appreciated!

If you have access to a dependent care FSA, also run the numbers on using that.

Standard employment contracts for nannies vary a lot regionally, but in our area, 1-2 weeks of PTO plus paid holidays is pretty typical.

Confirm with her whether she wants \$18 as gross or net pay.  Enough nannies work under the table (which is illegal, don't do it) that people sometimes quote a net figure, and will expect you to "gross up" her pay so that \$18 is her take-home pay.  That was common in the Bay Area when we lived there.

\$18 would be about market for a nanny with relevant education in my area, for two kids.  It would have been above market in my previous city, and well below market in the Bay Area.  I suspect it's about right for Minneapolis, especially since you were paying a high schooler \$15, but you should get local info to confirm.

Forget the idea that you are making her life easier.  Maybe you are, but then again, she'd be doing less driving every day if she just found a new family to work for full time.  In either case, she's already factored that into her thoughts about whether she's interested in working for you, and how much money she wants. The relevant question is whether there is a pay rate that she is willing to work for and you are willing to pay.

#### Laura33

• Magnum Stache
• Posts: 3505
• Location: Mid-Atlantic
##### Re: Actual cost of paying a nanny?
« Reply #2 on: August 08, 2017, 10:47:34 AM »
Yep, sounds about right.  Also including the sick days/vacations.  All of which is why we ended up using a child care center instead.

#### charis

• Magnum Stache
• Posts: 3163
##### Re: Actual cost of paying a nanny?
« Reply #3 on: August 08, 2017, 10:54:17 AM »
\$1 more an hour for someone who just got their degree sounds more than reasonable.  If you want to pay someone less, you'll probably need to look for a college student or other non-professional.  I am surprised that a high schooler was getting \$15/hr.  That would be very high in my northeast neck of the woods.

#### lbmustache

• Pencil Stache
• Posts: 926
##### Re: Actual cost of paying a nanny?
« Reply #4 on: August 08, 2017, 11:10:45 AM »
You will have to look into your state's laws regarding sick leave/PTO. It might be that it is not mandated if the employee is working <x hours a week.

I know in California the law is a bit more strict, it's something like you get 1 hour of paid sick leave for every 30 hours worked, but employers can limit you to 3 days per year only (24 hours).

#### Goldielocks

• Walrus Stache
• Posts: 7062
• Location: BC
##### Re: Actual cost of paying a nanny?
« Reply #5 on: August 08, 2017, 11:28:00 AM »
This does seem reasonable.

I had far, far fewer sick days with a nanny than any other childcare, but that may have been a fluke.  Two employers is a lot more work than one employer, too.
Live out, English-speaking Nannies with drivers licenses and EC education make the most in any region.

What would you expect to make, if the roles were reversed?

#### webguy

• Bristles
• Posts: 302
##### Re: Actual cost of paying a nanny?
« Reply #6 on: August 08, 2017, 11:44:54 AM »
\$1 more an hour for someone who just got their degree sounds more than reasonable.  If you want to pay someone less, you'll probably need to look for a college student or other non-professional.  I am surprised that a high schooler was getting \$15/hr.  That would be very high in my northeast neck of the woods.

The reason the highschooler is earning \$15/hour is that we originally advertised it in a nanny Facebook group as \$15/hour thinking it would be for a professional nanny. She's actual the daughter of a friend of ours and because we were comfortable with her we decided to hire her. We felt we should keep the rate at \$15 as that's what we advertised it at and it was only for the summer. The going rate for a highschooler is probably closer to \$10/hour, so she definitely got a good deal!

#### webguy

• Bristles
• Posts: 302
##### Re: Actual cost of paying a nanny?
« Reply #7 on: August 08, 2017, 11:49:48 AM »
This does seem reasonable.

I had far, far fewer sick days with a nanny than any other childcare, but that may have been a fluke.  Two employers is a lot more work than one employer, too.
Live out, English-speaking Nannies with drivers licenses and EC education make the most in any region.

What would you expect to make, if the roles were reversed?

Personally, I don't think \$18/hour is a lot for a qualified nanny, but I don't want to pay far above the going rate if it's unreasonable which is why I wanted to check. I want the nanny to feel like she's being compensated fairly and isn't disgruntled because she isn't earning what she believes she's worth, but I also want to be conscious of the cost. We were originally paying a daycare \$9/hour, we then got a nanny and the cost went to \$15/hour, now the cost is going up again to \$18.63/hour (maybe more when factoring in PTO etc), so it feels like a lot when thinking about it that way.

#### Tetsuya Hondo

• Pencil Stache
• Posts: 503
• Location: 1960's Tokyo on the Bad Side of Town
##### Re: Actual cost of paying a nanny?
« Reply #8 on: August 08, 2017, 11:52:05 AM »
Does this include any state taxes or unemployment? I couldn't tell if it's lumped in with Federal.

If you're over \$43k an FSA might be more beneficial to you than the tax credit. I'm not sure what the mechanics of that are, but we did it through my wife's organization. For us, we got more benefit from this than the tax credit given our income. http://www.kiplinger.com/article/business/T020-C001-S001-flexible-spending-account-vs-dependent-care-credit.html

Some expect paid days off, sick days, and bonuses.

#### Goldielocks

• Walrus Stache
• Posts: 7062
• Location: BC
##### Re: Actual cost of paying a nanny?
« Reply #9 on: August 08, 2017, 12:44:50 PM »
This does seem reasonable.

I had far, far fewer sick days with a nanny than any other childcare, but that may have been a fluke.  Two employers is a lot more work than one employer, too.
Live out, English-speaking Nannies with drivers licenses and EC education make the most in any region.

What would you expect to make, if the roles were reversed?

Personally, I don't think \$18/hour is a lot for a qualified nanny, but I don't want to pay far above the going rate if it's unreasonable which is why I wanted to check. I want the nanny to feel like she's being compensated fairly and isn't disgruntled because she isn't earning what she believes she's worth, but I also want to be conscious of the cost. We were originally paying a daycare \$9/hour, we then got a nanny and the cost went to \$15/hour, now the cost is going up again to \$18.63/hour (maybe more when factoring in PTO etc), so it feels like a lot when thinking about it that way.

Wasn't the \$9 per hour just for one kid?
Here, a live in nanny works out to the same price as two kids in full time child care, live out nannies are more.  That is one way you could see if it was reasonable locally..

#### FernFree

• Posts: 75
• Age: 55
• Location: Austin, TX
• On my way!
##### Re: Actual cost of paying a nanny?
« Reply #10 on: August 08, 2017, 02:25:12 PM »
I have a friend who has had nannies for several years for her two boys.  I think she found them on care.com.  That site is probably worth a look.  It says they will also take care of all of the tax issues for you.