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!