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People who have nannies are just like any other employer, with obligations accordingly ...
Nanny Payroll AdviceEmploying a nanny brings with it the same obligations as any business taking on an employee. By law, therefore, an employer must account for Income Tax and National Insurance Contributions on the salary paid to a nanny or mothers help, whether they are full time, part time or temporary. Under HMRC rules every employer who pays an employee £109 per week or more has to calculate PAYE and submit this online at the same time as the employee is paid It is called Real Time Information (RTI). So for example, if your nanny is paid every Friday, you will have to submit your pay and details to HMRC by Friday of every week. Failure to do so will result in you being fined by HMRC.
A nanny's salary is normally quoted net of deductions (i.e. the amount she wishes to receive in her hand), and it is therefore the employers responsibility to pay over to PAYE, Employees National Insurance and Employers National Insurance to HM Revenue & Customs in addition to the net salary paid to the nanny. Expenses paid in benefits provided on behalf of a nanny in addition to her salary may be liable to a separate charge to Tax and National Insurance.
The Government announced after the 2012 budget that more money was to be provided for HMRC investigations targeted at households who employ a nanny as part of a crackdown on "evasion, avoidance and fraud".
Remember that avoiding the taxman is illegal. If HMRC catches up with an employer who has failed to declare their nanny for tax purposes, has not declared all the salary, or has tried to maintain that she is self-employed, then they will be liable to pay the correct PAYE and National Insurance Contributions and interest and penalties up to 100% of the total nanny tax liability. There is no legal right to seek repayment from the nanny. Certain employers, who as professionals (eg solicitors, accountants), should be aware of these rules, could be proseuted in addition to the above.
Advice about holiday pay for nanniesAll full time employees have been entitled to a minimum of 28 days annual holiday (including bank holidays) in accordance with the provisions of the working time directive (see below). Part time employees are entitled to the same holiday entitlement pro rata.
Advice about statutory sick pay for nanniesAn employer is normally obliged to pay Statutory Sick Pay (SSP) to an employee who is sick for four or more calendar days in a row, regardless of the length of time the nanny has worked for that employer. Rates are stipulated by legislation, although any additional sick payment can be made at the discretion of the employer.
SSP is a complicated subject and each individual case needs to be looked at specifically to determine the amount of sick pay that is required to be paid to the nanny and any amount recoverable from HMRC.
Advice about statutory maternity pay for nanniesStatutory Maternity Pay (SMP) is payable to a nanny who is employed for a period of twenty-six weeks continuing into the fifteenth week before the baby is due. SMP is payable for up to 39 weeks), starting anytime from the 11th week before the baby is due. The amounts payable are 90% of the nanny’s average weekly earnings for the first six weeks and at a rate stipulated by legislation for the remaining weeks. (2012/13 SMP is at the rate of £136.78 per week.)
SMP is fully recoverable by a small employer together with an additional 3% and is recoverable by deducting the amounts paid from future Tax and National Insurance Contributions or by obtaining the SMP from HMRC in advance (which Taxing Nannies can organize on your behalf).
Advice about student loan deductions for nanniesThe government requires employers to collect repayments of student loans through the PAYE system. Where a nanny is required to make such repayments, these will be deducted from her salary in the same way as PAYE and National Insurance and paid over HMRC. Employers who pay their nanny a net salary need to make clear as to whether the net salary will be before or after making a student loan deduction. Failure by employers to administer the deductions properly may lead to a fine of up to £3,000.
National Minimum WageFrom 1st October 2013, employers will be required to pay employees aged 21 or over a minimum gross wage of £6.31 per hour (currently £6.19 per hour). Employees between 18 and 20 will need to earn a minimum of £5.03 per housr (currently £4.98 per hour) and 16-17 year-olds £3.72 per hour (currently £3.68.)
Working Time DirectiveThe working time directive lays down the rules relating to the number of hours an employee may work, holiday requirements and breaks to be taken during work hours.
The above information is correct at April 2013 and may be subject to alteration following changes in legislation.