Managing a Nanny

There are some relatively simple elements of managing a nanny – like formalizing a contract, setting up payroll, and establishing household rules – and then there are the more complex things like maintaining open lines of communication and retaining the hire you worked so hard to make.

Getting the simple stuff right makes the complicated stuff infinitely easier.  Having an employment contract in place may seem like a formality, but it’s the best way to get (and keep) everyone on the same page, while also protecting you and your family.  The job description you crafted can be the foundation for this contract: you’re outlining her duties and responsibilities, setting house rules (i.e. no phone or smartphone while on duty), while also putting into writing compensation (including base rate and overtime rate) and time off.  This is also the place to incorporate any confidentiality provisions to protect your privacy, not just related to personal information about you but also the children; many families will specify, for instance, no posting on social media about their family (names, photos, etc.). You can download a sample contract at the bottom of this page.

A contract may be mandatory in your state, under the Domestic Workers Bill of Rights.  A payroll service like MyHomePay can help walk you through the requirements, not just pertaining to the contract but all of the logistical hurdles in hiring childcare:

  • Establish yourself as a household employer at the federal and state level by applying for tax ID numbers
  • File a new hire report with your state, in case there is a child support lien against your employee
  • Put in writing the terms of your employee’s payment, including base pay and overtime rates (this is especially important because there’s no statute of limitations on wage disputes; if you have an employee who later claims you failed to pay overtime, you could be looking at years of additional wages)
  • Ensure you’re withholding the proper amount of state and federal taxes
  • File quarterly with your state and the IRS
  • Pay unemployment tax
  • Sign up for workers’ compensation insurance (legally necessary in 30 states)

While workers’ compensation insurance isn’t a requirement in every state, it can help insulate your family from significant financial damages.  Tom Breedlove, founder of payroll service MyHomePay, told me, “Workers compensation claims are where so much of a family’s exposure lies.”  This covers any medical costs or lost wages resulting from an on-the-job injury, and many families assume they’re protected under the homeowner’s insurance policy.  In most cases, homeowners’ policies apply to guest workers, like painters or electricians – and not household employees like nannies.  In a worst case scenario, if your nanny got in a car accident while driving your child to a play date, you could be held liable for all of her medical bills as well as her lost wages during that recovery time (we’re talking tens of thousands of dollars).

“It’s not expensive,” Tom said, “but it can be a pain to get.”  In some states, you can request a rider to your homeowner’s policy for $200 to $300 a year, but not all insurance companies will write worker’s compensation insurance because of some state regulations.  This leaves some parents hunting for a stand-alone policy or dipping into the state insurance pool, which is often expensive.  His firm has developed a national workers’ compensation platform that can help families who are unable to secure a policy from their current insurance provider.