You’ve assessed your family’s needs and decided a nanny might be your best childcare choice.
Now it’s time to review your budget so you can take the next steps.
The next thing to do is find out how much a nanny costs in your area.
The average cost of a nanny depends on many factors.
If your nanny is an employee, you can start to estimate the cost of a nanny by looking at the minimum wage in your state. You may also want to consider childcare workers' average hourly rate and annual wages in the U.S.
Average Costs and Pay Rates for Nannies
When calculating nanny costs, you will need to consider such things as where you live, desired experience and qualifications, the age and number of children to be cared for, and any other specific job expectations.
Location
The U.S. Bureau of Labor and Statistics (BLS) reports that the average pay for a full-time nanny is $15.42 an hour or about $32,070 a year. Although average nanny pay varies by area and within each state, nanny costs generally run higher in urban areas compared to rural ones.
Hourly Rates
Nationally, the average full-time nanny cost ranges between an hourly rate of $10.79 (approximately $22,450/year) up to $20.80 per hour (approximately $43,270/year), according to the BLS.
Your rate could be more based on things like an increase in demand for nannies or a higher cost of living in your area.
Factors Affecting Nanny Costs
There’s more than location and national pay averages that go into figuring out how much should you pay a nanny.
Your nanny pay rate may also depend on whether you’re looking for a part- or full-time nanny or a live-in nanny.
Paying a competitive wage will show prospective nannies that you’re serious about taking care of the person who takes care of your family.
Experience and Qualifications
You can expect to pay more for a nanny with a lot of experience. Those with specific training, skills or certifications can also command a higher-than-average rate.
Number of Children
More children to care for also typically means a higher pay rate. That’s a conversation to have with your prospective nanny.
A general rule is to add at least $1 per hour per additional child to the nanny’s base hourly rate. But it could be more if the second child is an infant or needs extra attention.
Type of Employment
When looking for a nanny, determine how many hours per week you will need someone part-time or full-time. Consider if you will need the nanny to spend any nights with your child or if you need a live-in nanny. The live-in nanny cost could be more than hiring a full-time nanny.
All those items will factor into the hourly rate or salary negotiations.
Extra Costs and Considerations
Your nanny’s pay rate is just one part of the overall compensation you will need to keep in mind when you budget.
When you hire a nanny, the IRS considers you a household employer.
This means you need to be aware of multiple employment laws and regulations at the federal, state and local levels. These laws may impact the total cost of hiring a nanny.
You will also need to budget for payroll taxes, like Social Security, and any benefits you are required to or want to provide.
Overtime Pay
Many household employees are non-exempt under applicable wage and hour laws, which means they are eligible to receive overtime pay for more than 40 hours per workweek.
Overtime must be paid at a rate of at least one and one-half times the employee's regular rate of pay, according to the Federal Labor Standards Act. State law may provide for additional protections such as daily overtime.
Nanny Tax
Household employers must withhold and pay payroll taxes for each paycheck given to a household employee. This is often referred to as the nanny tax.
Required taxes include Social Security and Medicare taxes (FICA). You may also need to withhold and pay federal and state income taxes as well as local taxes, depending on where you live. You can use our free paycheck calculator to estimate the cost of your nanny payroll.
Paying your nanny correctly helps you avoid fines and penalties. It also supports your nanny in building their employment history. And it helps to ensure they will receive Social Security and Medicare benefits when they retire.
Bottom line, running household payroll can be complicated. You don’t have to do it alone. Check our Complete Guide to the Nanny Tax and Payroll for tips to help you get started.
If you want more help, check into a payroll service like SurePayroll® By Paychex.
Learn how SurePayroll can help you simplify nanny payroll and taxes.
Benefits and Perks
As an employer, you may be required or choose to offer benefits to the person who helps you take care of your family. Benefits like paid time off, sick time and health insurance can help you show your nanny how much you value their role in your family. It also helps to create a competitive compensation package.
Cost-Saving Strategies
Childcare is a pricy proposition in the U.S.
The cost of childcare consumes a sizable portion of family income. The U.S. Department of Labor’s National Database of Childcare Prices shows that the cost of childcare represents between 8% and 19.3% of median family income per child.
Tax Credits
Whether you get a tax credit or take advantage of a flexible spending account (FSA), you might be eligible for significant tax breaks when you employ a nanny.
Many families can reduce their tax liability between $250 and $1,200 per year with a dependent care flexible spending account and child and dependent care credit.
SurePayroll Simplifies Nanny Payroll and Tax Management
Finding the right nanny for your family can be hard. Handling nanny payroll and taxes should be easy.
Gain peace of mind. Let SurePayroll help you simplify the complexities of payroll so you can focus on taking care of the people who take care of your family.
