Nannies are becoming increasingly common in Australia as parents negotiate the constant juggle between career and raising children.
At last count, there were about 30,000 employed nannies around the country, a testament to the fact that many families see the enormous benefits in having a nanny as opposed to sending their children to daycare, particularly in the early preschool years.
But making sure you pay your nanny correctly is a big responsibility. There are super contributions and insurances to think about, as well as pay loading for public holidays, along with annual holiday and sick leave entitlements.
And because nannies are a valued part of the family, most employers want – and aim – to do the right thing and pay their nannies correctly – but it’s complicated!
What’s more, if you don’t get the details right, you can find yourself in hot water with the ATO.
So, let’s start with some basics:
Employee versus contractor
Firstly, how do you determine whether your nanny is an employee or a contractor?
Only a few years ago, the Fair Work Ombudsman declared that nannies are to be considered employees. ATO guidelines, support the fact that nannies are typically considered employees if they meet the following criteria:
- Is paid for time worked;
- Isn’t responsible for providing the materials or equipment required to do their job;
- Must perform the duties of their position;
- Agrees to provide their personal services; and
- Works hours set by agreement.
So, this means that because nannies are considered employees, then the families they work for – in other words, you – are the employer.
As an employer you have a number of very serious responsibilities towards your employees.
For example, if your nanny works more than 30 hours per week, they are entitled to superannuation. Your mandated contribution as an employer is 9.5%.
What about higher rates of pay for public holidays and working out holiday leave entitlements?
Whether you need to pay public holiday rates depends on what is written in the employment agreement you have with your nanny. And holiday leave entitlements will depend on the number of hours worked.
Nanny wages simplified
Are you feeling overwhelmed? That’s fair enough. If you are not someone who is familiar with the technical ATO jargon as well as the Fair Work Act, it can seem overwhelming.
The good news is that there is a much simpler way to pay your nanny.
The CarePayCo team is a dedicated group of nanny and home help payroll specialists. As such, they are knowledgeable and experienced in all aspects of nanny remuneration, and can set up a streamlined system and pay the nanny for you.
The benefit for you is that the nanny will be paid accurately, and on time, and there will be a full record of the payment. The nanny might need this if he/she wants to apply for a personal loan or a mortgage. It also avoids inconsistencies and miscalculations.
Above all it’s stress free. You can rest assured that all of the appropriate details are being addressed. Once the details are in the CarePayCo system, the fortnightly pay schedule runs from an app. The nanny logs the hours worked, these are signed off by the designated family member / employer and the payment is made, with all other calculations complete.
Whether your nanny works full time or only a few hours per week, the system is invaluable. You can also set up payments through CarePayCo for other household staff too.
Australia’s complicated tax system
The fact of the matter is that Australia has one of the most complicated tax systems in the world, and when you add in all of the other factors employers are responsible for, such as calculating prorated and loaded hourly rates, super, bonuses, withholding tax etc, it really can become quite convoluted and time consuming.
Over the past few years the ATO has also made a commitment to stamping out Australia’s ‘black economy’ which is estimated to cost the economy billions of dollars every year. As such, the ATO has invested heavily in sophisticated data matching capabilities, as well as other technologies, to be able to detect discrepancies more efficiently than ever before. There are also new laws which make paying large cash payments a criminal offence.
Get professional help
While most people aim to do the right thing, mistakes can be costly – in terms of both the time and effort required to sort things out with the ATO.
This can be avoided by choosing professional payroll help.
