Gross V's Net Pay
The first and foremost thing to mention is that NannyPaye does not recommend either net or gross pay as the best way to employ a nanny. Each employment of a nanny is unique which will mean that the taxes each nanny is charged will be different. If as an employer you fix a net wage you may end up paying less that than you expected. In other situations you may end up paying more.
At NannyPaye we recommend that you call us before you agree anything with your nanny then we will give you our opinion of the best option for you based on our predictions of how the taxes will accrue with your particular employee. As an employer if you want a fixed cost, having a gross agreement is your only choice.... it just may not be your lowest cost.
Paying a net salary is the easiest and most popular way of passing a salary to your nanny. A net pay amount is the pay after all taxes have already been deducted, leaving you with a set regular figure to give to your nanny.
For example you may wish to give your nanny £300.00 per week and put the taxes on top. In this situation NannyPaye would produce payslips each payday with that exact £300.00 amount showing. In this situation your employer costs are directly affected by your nannies personal tax situation so you should be particularly aware of anything that can affect her tax code such as other income. Please call NannyPaye for us to guide you through this.
Net Pay Disadvantages
By agreeing a net salary amount you are effectively agreeing to pick up your nanny’s PAYE and NI tax bill. Normally this is a predictable amount of money but it can leave you open to unpredictable changes in your nanny’s tax coding.
Agreeing a gross salary lets you more effectively fix the cost you are prepared to pay for your childcare but it is slightly more time-consuming on your part to administer. If you agree a gross salary you simply pay the nanny her net pay after we have deducted all taxes from the gross figure. These taxes will vary from month to month so we keep you informed of how much net to give your nanny by e-mailing you a copy of her payslip as well as posting it to your nanny. Each payday open the e-payslip and simply pay the net amount we indicate to your nanny. The net amount will vary each payday due to tax fluctuations, it is these fluctuations you have protected yourself against by agreeing gross. Any +/- adjustment in the net pay to your nanny is offset against a+/- adjustment to the tax bill we send you at the end of the quarter thus keeping your costs fixed at gross + Employer NI which is not affect by the employees personal tax position.