Should I agree a gross or net wage with my nanny
When it comes to hiring a nanny, one of the key considerations for both the employer and the employee is how to agree on the wage. One of the primary questions that arises is whether to agree on a gross or net wage.
A gross wage is the amount of money paid to the employee before any deductions, such as Income Tax, National Insurance, Student Loans or pension contributions, are made. A net wage, on the other hand, is the amount of money paid to the employee after these deductions have been made.
There are pros and cons to each approach, and the decision ultimately depends on the preferences of the Employer and the Employee.
Advantages of agreeing on a gross wage:
Clarity: Agreeing on a gross wage ensures that both parties understand the total amount of money that the employee is being paid (subject to deductions).
Simplicity: Agreeing on a gross wage can simplify the process for the Employer and Employee.
Fairness: Agreeing a gross wage means that any tax rebates due to the Employee will go to the Employee and any tax underpayments of the Employee will remain with the Employee. Additionally if the tax rates and thresholds change then the employee receives the benefits of these on a gross wage agreement.
Predictability: Agreeing on a gross wage allows both the Employer and the nanny to anticipate the total cost of employing the nanny. This approach can be especially useful for employers who want to set a clear budget for their household expenses.
Advantages of agreeing on a net wage:
Autonomy: Agreeing on a net wage can allow an Employer to set up a standing order for the nannies pay each month, giving them one less thing for them to remember to do.
Predictability: Agreeing on a net wage gives the Employee the same amount of pay each pay period, meaning that they do not suffer from fluctuations affecting their tax.
In conclusion, whether an Employer should agree on a gross or net wage with their nanny ultimately depends on their preferences and needs. While agreeing a gross wage can simplify the process and provide predictability of Employers costs, agreeing on a net wage can provide autonomy and predictability of the Employees take home pay amount. It is important for both parties to discuss their preferences and come to an agreement that works for everyone involved.