Author: blog@paychecknanny.com

When you have school-aged children and the dog days of summer are winding down, back to school season also brings a new routine.  This may mean a babysitter or nanny for before or after school care, or both, during the school year.

If you are a household employer and pay $2,700 or more in 2024 to a nanny or babysitter in a calendar year, then you are responsible for FICA and Unemployment Insurance taxes.

Here is a quick calculator to help determine if you will owe these taxes.  Notice the $2,700 minimum is per calendar year and not school year.  So if you only use your nanny for the fall, you may not have to worry about these taxes. But if you also paid your babysitter earlier this year, this may put you over the lower threshold.

Don’t let taxes get you in the doghouse!

Download our handy app from the Google Play store for Android devices or the App Store for iOS devices to automatically calculate taxes and withholdings, track time, create & email pay statements and guide you through your tax responsibilities.

When your kids are out of school for the summer, getting a nanny can be a convenient option. There is no stress of getting kids out the door in the morning or dealing with drop-off or pick-ups. And if you are lucky, your nanny may even be able help out with errands or get the kids involved to help with dinner prep.

There are also many college students looking for summertime employment, so it is often a win-win arrangement.

If you have multiple children, a nanny could even end up being cheaper than a day care center or camps.

Finding a nanny can be a challenge, however, especially if you are new to an area. Some great tips on where to find a babysitter and what to look for are found in this guide How Do I Find (and Keep) a Great Babysitter in My New Town?

How much should I pay a Summer Nanny?

The hourly rate for a nanny in the US is typically between $14 and $20 per hour. And some areas can average even higher – I’m looking at you, California.  The factors that most affect the actual rate are:

1.  Location.  The going rate in an area will have the biggest influence on pay rate.  To get an idea of going rates in your area, see here.
2. Number of children.  The more children will generally yield a higher pay rate.
3. Prior experience.  Nannies with previous nanny experience will command a higher rate than a nanny with no prior experience.

Also don’t forget about overtime.  Labor laws require that you pay at least 1.5 times regular pay rate for any time beyond 40 hours a week.  Paying your babysitter hourly rather than salary will help ensure your babysitter is being properly compensated for for working overtime.

Total Cost of a Nanny

If you are weighing your options as to whether to get a nanny for the summer or enroll your children in a day care or summer camp, comparing the total cost can be useful.  The total cost of a nanny is more than just the hourly rate, however.  Don’t forget to factor in food, activities, taxes and other overhead when comparing costs.

For example, say you were paying $15/hr for 30 hours a week for 10 weeks.  You could do the simple math to estimate $4,500.  However, the other hidden costs in the example below add $1,300 on top of that.

Try entering in the cost and hours for your situation.  How does the total cost compare to your other summertime options?

Wait, do I really need to pay Taxes for my Summer Nanny?

Most likely.  It actually depends on how much you will pay your nanny over the entirety of the year.  If you pay more than $2,400 gross during the year to your nanny, it is considered tax evasion if you do not pay the appropriate ‘nanny tax’.

The good news is that some of this cost can be offset by tax breaks.  Your employer may provide a Flexible Spending Account for dependent care which allows you allocate pre-taxed dollars to pay for child care.  Or, you may be eligible for the Child and Dependent Care Tax Credit.  Those tax breaks could be used in the other situations like a day care center or camps.  One case it could not be used in, however, is if you pay your nanny under the table.

Or download Paycheck Nanny from the Google Play store for Android devices or the App Store for iOS devices to automatically calculate taxes and withholdings, track time, create & email pay statements and guide you through your tax responsibilities.

Hourly or Salary – Which is better?

The short answer is hourly.  Note that you can set the the hourly pay rate so it still works like a salary, but we will get to that in a bit.

Why pay hourly?

1. The legal aspect: Paying hourly is critical to properly calculating overtime pay.  By federal law (Fair Labor Standards Act), your nanny must be paid overtime, at a rate of at least 1.5 times her regular rate, for any hours worked over 40 in a 7 day work week.  One exception is for live-in nannies – although some states do have additional laws making overtime pay required for live-in nannies as well.
2. The nanny relationship aspect: If you agree with your nanny to a certain fixed weekly rate, this usually assumes some certain number of hours worked per week.  But what happens when you need your nanny for extra hours some weeks?  Many salaried nannies report that they frequently end up working more than the originally planned hours, and then feel taken advantage of when they still get the same fixed weekly rate.

If you don’t consider these scenarios up-front, it can lead to some messy situations.

Guaranteed pay option

One optional variation is to pay hourly but at the same time guarantee your nanny that she will be paid for a certain number of hours per week, regardless of whether she is scheduled for the full number of hours.  The overtime rate of 1.5 times the regular rate would still apply for time over 40 hours.

This perk is very appealing to potential nannies, so can help you to get a higher quality candidate.

How to calculate hourly pay from salary

If you do want to think in terms of weekly fixed salary, you can do some calculations to convert this to an hourly rate, and still keep yourself legal from an overtime perspective.

Plug in the hours and weekly salary in the calculator below to figure out the effective pay rate and overtime rate for your situation.

As an example, say you and your nanny agree to a gross salary of $750 for a 55 hour work week. The standard wage for the first 40 hours would be $12 per hour and the remaining 15 hours would be at $18 (1.5 x $12) – this would give a total weekly salary of $750.

If using the Paycheck Nanny App for Android, you would set your nanny’s hourly rate to $12 and then use the Auto-Fill capability to populate her paycheck for 55 hours every week.  In the Paycheck Nanny App for iOS, just add standard hours and click on all working days.

This mimics salary and automatically calculates the overtime for you – keeping you legal.