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.

The hardest part of paying your nanny legally, and not under the table, is figuring out what needs to be done. That is why full service payroll providers charge $1,000 / year or more to do it for you.  If you are not interested in paying this extra price, the good news is that you can, in fact, do it yourself.

Here is what goes into it.

One time tasks

1. Agree to terms with your nanny.  Consider creating a written Employment Contract, even if you are not in a state which requires one. Also known as a Nanny Contract, it can help clarify expectations and avoid conflicts. It should include things such as hourly and overtime pay rates, pay frequency, taxes withheld (such as Medicare and Social Security), taxes not withheld (such as federal and state income taxes if you choose not to withhold them), daily duties and other expectations,  and required leave notice.
2. Complete an I-9 Form.  Print out Form I-9. Your nanny should fill this out after accepting the job offer but no later than the first day of work. This form indicates documentation you as an employer need to inspect (Drivers license, SS Card, etc) to verify your nanny is legally able to work in the US. You do not need to submit this form but must retain it in your records.
3. Obtain an Employer Identification Number (EIN).  Follow the instructions on the IRS website to register as a Household Employer. The IRS will give you your EIN immediately after verification.
4. Register with Social Security. At least several weeks prior to filing Form W-2 with the IRS in January, register for a Business Services Online account at the Social Security website. As part of registration, the IRS may mail you a password so do not wait until the January 31st W-2 deadline to complete.
5. File a new hire report with your state.  File a New Hire Report with the New Hire Registry for your state.
6. Get Workers’ Compensation Insurance.  Some states require household employers to carry Workers’ Compensation Insurance from a local Insurance Agent. Even if not required in your state, it is still recommended to protect yourself in case your nanny is injured while on the job. Your homeowner’s insurance policy may provide coverage in some scenarios, so this is a good place to start.
7. Other State Specific Requirements.  Depending on your state, you may also be responsible for other state employment taxes, such as State Unemployment Tax.

Each pay period tasks

1. Keep required work records.  The Department of Labor’s Wages and the Fair Labor Standards Act (FLSA), have record keeping requirements which requires you to track hours worked, earnings, deductions, among other information.
2. Calculate Net Pay.  If your nanny will make over $2,700 in 2024, you must withhold Social Security and Medicare taxes (aka FICA) from your nanny’s paycheck, unless your nanny is your spouse, parent, or child under the age of 21. Account for this and any other necessary withholdings.
3. Pay your nanny. Pay the Net Pay amount. Set aside the amount owed by Social Security and Medicare. You will pay both the employee contribution as well as the employer contribution amounts when you file your taxes.

Quarterly tasks

1. (If applicable) Pay State Unemployment Tax. If your state requires State Unemployment Insurance Tax, it is likely due on a quarterly basis.
2. (If applicable) Pay Workers’ Compensation Premium. The provider of Worker’s Compensation Insurance will determine your payment amount and exact due dates, so talk to your local insurance provider for details.
3. (If applicable) Pay Quarterly Estimated Tax. If your employer does not withhold enough from your paycheck and the nanny tax collected is significant enough to warrant a tax underpayment penalty, you can pay the Medicare, Social Security and FUTA taxes withheld quarterly using Form 1040ES. See IRS Form P505 for details. An easier option is to request your employer withhold an increased amount from your own paycheck to cover the additional nanny tax amount.
4. (If applicable) Additional State specific filings.  Some states have additional quarterly filing requirements which may have been noted when you registered with your state.

Yearly tasks

1. File W-2 with the IRS and send to your nanny.  File a W-2 for the previous year with the IRS and send a copy to your nanny by January 31st. To generate the W-2, log in to the Social Security website and follow instructions to Report Wages to Social Security, and Create Forms W-2/W-3. Fill in with information from the Paycheck Nanny app. When complete, download the completed W-2 as a pdf. Email this to your nanny for use in her own tax return.
2. File Form Schedule H with your tax return.  When filing your own tax return, include Schedule H with your own income taxes. This will indicate the Medicare, Social Security, FUTA, and Income taxes withheld to pay at this point. Your tax professional can fill out this form from your records or you can fill in the Schedule H details yourself.

The Paycheck Nanny app can help you with these tasks, from generating a pay stub and keeping records, providing data required for tax filings, and more. Find it in the Play Store for Android devices or the App store for your iPhone and iPad.

Do I need to provide my nanny a pay stub?

Each time you pay your nanny, you should give her a pay stub/statement for her records and also retain a copy in your own records.  Sharing the data with your nanny will help avoid confusion on pay day as to how the net pay was determined.

While a pay stub is not legally required in many states, you still need to track much of that information for your own records (see below),  therefore it is highly recommended.  Note that California, the District of Columbia, Massachusetts, and New York have additional laws requiring pay stubs for household employees.

What sort of information should be included on a pay stub?

Below are the Recordkeeping requirements specified by the Department of Labor’s Wages and the Fair Labor Standards Act (FLSA).  The items emphasized below are items to be tracked for each pay period.

1. Employee’s full name and social security number.
2. Address, including zip code.
3. Birth date, if younger than 19.
4. Sex and occupation.
5. Time and day of week when employee’s workweek begins.
6. Hours worked each day.
7. Total hours worked each workweek.
8. Basis on which employee’s wages are paid (e.g., “$9 per hour”, “$440 a week”, “piecework”)
9. Regular hourly pay rate.
10. Total daily or weekly straight-time earnings.
11. Total overtime earnings for the workweek.
12. All additions to or deductions from the employee’s wages.
13. Total wages paid each pay period.
14. Date of payment and the pay period covered by the payment

So how do I go about this using the Paycheck Nanny app?

Watch the minute long video to see how to track time and generate a pay statement from the Paycheck Nanny app.

A pay statement will be created for you in .pdf format.  You can then email the .pdf directly to your nanny and also save it to Google Drive for your own records.

Like what you see and want a free trial?  Download Paycheck Nanny from the Google Play Store.

Also available with a iOS styled user interface in the App Store for your iPhone or iPad.