Compensation & Taxes as a Nanny
Everything you need to know!
How comfortable are you about talking about pay?
If you are a Nanny or Family Assistant you want to put your best foot forward when you present yourself to a future employer. From having a stellar resume to gathering great letters of recommendation when we help nannies prepare for the interview process but a lot of times they will often stumble when it comes to talking about pay.
Talking about compensation and understanding taxes is a crucial step to your development as a professional nanny. Your pay-rate should reflect your experience, educational level, skill set as well as value you can provide a potential employer and is one of the most important conversations you can have with a future employer.
Talk in terms of Gross wages
We aren’t talking about “chump change” this is a professional position and you are a professional so make sure to present yourself as one! If you are asking for benefits such as guaranteed hours, paid time off and healthcare benefits align yourself with that standard. Asking for cash is not only illegal but it also shortchanges you on having all the benefits of a professional position. Your employer likely pays their taxes so talk professional to professional by letting the family know your gross rate range. You can use GTM’s Nanny Tax Calculator to do the math.
All in-home professionals whether you are a Nanny, Family Assistant, Household Manager, Chief of Staff, Chef or Housecleaner you should be a W2 employee.
The benefits and protections taxes proved:
A traceable employment history. This may not seem like a big deal, but there are several life situations where you’ll need to provide payroll documentation. Some examples are applying for a car loan, a mortgage, a student loan, a credit card, an apartment lease, health insurance or auto insurance. If your employment is not documented, it’s as if you don’t work or have income, which makes it difficult to be approved for any of these items.
Unemployment insurance benefits. When paid legally, you are entitled to receive approximately 50% of your salary for up to six months if you lose your job due to no fault of your own. This benefit is free to you as your employer pays taxes toward the cost of the program.
Social Security & Medicare credits. When you retire, you’ll receive money for living and medical expenses.
Healthcare subsidies. As a requirement of the Affordable Care Act, you must have a health insurance policy. If you purchase an individual policy on the health insurance marketplace and are paid legally, you could qualify for a subsidy to lower the cost of your premiums. See how much you could save by using the Kaiser Family Foundation’s subsidy calculator.
Overtime. If you are working over an 8-hour day you are eligible for overtime pay at time and a half.
Understanding Net Vs. Gross wages
Because everyone’s taxes are different depending on where you live, how much you make, and other factors, jobs have to be posted in terms of gross wages (before taxes) instead of net pay (after taxes). However, most people need to know how much they can expect to put into their bank account each pay period. To make things easier on you, work backwards using a paycheck calculator to convert net pay into gross wages. Then you’ll know what rate of pay to ask for when you apply for different caregiving positions.
Discussing Compensation Confidently
Being confident and comfortable speaking about compensation is essential when negotiating pay so here are a few tips to help you discuss the green stuff so be prepared. Understand and track your monthly expenses, research market rate and practice answering the question, what do you charge?
Nanny Sara, “I charge between $35-40 gross per hour depending on the individual family's needs. It depends on the number of children in my care as well as if a client/ family is asking for additional household help outside the typical child-related duties.”
Always offer a range and stay consistent to that range. Increasing your rate range after meeting a family may be a red flag so give yourself some wiggle room to negotiate. Know your minimum you are able to accept an offer and from there you can include a buffer depending the details of the position. That buffer should be based on added value like family assistant duties or added talents such as your amazing cooking skills, tutoring, teaching a second language or your musical genius. Knowing what you are worth and being able to articulate that will boost your ability to land the job of your dreams!
Determining worth
Lastly remember that not everything is quantifyable when determining your worth. What you bring to the table as far as experience, education or hard skills isn’t everything. For instance employers looking for a highly skilled professional to partner with are also looking for personality fit. Does this person fit with the families values, work ethic, personalites!?
They may describe this person as having a calm or positive disposition, the ability to be flexible and adaptable to change, consistent, capable and proactive, a problem solver, having emotional and intuitive intellegnece and clear and transparent communication. You are spending a lot of time with their children and the parents so it’s very important that the person taking care of their children align with their family values.
Be realistic throughout the negotiating process
Having an official or unofficial placeholder offer is exciting so don’t blow it by making a mistake that can cost you the position. Asking for more money or benefits after a verbal agreement can sometimes sour a new relationship. That is why you do your homework beforehand mapping out a budget and realistic range based on all the information you have at your fingertips.
If you really want the position and they are not offering healthcare or the rate you wanted you can ask that they do a 6 month assessment on your performance with the opportunity to increase your rate or add a healthcare stipend. At the end of the day although this is a transaction it is also a very human one and should be communicated with respect and care from both sides.