Congrats! You’ve found the perfect nanny for your family, and their start date is coming up quick. But are you as prepared as you think you are? Hiring a nanny contains its fair share of paperwork, which should be completed before your employee’s first day of work. That way you can focus on helping your nanny’s first days on the job go smoothly.
Payroll, Taxes, and Insurance
It’s to your benefit to comply with domestic employment laws, pay your nanny legally, withhold and pay the proper taxes, and obtain required insurance coverage. You can easily get caught not paying nanny taxes, which could result in tens of thousands of dollars in fines, penalties, and back taxes. Your nanny will also enjoy a number of benefits of being paid on the books for the relatively small amount taken out of their pay in taxes.
You’ll need to:
– Pay your nanny at least minimum wage, which is the highest of the federal, state or local rates
– Pay your nanny at least time and half for hours worked over 40 in a week (some exceptions may apply for live-in nannies)
– Withhold from employee’s pay Social Security and Medicare taxes
– Pay your share of Social Security and Medicare taxes
– Withhold federal income taxes if agreed upon with your employee
– Obtain workers’ compensation insurance if a policy is required in your state. Even if it’s not required, you may want to consider voluntary coverage.
– Understand your state’s Domestic Workers Bill of Rights if applicable
That’s just the start. In fact, the IRS estimates that it will take a family 60 hours a year to comply with all federal and state tax, wage, and labor laws when they hire an employee to work in their home.
That’s why Sittercity has partnered with GTM Payroll Services to provide comprehensive payroll and tax services to make pay day and tax time as easy as possible.
If you don’t have one already, obtain an employer identification number (EIN). This gives you a specific tax number, like a Social Security number for employees, for dealing with the IRS and other agencies. You may also need to obtain a new hire report from your state.
As an employer, you are responsible for verifying the identity and work authorization or eligibility of those you hire. Provide your employee with Form I-9. Your employee will present documents that prove their identity and authorization to work in the U.S. You’ll examine the documents and determine whether they reasonably appear to be genuine. You do not need to file this form. However, you must keep Form I-9 for three years after the date of hire or for one year after employment is terminated, whichever is later.
If you and your employee decide to withhold income taxes from their pay, they should complete Form W-4. You’ll use this form to determine how much income tax to withhold from each paycheck.
Create a work agreement or contract that’s in place before the first day of work. It’s an essential document that should be put together with input from your employee. A work agreement will help establish a successful working relationship, prevent problems from occurring, and set a tone of open and clear communications. For you, it outlines your employee’s commitments in a professional manner and creates seriousness about the position. For your employee, it protects their compensation, benefits, and severance pay, as well as job requirements.
A work agreement is legally enforceable and should include:
- Hourly rate of pay
- Overtime rate of pay
- Schedule of work hours
- Start date
- Term of employment
- Paid time off including sick days and vacation time
- Holiday pay
- Benefits (health insurance, mileage compensation, etc.)
- Job responsibilities
- Employee expectations
- Household procedures
- Instructions for how your children should be cared for
- Performance review and potential bonuses
- Procedures if nanny can’t make it in to work due to inclement weather or illness
- Termination of agreement
- Confidentiality clause
Both you and your employee should sign and date two copies of the agreement, one for your employee to keep and the other for their personnel file.
In tandem with the work agreement, an employee handbook reinforces your household’s employment and personnel policies. This is a document you create and keep a copy with the employee’s personnel file. Your employee should sign an acknowledgement that they received it.
With proper planning, you and your employee should be able to handle pre-employment paperwork before the first day of work. Doing so establishes professionalism, creates a strong bond with your employee and bodes well for a successful work relationship.
Need a little help managing all the paperwork? GTM is a no-risk, no-hassle way to manage nanny taxes and payroll. And just for Sittercity families, we’re waiving the $95 sign-up fee! Learn more here.