Understanding Legal Pay for Nannies

November 4th, 2021
by A Nanny Match

Understanding Legal Pay for Nannies

Since the covid-19 pandemic began, many families and nannies learned the benefits of legal pay. We are finding that the majority of candidates and families now insist on complying with legal pay. But there is still confusion about the risks and benefits. 

Benefits for Employers: 

       1. Protection from being sued and/or audited.

The benefits for families far outweigh the perceived financial savings of paying “off the books.’ Anytime a worker is paid “under the table,” the employer risks being audited by the IRS or sued by their employee.

A current or former nanny can sue for not being paid legally, even years after they have stopped working for an employer. This has never been more prevalent than since the COVID-19 pandemic began.

When an employee files for unemployment, whether they are eligible or not, they must fill in their recent employers on the application. The former employee may not know or understand how that might affect the former employer. It exposes the employer and they can face fines, penalties, and payment of back taxes with interest.

If a nanny is eligible for paid sick or family leave under the Families First Coronavirus Response Act, they could ask for compensation through their state labor agency, and it would be treated as an unpaid wage claim. 

There are many other labor laws to comply with.

A good payroll service, such as GTM Payroll Services, will alleviate the stress of compliance, and they will send payment to your nanny through direct deposit. They can also provide you with HR support. 

  1. Employers are eligible for tax breaks.

When an employer legally employs someone in your home, they can take advantage of tax breaks. The Dependent Care Assistance Program (DCAP) allows employers to contribute up to $5,000 of pre-tax earnings to a Dependent Care account.  The Child and Dependent Care Tax Credit allows employers to claim up to $3,000 of the unreimbursed qualifying childcare expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals. (2021)

  1. More professional career nannies to choose from.

A Nanny Match is based in NYC, and we mainly work in the Tri-State area and Miami markets. The majority of our career nannies in these markets require legal pay, and they understand the need to show proof of employment. 

They take pride in their work as they are preparing for a long-term role with the family.

More information about our matchmaking process can be found here. 

Benefits for Nannies:

  1. Domestic Labor Laws protect workers.

When you comply with legal pay, Domestic workers’ bills of rights and other employee protections apply to you. For a complete list of Domestic Labor Laws currently available in the United States, please click here. 

  1. Unemployment Benefits

The need for unemployment has been more apparent until the pandemic. If you are paid illegally, “off the books,” you are not eligible to receive unemployment benefits. Not only does unemployment pertain to the pandemic, but anytime you lose your job at no fault of your own.

  1. Eligibility for paid sick leave.

The federal government has increased the number of sick days per year for legal employees and many states have extended paid sick and family leave laws that include household employees. Regarding the COVID-19 pandemic, the federal government passed the Families First Coronavirus Response Act, which provides two weeks of paid leave if you get sick and additional time if you need to care for someone who is ill.

  1. Short and long-term benefits.

Many states require employers to carry workers’ compensation and disability insurance for any job-related injuries that occur. Legal employees benefit from full or partial coverage of medical bills and wage loss benefits. 

Health Reimbursement Arrangements (HRAs) are a popular benefit included in salary packages that are mutually beneficial for employers and employees. Employers can reimburse a portion of their nanny’s health insurance coverage on a pretax basis, as well as claim a tax deduction because of it. The stipend can be used for out-of-pocket medical, dental, and vision expenses, and it can also be paired with a spouse’s plan. 

It’s important for nannies to understand that they can accept full legal pay and receive better health coverage, and a plan of their own choosing. 

  1. Build a verifiable employment history 

Legal pay allows nannies to provide a verifiable employment history that can help you get credit, leases, and loans. 

Without an established wage and credit history, you may not be approved to rent an apartment, obtain a cellphone contract, or get hired for another job after you part ways with your nanny family. Showing a verifiable income will help you succeed in your personal and professional life.

When you begin your next job search, consider either working with a reputable nanny agency or establishing early on during your personal interview process, that paying on the books is the expectation.