August 1, 2012
Summertime. When my children were little and summer rolled around, we used to get someone we called a summer girl to come stay with us for the summer, be an activity director for the children, and give us a little time to ourselves. Now I think they’re called Nannies, and sometimes they’re hired on a year around basis. Nannies aren’t all about fun, games and free time, you have to be aware of the legal, tax and other issues involved. Here are some of the most common issues that families should understand before hiring a childcare provider.
Independent Contractor vs. Employee?
Workers classified as independent contractors set their own hours, and can generally work however they choose to get the job done. For a Nanny to be classified as an independent contractor, she would have to set her own schedule (doesn’t work well for someone who is hired to take care of your children), be available to the general public, and may finish a job any way she wishes, without review of the process by the family she works for.
Many businesses are concerned with the distinction between independent contractors (no withholding, no overtime pay, etc.) and employees. A Nanny is almost always considered an employee. Since the family designates the hours the Nanny must work, as well as specific tasks and other household chores she is to perform, a Nanny would usually not meet the requirements for classification as an independent contractor.
Pay and Overtime Pay
You and the Nanny should be specific about the rate of pay (remember minimum wage applies) for the Nanny, and when payments will be made. Will you be providing any fringe benefits, such as health insurance or workers compensation insurance? Will the Nanny be living in your home? Provided with free meals? Have her own bedroom? TV? Computer? Access to your telephone?
All household employees, including nannies, must be paid for overtime work under federal law unless they live in your home. Any time she works more than 40 hours within a 7 day week you must pay her an hourly rate that is 1.5 times her regular hourly wage. However, there may be other forms of compensation.
Work Eligibility
Before a Nanny starts work, ask her to complete an I-9 Employment Eligibility Verification form. Read the directions on the form and verify the Nanny’s proof of employment eligibility. The prospective Nanny should be ready to show a combination of documents as evidence of her ability to work legally in the U.S. Documents can include a Social Security card, driver’s license, birth certificate, passport, green card, or work permit, or combination thereof. You should make copies of these documents and keep them in your records along with the completed I-9 form.
Additionally you will undoubtedly want to ask applicants for references, check those references, and do a background check on applicants before making a final hiring decision.
Qualifications
You probably will want your Nanny to complete First-Aid and CPR training. It may be necessary for you to pay the cost of this training, and to find the most convenient place where it can occur. You may even have to provide transportation for the training, but if you consider it important, its just part of the cost of obtaining Nanny care.
Tax Responsibilities
If your Nanny is paid at least $1,500 a year, you must contribute to Social Security and Medicare. You pay for half of the Social Security taxes and deduct the other half from the Nanny’s pay check. You may choose to withhold income taxes as well, although it is optional. However, it’s usually more convenient for the household worker for you to withhold. When your Nanny starts employment, ask her to complete a W-4 form so you know how much to withhold from her pay. You’ll also need to issue a W-2 form to her every year so she can report her income when she files her tax return. You are required to withhold tax and social security tax and remit these on a regular basis just as businesses do with their employees. There is personal liability to the IRS for failure to do so.
Creating an Employment Agreement
When you hire your Nanny, it is a good idea to have a comprehensive Nanny-Family Employment Agreement. This document will include state guidelines such as the hours the Nanny will work, how much and when she will be paid, a description of her basic duties, and conditions and procedures for termination. You may also want to include additional duties and guidelines for confidentiality. Your DiMonte & Lizak, LLC attorney can provide you with such an agreement if you wish.
Automobile
Will it be necessary for your Nanny to have a car to perform her duties? Will you allow her to use one of yours, or require her to provide her own? You need to be sure she is licensed to drive. Insurance – is she providing insurance, or will she be covered under your policy? What will that do to your insurance rates? Will she be permitted some limited use of your car when she is on her own time? Will there be restrictions on such use?
Restrictions
You need to be clear, and make it a part of the contract, on use of substances while in your home and while working. Is smoking permitted? Restricted areas? Drugs and alcohol should also be discussed, and you should have a written agreement covering the whole range of dos and don’ts. Is Nanny permitted to take food to her room? Rules on whether food can be kept there are appropriate, as are rules regarding dirty dishes and condition of the room generally. Can Nanny use the washer and dryer? Will such use be limited to certain times or days? Do you want to include provisions for friends and social activities, personal telephone use, use of computers and the Internet, etc?
Conclusion
Like any other business association, a detailed, written agreement can go a long way toward the success of the relationship. It is also key to avoiding trouble for you over tax and employment issues.