Nanny Costs: What is a Realistic Picture?

Nanny Costs: What is a Realistic Picture?

by Kathy Green

There is not a parent among us who, on a cold dark winter morning, would not love to leave their sleeping children in their warm beds. Further, we could get ready for work knowing that the nanny would be arriving in time to wake the children, dress them, feed them and accompany them to school, if they are of school age.

But there are other costs besides wages that nanny employers should expect to pay for this idyllic morning scenario.

  • Overtime is not free. The nanny contract will set out the number of hours the nanny will work a week at a certain pay scale. This will be determined by the state or province where you live. An average work week is 40 hours with an average pay of $14/hr. Therefore hours over 40 hours cost $21/hr and this would include date nights and late nights.
  • An end of year bonus is an expectation with this nanny employment. It is usually equal to 1-2 weeks salary. If you understand this when the employment begins, you can budget for it. It is really not an option to eliminate this bonus for this recognition is an important part of a healthy and respectful employee/employer relationship.
  • Reimbursement to the nanny for extra expenses incurred for the child's activities is an obvious expense , but needs to be paid on a regular basis. They add up quickly: arts and craft supplies, lunches after a play date, and admission to museums and zoos.
  • Taxes on the nanny's wages are the legal responsibility of the employer. They must pay their portion of all state and local taxes required. Although these can add up to 9 to 11% of their nanny's gross wages, , most employers can claim a tax break at the end of the year which offsets part of the tax payout. It is good to talk to a local tax advisor to get an idea of what is involved.
  • Not a huge expense, but something to be aware of, is that there can be an increase in utility and food bills when you employ a nanny. Rather than having your children out of the house all day at day care, they are at home with the nanny using gas and electricity. Further, depending on your nanny agreement deals, the nanny may be eating lunch and/or dinner with your children. There expenses are usually not significant, but are something to factor in.
  • Something to consider when adding up the expenses of your nanny are all the peripheral benefits you get. Without a nanny, you would likely need a housekeeper to scrub floors, clean counters, and wash bathrooms. However, the cost of a housekeeper ranges between $20 and $40 an hour, meaning that your nanny will likely be cheaper for that period of time. Ensuring you have an organized and orderly can provide a whole lot of value outside of childcare alone.

None of us like surprises with our budgeting. Having a nanny is a great option for your childcare, but it is important that you do your homework. No matter whether you chose daycare, nanny care or some other option, there are always extra costs that have to be factored in. Armed with this knowledge you will make the best choice for your budget and your children.