How To Calculate The Cost Of A Nanny?

How much it costs to employ a nanny in the UK is something that is often asked on parenting forums like Mumsnet and Netmums.  I find myself often preparing cost calculations for parents, so today I will write about how I calculate the cost of a nanny.

Nannies Salary

Start off by picking a figure for the nannies salary.  This can be tricky to decide and will vary from one part of the country to another, even within the same town or city the salary that nannies are offered could vary quite a bit.   There are various factors which may affect the level of salary, such as how much experience is desired, if the nanny is expected to work unusual hours, varying shift patterns perhaps.

At the time of writing (February 2012) jobs are thin on the ground, so it is what I would term as being an Employers Market.  Employers can offer jobs at whatever salary they like and see who applies.  You may well be able to get a great nanny with lots of experience for less money than you could a couple of years ago, as people need jobs at the moment and it’s better being in a job than job hunting.   So an experienced nanny may take a job at a lower salary than usual, in the hope that salary increases over time, which is likely to happen though the increase may be quite small.

As job applicants may be expecting the salary to increase over time, take that into account when working out what salary to offer.  Work out your budget and offer a salary below your budget, so that you have room to increase the salary say after the initial probation period and at the end of the year.

Get a feel for what other jobs, nannying and non-nannying are paying in your local area.  There are many job sites on the internet which will give you a feel for salaries on offer.
Nannies I would say would typically be paid £7 to £13 gross per hour.  Less than £7 I would have thought would be quite rare as £6.08 is National Minimum Wage for someone aged 21 or over, so an experienced nanny I feel would be wanting more than NMW.   An inexperienced nanny in their first job however may be happy to accept a wage nearer to NMW, though if you would be happy having them care for your children would be dependent on your childcare requirements, age of children, and things like how much supervision you may be giving the nanny.

Employers National Insurance

Employing someone costs money.  The UK Government taxes income and requires contributions to be made towards National Insurance (introduced in 1911) which is for paying things like health care.    Find out more… Why do we pay National Insurance (BBC Newsbeat article)

The amount that employers pay to HMRC in terms of Employers National Insurance varies according to the salary being paid to the employee and according to the current rate set in the Budget.   PAYE calculators like MrAnchovy’s PAYE Calculator will calculate the Employers NI amount that would be due for a given salary.  These calculators can be very accurate but should not be used for payroll purposes – follow the procedures for operating payroll instead.   So using the PAYE calculator as a guide tool, we can see that if we paid a nanny £1500 Gross per month, in 2012/13 tax year, Employers NI would be £121 per month.

Activity Budget – Nanny Kitty

Caring for children will often involve taking them out to various places – toddler groups, singing groups, to the library, museums, castles, trips on a train etc.

These activities and outings cost money, so you need to decide how you want to pay for those things.   Do you want to reimburse each expenses individually or do you want to give a weeks budget and let your nanny decide how to spend that money on your children?

I would say that it is easier to give your nanny a set budget and let them manage that budget.   £5 per day may well work quite well if you have a couple of children, a bit more may be needed during school holiday periods.  A bit more may be needed if you have more children and as children get older as admission charges for under 3’s can sometimes be nil, whilst a 6 year old could be charged quite a lot.

So if you take £5 per day as a budget, you can calculate that out over a 1 year period.  The amount will vary depending how many days per week your nanny works.  Also you won’t need to include in the budget days your nanny is on holiday (5.6 weeks is minimum holiday entitlement in the UK).

A nanny working 4 days per week would be looking at a kitty / activities budget of £928 per year.

Payroll

Will you be doing the payroll paperwork yourself or would you want some help with that?   There are various nanny payroll companies who will do a lot of the paperwork side of payroll for you and each company has varying charges.  I would say that £135 per year is typical of a charge for doing payroll for a nanny who is paid monthly.

Adding all these costs together can help give you a better idea of how much employing a nanny will cost you.   There are other costs that may also be involved, such as nannies travel whilst on duty, nannies food & drink whilst on duty, extra wear & tear at your home if you are comparing having a nanny to using care outside of your home such as a nursery or childminder.

Are there any costs you feel should be added in, which can be easily calculated?  Or are all the other likely costs too variable to be able to give a realistic general cost?

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One comment on “How To Calculate The Cost Of A Nanny?

  1. Hi Nick, a great post on the subject.