by Paul Byrne, Managing Director of Thesaurus Software
Hiring a nanny can seem like a simple process – choose the right nanny to suit your needs and pay them. However, it is much more complex than this. If you employ a nanny in the UK and you pay them more than £149 per week, you have to comply with certain payroll and tax responsibilities.
When you hire a nanny, you become an employer. This means that you are required by UK law to carry out a number of responsibilities.
Register as an Employee.
Your first responsibility is to register as an employer. This lets HMRC know that you are paying an employee and making PAYE deductions from their pay. You must register as an employer in advance as the process can take up to two weeks and must be completed before the first time you pay the nanny.
Employment Contract.
Your next responsibility as an employer is to provide your nanny with an employment contract. This highlights employment conditions, rights, responsibilities and duties of both the employer and the employee. Creating an employment contract can be made easy with software packages that enable you to create tailored, professional contracts of employment and staff handbooks.
Payslips and Deductions.
You are required by law to provide a payslip to your nanny highlighting their pay and deductions made from their salary. It is critical that you deduct income tax and national insurance contributions on behalf of your nanny. It is also compulsory for you to pay an employer’s NI contribution. NI contributions go towards your nanny’s statutory entitlements such as unemployment benefit and state pension. Not declaring their salary in full is not only illegal but also affects these and other rights. By having payroll software, payslips – and especially having the advantages of payslips online – are automatically created with the necessary deductions ensuring fewer errors.
Tax Records.
Another responsibility of employers is to maintain records of all pay and tax deductions for each employee. You must ensure that you have a record for your nanny containing as much information as possible. If you have payroll software to help you with your payroll, this will automatically keep an employee record for your nanny, making your responsibilities less of a nuisance.
HMRC Submissions.
Payroll software ensures that HMRC submissions are simplified as much as possible for employers. These submissions are an ongoing process which needs to be done at each pay period. As an employer running payroll, you must report your employee’s pay and deductions in a Full Payment Submission (FPS) on or before the employees’ payday. An Employer Payment Summary (EPS) must also be sent by the 19th of the following tax month. This notifies HMRC of any reduction on what you’ll owe from your FPS.
Auto Enrolment.
Auto enrolment is a new scheme currently being rolled out by the Pension Regulator. In summary, it means automatically enrolling certain employees in a pension scheme. As you will only have one employee, you will not be affected by auto enrolment until 2016/17. However, if you are using certain payroll software it can help with the auto enrolment process.
Pay Your Nanny with Ease.
Becoming an employer, especially for the first time, can be both stressful and confusing, and without knowledge of the tax system and current employment law it can make hiring a nanny much more difficult than first perceived.
However, many of the employers’ responsibilities outlined above are simplified by using payroll software. Although some payroll software can be quite expensive, there are a handful of providers offering free software, especially when you only have one employee. Payroll software guarantees that the complex process of employing a nanny can seem easy and hassle free, allowing you to have more time to choose the right nanny for you and your family.
Paul Byrne is Managing Director of Thesaurus Software, a company providing high quality business software including BrightPay and Bright Contracts.
