Are Nannies Entitled to Benefits?

When you hire a private, in-home childcare provider for the first time, you’re likely to have a variety of questions and a fair bit of confusion regarding what you’re required to provide and how to be fully compliant with employment laws, especially in terms of benefits like health insurance, paid vacation, paid sick days and retirement savings plans. It’s not always easy to know where your obligations end and where best industry practices take over.

Many employers of permanent, full-time household workers understand that offering a competitive benefits package will help them to attract and retain the best domestic employees in their local pool, especially when it comes to nannies. These employers make a point of offering health coverage contributions, generous paid leave and other benefits to reduce turnover and to maintain a level of consistency within their home. While this is a common practice, nanny employers living within the United States are not required to provide such benefits under federal law.

Understand the Tax Benefits of Offering Health Insurance

For families that are fully compliant with state and federal employment taxes, the idea of adding an additional financial burden by partially contributing to or paying their nannies’ health insurance premiums in full may be slightly repellent. In addition to the reduced turnover, lower chances of burnout and higher work performance perks that come along with providing a competitive benefits package, however, comes the ability to enjoy some valuable tax breaks each year. Because some of those paid contributions, like contributions towards health insurance premiums, are not treated as taxable income to the employee, you won’t be required to pay employment taxes on the contributions either.

It’s worth noting, however, that you will be required to extend those same benefits to all of your employees, which can become a sticky situation if you’re also paying a housekeeper or other domestic staff that you don’t intend to provide coverage for.

Reasons to Consider Offering Competitive Benefits

When your nanny enjoys the security that comes with having reliable access to preventative healthcare, she’s far more likely to take advantage of it. As a result, you may actually find that your contributions pay for themselves in the form of a healthier, happier nanny that’s less likely to call in sick due to preventable illnesses.

When there’s a strong benefits package included with your nanny’s compensation, she’s also less likely to change jobs abruptly. Paid vacation time, paid sick leave and even annual or quarterly performance bonuses are all great ways to sweeten the pot for your nanny, helping to retain her services. In the end, you may find that providing a healthy set of benefits as part of a strong compensation package actually costs less than dealing with regular turnover, downtime and lost work time on your part for the hiring and training process.

Among the benefits frequently offered to full-time nannies, paid holidays, vacation and sick days top the list of the most common. Reimbursement for the use of a personal vehicle or use of a work vehicle, health insurance premium contributions, education reimbursement and access to health club or gym membership are also relatively common. Before you decide to pay your nanny a flat, under-the-table rate that includes no additional benefits, it’s wise to carefully consider whether or not you’d like to find yourself competing against families in your area who do offer these benefits for the best available childcare providers.

The Nanny Contract and Employment Benefits

The nanny contract is a written work agreement that governs your professional relationship with your nanny, and is one of the most important documents you can have on hand when it comes to preventing disputes borne of misunderstanding. There’s no confusion when the benefits package that you’re willing to extend is documented, and both you and your nanny are able to easily understand what’s expected of everyone involved. Neglecting to draw up a nanny contract may save you a bit of time at the outset of your relationship, but it can be a real lifesaver if there’s ever a dispute or a misconception about the sort of benefits that your nanny is entitled to under your agreement.

In the end, your nanny isn’t technically entitled to any benefits outside of fair compensation and tax compliance under federal law. However, while you’re not required to provide health insurance, paid sick time or vacation days, doing so can make it much easier to get and retain the best possible care for your children.

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