It might seem like an easy option to treat a nanny as self-employed – no hassle with nanny tax, no employer’s NI to pay. However, both you and your nanny can run into trouble with HMRC if you don’t pay your nanny through payroll (PAYE).
Many people wrongly assume that nannies are self-employed and responsible for paying their own tax and NI; even if your nanny has been or is registered as self-employed for similar or other jobs, employment status does not automatically transfer to a new job role.
There are a few exceptions, perhaps where a nanny works for several families at the same time or has had lots of temporary jobs or you hire an au pair, who aren’t normally considered employees.
As soon as you hire a nanny you become an employer and your nanny will be classed as an employee under HMRC employment status rules. This means he or she is entitled to employee rights such as earning the National Minimum Wage, Holiday Pay, Statutory Sick Pay, Workplace Pension and so on.
A nanny is classed by HMRC as an employee because:
- The nanny works regularly in exchange for a salary
- The nanny has to do the work themselves and can’t get someone else to do it for them
- The nanny is told what to do, when to work and how to work
- The nanny works at an address specified by you
- You provide the equipment and materials that your nanny needs to the job
In contrast, self-employed workers:
- Don’t get a regular salary
- Provide all the equipment needed to do their job
- They can decide what work to do, when to do it and how to do it
- The time it takes to do the work is negotiated with the client
If a nanny says they are self-employed then you as the new employer need to check with HMRC and get confirmation in writing that their self-employed status can be applied to your job role. If you do not and it transpires that your nanny cannot be classed as self-employed by HMRC for your job role, then you as the employer will be responsible for paying any backdated tax and NI including interest. Also a self-employed status is no automatic exemption from your employer Workplace Pension duties and you will also need to assess your nanny for eligibility for automatic enrolment as you would an employee, this is because under the Workplace Pension regulations you must assess and perform duties to those who, “Work under a contract of employment (an employee) OR have a contract to perform work or services personally and are not undertaking the work as part of their own business”.
Anyone you employ must:
- have an employment contract
- be given payslips
- not work more than the maximum hours allowed per week
- be paid at least the National Minimum Wage
If they meet the eligibility requirements, they’re also entitled to things like:
More information
The Pension Regulators guidance on defining your workers
Check employment status for tax