Nannies / Employed or self-employed?
We are frequently asked if a nanny can be self-employed and in truth, there are no easy answers. This article serves to look at the issues.
The employment status depends on each individual job. Being self-employed for one activity doesn’t mean that a nanny is self-employed for all jobs. Some nannies can be employed part of the week by one family that they work for regularly and self-employed part of the week working other families. Below are some guides / indicators of employment status that HMRC use to assess status and the pros and cons of being self-employed for nannies and parents.
Do they have to do the work themselves?
Can someone tell them at any time what to do, where to carry out the work or when and how to do it?
Can they work a set amount of hours?
Can someone move them from task to task?
Are they paid by the hour, week, or month?
Can they get overtime pay or bonus payment?
Nannies are usually:
– required to look after the children personally
– required to follow the reasonable instructions of their employer, in a place determined by their employer and at a time chosen by their employer
– contracted for a set amount of hours per day or per week
– able to have their job description changed by their employer
– paid hourly, weekly or monthly
– paid extra for overtime and may receive a bonus
Can they hire someone to do the work or engage helpers at their own expense?
Do they risk their own money?
Do they provide the main items of equipment they need to do their job, not just the small tools that many employees provide for themselves?
Do they agree to do a job for a fixed price regardless of how long the job may take?
Can they decide what work to do, how and when to do the work and where to provide the services?
Do they regularly work for a number of different people?
Do they have to correct unsatisfactory work in their own time and at their own expense?
Nannies are not usually:
– able to hire an assistant, unlike child minders
– required to risk their own money
– expected to provide the major pieces of equipment, such as a pushchair
– paid fixed price regardless of length, they are paid hourly, weekly or monthly and have fixed working hours
– able to decide the manner, timing and location of the work, the parents usually decide the hours required
Temporary nannies and specialists such as maternity nurses may meet certain additional criteria. They may have risked their own money to undertake necessary specialist training without a guarantee that they will be successful in finding work. They may decide the hours and days that they are available. They may agree to work for a fixed fee for an unspecified length of time.
Although self-employment can seem an attractive prospect it’s important to fully understand the implications for nannies and parents.
Pros for nannies:
You are in control of the times and days you work, so you can dictate when you will take time off and arrange to care for other children at the same time.
Your business expenses such as training and insurance, travel can be offset against tax.
Cons for nannies:
You do not get sick, maternity or holiday pay.
You are not paid mileage but can claim the tax back on travel expenses
You need to carry out a self-assessment each year for tax purposes
You need to invoice parents for the work carried out.
Pros for parents:
You pay-as-you-go and are not liable for holiday, sick or maternity pay.
You don’t pay mileage – a self-employed person charges an all-inclusive rate which covers their expenses.
Cons for parents:
If HMRC decide you should have been employing your nanny you will need to backpay the tax and National Insurance plus a fine which can be equal to that amount.
Your nanny can decide they are not available to work.
Your nanny can make arrangements to substitute someone else in her place.
Your nanny is not obliged to provide exclusive care for your children as long as she does not exceed two families at any one time.