Myth busting Net Pay for Nannies

Everyone likes to know their take home pay, but it seems that only this sector negotiates net, and nannies lose out because of it. Having a gross pay rate doesn’t mean that you will be paid ‘cash in hand’ or ‘self-employed’. Legally, your employer must always treat you as an employee. You continue to receive a payslip, and your employer still pays tax and National Insurance to HMRC on your behalf, and pension contributions too. The only difference is that your pay is calculated as ‘gross pay less deductions’ instead of ‘net pay plus deductions’.

Nowadays no informed employer will agree a net rate in the contract, for several very good reasons, including the impact of the pension legislation.

How do I know the gross amount offered is correct?

The best method is to negotiate a gross rate in the first place and make no mention of net. Ask NannyMatters or use our online calculator tool to work out the gross salary, and tell the employer that’s what you want, less deductions. If the employer or agency is talking in net terms, tell them it’s not a good idea to discuss the net, give them the gross that you want, and refer them to NannyMatters for a free illustration and advice about their total costs.

Potential employers will be impressed by a nanny who requests a gross rate at interview since it demonstrates professionalism. It also gives you the opportunity to achieve a higher take-home pay, because you are taking control of the gross rate negotiation.

Why negotiating a gross rate is best for nannies

• You get any tax refunds that are due, eg. if you are sick, or you have paid too much tax already, or you have a gap between jobs.
• You can ensure the gross rate that is applied is correct for your particular circumstances. That’s really important if you have another job, or you are planning on getting another job at a later date.
• You don’t have to split your tax code.
• You don’t have arguments between employers about who pays what taxes.
• You get an increase whenever the personal tax allowance changes.

Of course, the downside is that you receive less net pay if you are due to pay extra tax eg. if you have an underpayment from a previous year. Thankfully these are relatively rare, compared with tax refunds (very common) and the extra net pay when the tax allowance changes. Very few employers will agree to pick up a nanny’s underpayment from a previous employer anyway. You can see that you will almost always be better off when you negotiate a gross pay rate, so long as it is the correct gross rate for you.

Any questions about this article just get in touch with the NannyMatters team at enquiries@nannymatters.co.uk.