Domestic bliss can be taxing

Domestic bliss can be taxing

 

Life used to be simple. I had a cleaner who popped in once a week. Cash in hand. Easy. Then I took on a nanny to help look after the kids. Suddenly I'm an employer. Not so simple. An employer needs to operate PAYE and have appropriate insurance. The cleaner could become an employee along with the nanny. Employees are entitled to holiday pay, pensions, redundancy pay, maternity leave, etc... I've found out a lot of this the hard way so let me give you a few tips, so you don't have to!

 

Can I pay a cleaner cash in hand?

 

If this is the only person you pay for services and the total amount paid is less than £113 per week then… yes! Of course, some are saying that Britain is set to become a cashless society and while I’m all for that I can’t see it happening anytime soon.

 

When do I need to register as an employer?

 

If you pay someone more than £113 per week then the chances are you need to register as an employer with HMRC. This will apply to nannies, carers, mothers’ helps, housekeepers, cleaners, gardeners and even personal assistants. 

 

Do I need to draw up a contract for my employees?

 

Yes, this lays out all the terms, including the rate of pay and holiday entitlement, so you both know what to expect from the arrangement.

 

My employee wants me to agree a net wage, what does that mean?

 

From first-hand experience, I know this is very common among nannies. They want to agree the amount they get to take home after taxes have been deducted. You as the employer need to be aware of the gross wage as you will be paying over the taxes to HMRC.

 

A word of warning, the gross amount can differ depending on the personal circumstances of the employee. If they get income from other sources (for example a nanny may babysit for another family or host children birthday parties at the weekend) then you will effectively end up paying their tax on these other sources of income. The easiest way to avoid this is to agree a gross wage with them i.e. the amount before any tax has been deducted.  

 

To compare the net amount payable to the gross cost to you, why not try out our handy online calculator:  http://www.scodiedeyong.co.uk/calculators/payslip.

 

What does running a payroll entail?

 

You need to: calculate and deduct tax and national insurance, work out any pension contributions due, provide a monthly payslip, file monthly RTI returns with HMRC, file monthly declarations to your pension provider, complete the end of year returns and provide a P60. You also need to work out how much tax and national insurance (employee and employer) you need to pay over to HMRC each month and the total pension contributions to pay over to your provider.

 

While it is possible to do all this yourself, it is worth using a payroll company to take care of all this paperwork for you – this is a service Scodie Deyong can provide for as little as £65 per month which is inclusive of VAT.

 

Do I have to give paid holiday?

 

Yes and there is a handy tool on the HMRC website to calculate holiday entitlement: https://www.gov.uk/calculate-your-holiday-entitlement.

 

I've got a letter from the Pensions Regulator, what's that all about?

 

Once you are an employer you must operate a pension scheme for all your eligible employees and pay into this if they earn more than £490 per month. Again, Scodie Deyong can assist you with this.

 

http://www.thepensionsregulator.gov.uk/en/employers/employing-staff-for-the-first-time.aspx

 

I only need a nanny until my kids start school so why do I have to pay redundancy?

 

You may have thought this was obvious (and your nanny may have suspected this) but if you don’t give your nanny a fixed term contract then they can claim redundancy pay if they have been employed by you for more than two years and you end their employment. A fixed term contract is one way to avoid this.

 

Surely I don’t need insurance?

 

As an employer, you need to ensure your employees are insured. The good news is that a lot of buildings and contents insurance policies cover domestic staff but do check the terms.

 

Anything else I need to think about?

 

National minimum wages, the working time directive and “right to work” checks to name but a few!   

 

What about au pairs?


There's a completely different set of rules surrounding au pairs which I've researched but don't have first-hand experience of... Maybe that will be a future blog once I have moved into a house big enough to accommodate an au pair... watch this space!

 

In the meantime, if you would like any advice or guidance on any payroll or employee issues then please get in contact with us here

at Scodie Deyong LLP.