So, you’ve employed a nanny to watch your children. Hallelujah!

This may seem like a silly thing to say. Unfortunately, the nannying industry is ripe with payroll mistakes. Everything from wages to payslips has room for error. Payroll mistakes are much easier to avoid than they are to fix. With that in mind, here are 5 Nanny Payroll Mistakes to avoid when hiring in NZ.

Taxes are something you need to get right.

Both underpaying and overpaying government taxes will have negative consequences for your employee. Let’s say you hire a nanny for a year, and over the course of her employment you accidentally withhold 1,000 NZ$ extra. When either of you notice this discrepancy, the nanny will immediately need to be paid the $1,000 you took from her. This can be a hefty expense.

Or, worse, if you deduct too little from an employee’s payslip, they may be in trouble with the IRD. While it might be argued that it’s their responsibility to pay the due taxes, this will likely damage both your relationship with your employee and your reputation in the industry. 

In both cases, it’s unprofessional and costly.

Payslips are a basic requirement for proper accounting and it’s also a legal requirement. If you do not provide your nanny with a payslip, there is no legal proof that you paid him or her. The nanny can therefore raise a dispute against you in court.

Payslips also prevent tax accidents, as mentioned above. When two people have eyes on the deductions of a payslip there is a significantly lower chance of error. Payslips can be a handful to create manually; thankfully, there’s software and services available to streamline the process. 

Payslips contain a great deal of helpful information for both employer and employee. Things like:

• Gross vs. Net pay
• YTD Gross and Net pay 
• Sick leave balances
• Annual Leave balances
• Pay for public holidays
• Kiwisaver information

 

Helping your nanny retire someday is the right thing to do. But it’s also the law. Per the NZ government, employers must make KiwiSaver deductions at the default rate of 3% of a nanny’s wages (unless you want to raise it to 4% or 8%. But this is up to you.). You also need to make sure you've selected the correct employee deduction rate, which they will select.

You must also provide your nanny with a KS3, which is an information packet for employees that explains how the deductions work. 

New Zealand is one of the only countries in the world to offer such a robust retirement plan for its citizens. Let’s help each other all take advantage of it!

Not properly tracking your nanny’s leave entitlements may result in him or her missing vacation time that is legally afforded to them. This can be cause for a significant amount of legal trouble, even if it’s merely a case of not paying attention.

After six months of employment (again, part-time also included) your nanny is entitled to 5 days of sick time to care for herself or her loved ones. It’s also important to note that the amount of sick leave your nanny is entitled to is set to increase soon.

It is the responsibility of the employer, not the employee, to properly track and relay leave entitlements. 

But wait, isn’t it legal to pay my nanny in cash?

Yes. But not cash in hand. By this we mean you still need to deduct the proper taxes and provide a payslip if you want to pay your nanny’s wages in cash. Cash in hand payments are not only illegal, they put your nanny in a difficult situation if she ever needs to prove her income for tax purpose, to put a down payment on a house, or receive a loan from the bank. 

Generally, it’s best to avoid paying in cash. Even with adequate pay slips, it’s far easier to make mistakes at the expense of yourself or your employee if you’re paying in cash. 

Nannying is domestic work. Oftentimes we have somewhat close relationships with the nannies we employ - they do, after all, live in our houses and watch our children!

Unfortunately, this closeness is the reason why the industry tends to be associated with payroll mishaps. It only takes one payment slipup to have serious consequences for your employee’s wellbeing and your professional reputation.

Take your nanny’s employment seriously. Provide payslips, deduct the proper amount of taxes, monitor their leave entitlement, contribute to KiwiSaver, and do not pay them in cash. It’s better for everyone involved.

Our mission is to make it as simple as possible for households to manage payroll for their nannies.​

Pay The Nanny provides friendly, accurate and flexible nanny payroll services to nanny employers. We take care of everything to do with PAYE, ACC, holiday pay, sick pay, maternity leave and Kiwisaver.

For more information, check out our website at www.paythenanny.nz. Make sure you give us a like over on our Facebook page too.