In addition to the compensation nanny employers provide their nannies, there are other costs involved with hiring and employing a live-in nanny.

Besides the hourly rate parents must pay their live-in nannies, they also must pay the required employment taxes. Coined the “nanny taxes,” a live-in nanny employer’s tax responsibility includes paying the employer part of the Medicare and Social Security, federal unemployment insurance and state unemployment and worker’s compensation, or disability, where required. These out-of-pocket expenses add up to about 10% of the nanny’s gross annual salary. Fortunately for employers who pay legally, there are tax breaks and credits that can offset this cost.

Since live-in nannies receive free room and board as part of their compensation package, nanny employers must ensure, at a minimum, that both a private bedroom and bath are prepared for their live-in nanny. Most employers freshly paint the live-in nanny’s quarters and allow her to help choose the décor so she feels at home. Since an additional adult will be living in the home, live-in nanny employers can expect the utility bills to reflect additional usage.

While nannies may share most of their meals with the children, live-in nanny employers are required to provide meals for their nannies even when they don’t. Most live-in nanny employers ask their nanny to add items to the grocery list or to pick up the foods they’d like from the grocery store using a family provided credit card or petty cash. If the family has additional household staff, like a chef or housekeeper, the nanny is typically considered an extension of the family and treated as such.

Live-in nanny employers may also see an increase in the usage of basic household supplies like toilet paper, soap and paper towels when another adult resides in the home. These expenses and costs should be considered when planning a childcare budget.

Many live-in nanny employers opt to provide their nanny use of an employer furnished vehicle. When they do they simply add their live-in nanny as a covered driver to their auto insurance policy and furnish a credit card or petty cash for gas.  If the parents expect the nanny to use her own car to transport the children, however, the employers will need to pay their nanny the Internal Revenue Service standard mileage reimbursement rate to cover the cost of gas and wear and tear on their nanny’s car. In addition, if the nanny has to increase her auto insurance coverage to accommodate transporting children on the job, the parents may be asked to contribute towards the increased premium.

10 Costs Live-In Nannies Incur

Due to the nature of the living arrangement, many live-in nanny employers end up footing the bill for much of their nanny’s living expenses, however, there are still some costs a live-in nanny may incur that should be considered her own responsibility.

  1. Basic Supplies.  While employers are typically willing to pitch in for supplies that are shared, live-in nannies are usually responsible for their own toiletries.
  2. Transportation. Sometimes a nanny will use her own car for transporting the children. While the live-in nanny should receive the standard IRS mileage reimbursement rate, she may be responsible for repairs, parking and other associated costs.
  3. Uniforms.  The day of the uniform may have come and gone, but it is up to a nanny to have an appropriate work wardrobe to wear while on duty.
  4. Trips to the Salon. While an employer may invite a live-in nanny to join her at the spa or send her as a treat after a long days work, in general, nannies are responsible for their own salon treatments.
  5. Dinners Out. While a live-in nanny employer will cover the costs incurred when taking the children out to meals and activities, during her off time a live-in nanny is typically responsible for footing the bill of her meals out.
  6. Dental Work. An employer may cover all or a part of an employee’s health insurance, but it will usually be a nanny’s responsibility to take care of her own dental program. This is a negotiable item, however, and some employers do cover dental as well.
  7. Luxury Expenses.  If a nanny has “Mercedes” tastes, but the family lives on a “Kia” budget, then the nanny will probably be the one to pay for her own luxury items, which could include anything from bars of handmade soaps to expensive food items not on the family’s regular menu.
  8. Health Insurance.  Employers may cover all of a live-in nanny’s health insurance costs or make a partial contribution. The nanny is responsible for the remaining premium and any co-payments or medications.
  9. Eye Doctor. Depending on the nanny’s health insurance plan, a nanny may be responsible for her own vision care.
  10. Retirement Savings. While retirement plans are becoming more accessible to nannies, it’s still not standard practice for employers to match the live-in nanny’s contributions.

Each live-in nanny and employer relationship will vary, and having a written work agreement that hammers out the responsibilities of both the nanny and the family will help to eliminate confusion down the road.