While many people imagine a live-in nanny as someone who lives with the family and provides nonstop care for the children in exchange for free room and board, that’s not only a myth, it’s illegal.

By law, live-in nannies are entitled to be paid at least minimum wage for each hour worked. In fact, in some states live-in nannies are even entitled to overtime pay for hours worked over 40 in a 7-day period. While many live-in nannies and their employers discuss the nanny’s compensation in terms of salary, nannies can’t legally be salaried employees.

Live-in nannies are classified as non-exempt employees and are protected under the Fair Labor Standards Act. To be compliant with labor and tax laws, a live-in nanny’s “salary” must be broken down into an hourly wage. In some states, live-in nannies are paid their base hourly wage for overtime, whereas in other states, live-in nannies must be paid at a rate of 1.5 times their base hourly wage for overtime.  Both the base wage and the overtime wage must be compliant with these standards for the state in which the nanny is employed.

Since nannies are employees of the families for whom they work, both the nanny and parents have tax responsibilities. When a nanny is paid more than the annual wage threshold as established by the Internal Revenue Service, $1800 per calendar year for 2012, tax filings must be made.

Nanny employers typically pay about 10% of the nanny’s gross annual salary in required taxes and insurances. The incentives for being compliant, however, are tax breaks and credits that can offset the cost of paying a nanny legally.

Live-in nanny employers are responsible for:

  • Their share of Social Security & Medicare
  • Federal Unemployment
  • State Unemployment and Workers Compensation (where required)

Live-in nannies are responsible for:

  • Their share of Social Security & Medicare
  • Employee Disability and Workers Compensation (where required)
  • Federal Income Taxes
  • State Income Taxes

It is up to the employer to submit both their and their live-in nannies Social Security & Medicare taxes.

In addition to an hourly wage, live-in nannies are entitled to room and board. At minimum, live-in nannies should have a private bedroom and bath. Live-in nannies typically also receive paid vacation, sick days and personal days as well as partial or full contributions towards their health insurance premiums. Some nannies also receive paid days off for professional development and contributions towards a retirement plan.

While it can be tempting for live-in nannies and parents to work out an alternative payment arrangement, doing so in never a good idea. The implications of paying a nanny illegally makes doing so a risky proposition for live-in nanny employers. For live-in nannies who wish to establish credit and an employment history, being paid illegally puts doing so in jeopardy.

According to the 2012 International Nanny Association Nanny Salary and Benefits Survey, full-time live-in nannies in the United States earn $652 gross per week. Since live-in nannies work, on average, 40 to 60 hours per week, live-in nannies earn an average of $11 to $16 gross per hour.

Like any professional, a live-in nanny’s earning potential is based on her education, experience, qualifications and the geographical area where the nanny works. Live-in nannies who work in major metropolitan areas tend to earn more than those who do not. 

10 Things That Affect Live-In Nanny Salaries

Finding the perfect live-in nanny can be a daunting task, especially since she has to be a great caregiver and housemate. But once you find the perfect parenting partner, how do you know what to pay her? While live-in nannies, on average, earn $650 gross per week, according to the2012 International Nanny Association Nanny Salary and Benefits Survey, what determines if you should pay your live-in nanny more or less?

  1. Geographical Area. Nannies who live and work in major metropolitan areas, like New York, Boston, Los Angeles and Washington DC., typically earn more than those who work in smaller suburbs. High earning live-in nannies tend to work where the cost of living is higher.
  2. Experience. A live-in nanny’s experience will most definitely impact her earning potential. Nannies with several years of live-in experience under their belt will earn more than those without it.
  3. Duties. Expecting your nanny to do chores or fulfill duties that aren’t directly related to childcare is perfectly acceptable, as long as you’re willing to compensate her fairly and she agrees. If you expect your nanny to prepare meals for the entire family, do everyone’s laundry, or take on other housekeeping duties, the hourly rate should be raised to reflect her increased responsibilities.
  4. Education. A nanny with a degree in early childhood education or a related field will typically earn more than a live-in nanny without a college degree.
  5. Specialized Skills. If your live-in nanny has specialized skills or abilities that make her a valuable employee, you may have to offer a greater wage. Specializations can make other parents compete for her services, but generous pay can help you to secure her.
  6. Bilingual. Having the ability to fluently speak more than one language is a skill she can reasonably expect a higher salary for, especially if you wish to raise bilingual children.
  7. Expertise. Nannies trained in caring for children with special needs or behaviors typically earn a higher salary. The average live-in nanny may not be cut out for this work, and one who has shown an aptitude for it by pursuing the appropriate experience or training deserves to be compensated.
  8. Schedule. If you require a live-in nanny to work split shifts, on weekends or on an alternative schedule, you may need to raise the hourly rate you’re offering.
  9. Hours. Since live-in nannies are entitled to be paid for each hour worked, and in some states for overtime, the more a live-in nanny works the more her salary will be.
  10. Living Status. If a live-in nanny gets married or the family living situation changes and she is required to move out, you can expect to increase her hourly rate by $1 to $2.

Of course each family will have a set childcare budget and should strive to secure a live-in nanny within that budget. When considering your budget for a live-in nanny’s salary, be sure to take these factors, as well as employment taxes, into consideration when preparing the salary package you’ll offer.