21 Jul The Cost of Quality Childcare: How much does a nanny cost?
If you’ve narrowed down your choice of child care options and decided that hiring a nanny is the right option for your family, you’re probably wondering: Can we even afford a nanny?
Child care can be expensive and is often the second highest monthly expense for families behind rent or a mortgage. As with any child care option a parent considers, it’s crucial to know up front what it’s going to cost so you can look at your budget and plan accordingly.
Nanny wages vary across the country and depend on experience levels and whether you provide housing. On average, the hourly rate for nannies in the U.S. in 2017 was $19.14, up from $18.66 in 2014, according to findings by the International Nanny Associationtion. In areas with a higher cost of living such as New York City, the average rate is up to $20 for one child full time.
The criteria for determining nanny salaries however includes years of experience, education level and additional certifications. Thought has to be put into whether or not the nanny is working for your family full-time, as this will not allow her to take on another part-time job.
Additionally, we consider the amount of children she will be looking after, as well as their ages. Younger children tend to require more energy and attention than older children.
Lastly, we factor in any other responsibilities she will take on; if she’s helping out with more than just child care, such as laundry, grocery shopping, cleaning and any other household chores, her salary should reflect these tasks.
Not to mention the additional costs that come with hiring a nanny including: taxes, health insurance, vacation, a transportation stipend and an annual bonus.
Nannies’ salaries are covered under the Fair Labor Standards Act, which means that they must be paid at least the federal minimum wage and may also be paid overtime for any hours worked over 40.
It can all add up quickly, but don’t be intimidated. We’ll break down the different options you have for nannies, plus cover everything included in payroll so you’ll have the full picture.
One of the biggest factors in how much you’ll pay for a nanny is where you live. Hourly rates for nannies vary widely from one community to the next. Those living in areas with a higher cost of living generally pay more for nanny services than in lower-priced areas. Competition can also be a factor. Cities with fewer experienced, well-qualified nannies will pay them more than in places where competition isn’t quite so fierce.
Beyond cost of living, commuting can also play a role. For instance, if the nanny has to commute, the nanny will be taking into consideration the cost of her time in transit and mileage, especially if the hours are part-time.
Types of duties and tasks
In addition to where you live, what you’re asking the nanny to do could also affect how much you’ll pay. Caring for more children, for example, usually means more work for the nanny, and therefore, a higher pay rate.
Hiring a nanny is about making a family’s life easier. That can mean things like party organization, grocery shopping, organizing, planning schedules — it can be a lot of hats for one person.
Circumstances that might make the price of nanny services go up or down include:
- Number of children.
- Ages of children.
- Driving to and from activities — typically covered in the form of using a household vehicle or paying the nanny a mileage reimbursement if they have to use their own car.
- Household tasks, such as cooking, laundry, cleaning or dog-walking.
- Errands like grocery shopping or picking up the dry cleaning.
- Managing contractors or other household employees.
- Event planning.
How much more a nanny should earn for these non-child-care tasks is between the family and the nanny, it should be something that’s discussed during routine pay assessments and written down in a nanny contract or workers agreement.
Experience and background of the nanny
If families are looking for someone with a lot of training or background in a specific area, they should be prepared to pay more for that experience.
Nannies with a bachelor and master’s degree, especially related to early childhood education, typically have a higher earning potential. Nannies with specialized training or experience with niche circumstances, such as caring for multiples or children with special needs, also earn more.
Extra costs not included in nanny pay rates
How much you pay your nanny is only part of the equation. When you’re budgeting for nanny services, you should also take into consideration other costs, like nanny taxes, background checks and supplemental care when your nanny is sick or on vacation.
These additional expenses include:
- Nanny taxes: According to the Internal Revenue Service, nannies (full-time or not) are employees — not independent contractors — meaning families are responsible for not only withholding state and federal taxes for the nanny, but also covering the costs of taxes typically paid by other kinds of employers. These “nanny taxes” kick in when the nanny makes more than $2,200 in a calendar year, and how much they are varies by location. Note: These taxes apply even if you hired your nanny through an intermediary, like a service or website.
- Payroll services: Some families opt to use a payroll service or accountant to manage the nanny’s paycheck and nanny taxes, which can also be an added cost.
- Intermediary agencies: If you hire a nanny through a referral agency or nanny service, these organizations will generally charge fees to vet and recommend nannies for you.
- Periodic background checks: Background checks for nannies prior to hiring them on, as well as on an annual or routine basis, are also an added cost. Typically, the more in-depth the background check, the higher the fee.
- Additional certifications: Families insisting that their nannies be up-to-date on CPR and first aid certifications will often pay for them to be renewed every few years.
- Raises and overtime: Like many different types of employees, nannies expect to receive routine raises and are entitled to overtime pay (time and a half) if they work more than 40 hours per week, according to the U.S. Department of Labor. How much you should give in raises is between you and your nanny, but a 2-3% cost-of-living raise, in addition to a 5-7% merit increase, is fairly standard.
- Supplemental child care: Many families choose to give their nannies paid sick leave or vacation days. During that time, families might need to pay for supplemental, short-term child care, such as an emergency babysitter or drop-in child care, if family members are unable to fill in.
- Full or partial health insurance: This varies depending on the type of insurance and how much, but the average cost can be anywhere from $200-300 per month, depending on where you live.
- Paid holidays: Most nannies receive about six paid holidays. They’re usually New Year’s Day, Memorial Day, 4th of July, Labor Day, Thanksgiving and Christmas, though what you offer may vary.
- Paid Vacation: Most nannies receive two weeks paid vacation, and some families try to schedule this during a time that may coincide with other school vacations (like the weeks between Christmas and New Year’s or a week during summer).
- Paid Sick Days: The amount offered is usually four or five days, but that is up to your discretion.
- Holiday Bonus or Tip: Approximately one week’s salary, plus a thoughtful gift from the kids.
- Transportation reimbursement or supplement: This varies depending on where you live. If you live in New York City, it’s come to provide your nanny with an unlimited monthly metrocard to ease her commute to work. If your nanny drives (your car or his or her own personal car) to run errands or bring the kids to school, it’s typical to reimburse gas and tolls.
How much a nanny costs can differ widely from one family to the next, based on circumstances, expectations and experience levels. Families interested in hiring a nanny should start by looking into the costs of nannies in their area and taxes for their state and adjust their budget from there.
The ultimate goal, of course, is to determine a fee for your nanny that fits into your budget and allows you to feel secure in leaving your child with their caregiver.
You might plan on having performance reviews with your nanny or babysitter to prevent any miscommunication and discuss appropriate compensation levels as your family’s needs change over time.
Some of the things you can do to reduce your Nanny cost
This is when one nanny watches two or more children at the same time from different families. In some instances, you or the other family may already have a nanny you love, and want to start the share to cut down on each individual family’s costs (cha-ching!).
It’s up to both families and the nanny hired to coordinate the schedule, location of the caregiving (either at one host family’s house or split up between the two family’s homes) and any other important details (who will manage the nanny or how communication will work between everyone in the share agreement). It can get tricky, so make sure you pick a shared family that you see eye-to-eye with on the big stuff like discipline, activities, learning methods, etc.
Typically, the hourly rate for this type of nanny is higher than one for a full-time nanny for just one family, since she is caring for more than one child. But since both families split the cost, the personal cost per family is lower. (And yes, both families are responsible for the taxes associated with hiring the nanny.)
Flexible Spending Account
If your employer offers a Flexible Spending Account, or FSA, you can set aside up to $5,000 of pre-tax earnings to pay for child care, including nanny wages and taxes. Depending on your tax rates, tax advisors estimate this could save you as much as $2,300 a year.
Alternately, if you qualify, you can claim the Tax Credit for Child or Dependent Care, and for one child can claim from 20% to 35%, depending on your income level, on up to $3,000 in child care expenses. That comes to a tax savings of $600 to $1,050.
While crunching the numbers, running through the different scenarios and trying to imagine what the best solution would be for your family, don’t forget this: it takes a while to get into a groove. Families said it took four months on average to feel great about their child care situation.
One of the fastest growing trends? Mannies. Male nannies, who can be an especially good fit if you got young boys who could use a male role model or big-brother figure.
Don’t put too much pressure on yourself to find the exact perfect person or scenario from the beginning. Doing the math is one thing, but finding the right care that both you and your baby are happy with is priceless.