Paying Your Nanny: What You Need To Know

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When hiring a nanny, every situation is unique. The real question is, are you paying your nanny correctly? Here are a few things you need to do and consider when hiring a nanny:

Step 1: The Details

It’s important to get the details right. How are you going about hiring and paying your nanny? Will this be a live-out or live-in nanny? Will you be paying them based on the number of hours worked or set a salaried amount? How frequently will you be paying them? (Weekly, bi-weekly etc.) Be sure you develop a written contract for your new nanny outlining the answers to these questions to ensure a complete understanding of both your roles and expectations with this job.

Step 2, Payroll

You will need to start by obtaining a payroll number which can be done in a few minutes by calling the Canada Revenue Agency. This payroll number is required for anyone who is paying an employee and is used for tracking taxes paid and any employment credits you may be eligible for.

As an employer, you are required to remit federal and provincial taxes, CPP and EI contributions. These are deducted from your employee’s pay and must be paid directly to the Canada Revenue Agency.

Vacation pay, as well as statutory holiday pay, are requirements in Canada. Make sure you discuss with your accountant the best way to go about either accruing or releasing vacation pay or how you should calculate statutory pay.

When diving deeper into payroll, you need to consider any special benefits, deductions or earnings you may need to include. For example, if you have a live-in nanny, how do you choose to showroom and board on their payslip? Do you add it as part of their salary as a taxable benefit? Or, do you charge them separately and show it as a deduction. When making this decision, we suggest you speak with an accountant to figure out what works best for you.

Step 3: Documents and Reporting

It is imperative that you keep track of your payroll. Whether it’s the hours worked by the employee, vacation banked and/or paid or simply a complete summary of the payroll and taxes, you need to keep documentation. This will help you at year end when you need to submit your taxes as well as complete tax slips (T4s) for your nanny. Also, should any problems arise whether with the CRA or your employee, you can always revert back to your reports.

Step 4: Payslips

Payslips are an important document that you are required to offer your employee. Payslips fully disclose the employee’s wages, additional earnings, and any deductions. You’ll want full transparency when it comes to finances between yourself and your nanny.

Step 5: Tax Documents

At year end, you must provide your nanny with a tax slip (T4). Along with the T4, you will need to submit a T4 summary directly to the CRA – this is your report as an employer. The information required on T4 details all of the financial year to date information for the employee for the calendar year. Each year, T4s are due on the last day of February both to the employee, as well as the CRA.

Step 6: Payment

There are various ways that you can pay your nanny such as writing cheques, sending email e-transfers or everyone’s preferred method: direct deposit. Paying your nanny directly helps you save both time and money. No more signing cheques, and no more trips to the bank for your nanny.

Run payroll, for free:

PaymentEvolution provides a one-stop shop when it comes to paying your nanny and includes: full payroll calculations, direct payments, T4s, T4 summaries, and online payslips helping you solve your payroll pain. The best part? You can run payroll in under a minute and have the money sent directly to your nanny’s bank account. To learn more about our plans visit https://PaymentEvolution.com/Plans

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