Choosing Nanny Care: How Much Does A Nanny Really Cost?

To decide if you can afford a nanny, it’s important to not just look at the hourly rate but to look at all the costs involved in hiring and employing a quality caregiver. Here I’ve outline the expenses you should consider and when possible, I’ve given you a rough estimate of what they’ll cost.

Wages
It’s not the only expense involved but it’s by far the largest. To get a better idea of what your area’s average wage is, call a few local placement agencies or your local support group and ask what range they’d put your job in. Don’t go by the hourly rates listed on nanny job sites like Care.com. Many of those rates are infamously low and don’t represent what a quality caregiver will cost.

Your Nanny Search
Full Service Placement Agency
An agency will recruit, screen and match nannies to your family’s needs. Some agencies charge a registration fee usually between $75 and $150. Once you hire a nanny, you can expect to pay a placement fee between $1,000 and $4,000.

Online Nanny Job Site
There are several online nanny matching sites (e.g. Care.com, Sittercity.com) that allow parents to post their jobs and view the profiles of available nanny candidates. A database membership generally ranges from $40 to $250.

Background Check
If you’re using an online job site or finding a nanny on your own, you shouldn’t offer the job until you run a full background check on the candidate. (An agency should include this in its placement fee.) Although the cost of a comprehensive background check will vary depending on the firm you use and the checks necessary to adequately screen your potential nanny, you can expect to pay between $100 and $350.

Interviewing Costs
You’re responsible for the costs associated with interviewing a nanny.  For local nannies this is a small investment (e.g. tolls, parking).  For out of area candidates, you’ll need to add in transportation to and from your home (e.g. airfare,  train fare, cab fare) and food and lodging during the trip.

Working Interviews
If you plan to evaluate nanny candidates during a working interview, it’s standard within the industry to pay the caregiver for her time. Generally she’s paid a flat fee (set by you) or her asking hourly rate.

Taxes
Employer Taxes
Employers are required to pay certain taxes and insurance premiums; Social Security, federal and state unemployment, and worker’s compensation. You can expect to pay 9 to 11% of your nanny’s gross wages. There are lots of taxes breaks available so make sure you talk with a nanny tax service before you settle on a wage and benefit package.  Here are the two companies I refer clients to.

Payroll and Tax Preparation
Many parents choose to hire a service to handle payroll preparation and quarterly and yearly taxes. These services can vary in their set-up and monthly fees.

NOTE: When hiring an individual or service, make sure they are experienced in NANNY taxes. Many very expensive CPAs and payroll services don’t understand the unique nature of household employment and make costly mistakes.

Car
Employer Provided Car
Employers that provide their nanny with a car for work and/or personal use are responsible for the car or lease payment, insurance, gas used during work hours, maintenance and repairs.

Nanny Provided Car
Employers that ask their nanny to use her car for work are responsible for paying for a professional use insurance rider (if required by state law) and mileage reimbursement based on the current IRS rate.

Benefits
Meals
Many live-out nannies are provided meals while on duty and live-in nannies are provided all meals. (Part of the “board” in room and board.) Of course this isn’t a blank check for the grocery store but even with reasonable limits, food can add up.

Comfortable Work Environment
Additional utilities are one of those expenses you may or may not have, depending upon how much a nanny will change your housestyle. If you’re used to only kicking on the heat or air conditioning for a couple of hours in the evening after work then suddenly you have a nanny and child home all day, you’ll definitely notice the difference in your utility bill.

Outings
Employers are responsible for the cost of the activities their child participates in (e.g. zoo, museums, classes, lunch out).  These costs include the cost of the nanny’s admission and meals.  Depending upon the type of activities you want your child involved in, this could be close to zero or a substantial expense.

Supplies
Some nannies don’t use any supplies, others use a lot. It all depends on the type of environment you want for your child. If you want days full of arts and crafts projects, educational activities and music time, the more you’ll need to supply.

Paid Time Off
It’s standard for all full-time nannies to receive two weeks paid vacation and paid major federal holidays.  Many also receive paid sick, professional, weather, and personal days off.  If you can’t take off work or have relatives that can pitch in during this time off, you’ll need to pay for back-up childcare.

Bonuses
The standard for the nanny’s yearly anniversary is one to two week’s wages.

Professional Development Allowance
Many families provide their nanny with an allowance to take child-related classes and attend professional conferences. This can include registration, travel, lodging and meals.

Health Insurance
Although it’s not a standard benefit, many experienced nannies require fully or partially paid health insurance. The cost of health insurance depends upon your state and the age of your nanny.  Health insurance premiums are non-taxable compensation so this benefit doesn’t cost as much as you think.  For more info read the post on nanny health insurance.