The dictionary defines a salary as “a fixed compensation periodically paid to a person for regular work or services.” Even if we don’t know the exact laws that surround the salary issue, we have a common understanding of what salary means. It means that a person is paid a set amount for a set period (e.g. weekly, monthly, annually) regardless of how many hours are actually worked in that set period. So if you’re a lawyer and have to pull an all-nighter to get ready for a big case, you’re not racking up the overtime pay. You get paid the same amount for working 80 hours as you do for working 40 hours. (I know, lawyers never work just 40 hours!) If you’re a banker and you take the day off to attend your child’s play, you won’t be docked those hours. You get paid the same amount regardless of how much time you take off. Of course salaried employees are expected to get the job done regardless of how long it takes and they’re usually entitled to bonuses and other perks. It’s one big give and take that hopefully balances out in the end.
By comparison, we all have a common understanding of the hourly worker. She’s paid extra when she has to work beyond 40 hours and she’s docked time when she misses work.
The problem is in the nanny world we’ve taken bits from both models and put them together. It works well for us but this unique hybrid model isn’t defined by any law in the real world. Which means we have to define it and advocate for it ourselves.
How We Got Into the Salary Mess
Before we look at where we are now, it’s important to understand how we got here and why people are holding onto old ideas.
Back in the day, families rarely paid taxes or overtime. They weren’t worried about following the law and in fact, most didn’t even know there were laws that regulated nannies. Paying a flat rate per week or month was the simplest and most effective way to go. It became the standard and that’s proving hard to change.
The idea of salary, a set amount for a variable number of hours, fits in well with the informal nature of nanny care. More often than not, nannies act more like salaried workers than hourly workers. Nannies don’t punch a time clock. They don’t get scheduled breaks or a lunch hour. Parents often get home a little late. Nannies often go home a little early. They get paid when their charge goes to preschool or when their family goes on vacation. So rather than track exact hours, a salary is a great way to deal with the natural flexibility that comes with a nanny position. If only the IRS gave us that option.
A salary makes negotiations easy. Nannies don’t work a typical 40 hour work week. They normally work 45 to 60 hours a week. Trying to negotiate a wage based on a 40 hour work week is a lot more complicated than just going with a set amount.
For example, Family A needs a nanny for 50 hours a week and they have an $800 budget for childcare. So they can say they’re offering a salary of $800 a week or an hourly rate of $14.55. Confused? Here’s the breakdown. $14.55 X 40 hours = $582.00 in regular pay plus $21.82 X 10 hours = $218.20 in overtime pay for a total of $800.20. It’s easy to see why the salary approach is more popular. And let’s face it, $800 a week sounds much more attractive than $14.55 an hour.
Most of the parents that employ nannies are paid a salary so it’s an idea they’re familiar and comfortable with. They like the idea of having a caregiver that’s paid a set amount and that can work whenever they need her to.
So What’s Happening Today
The good news is that parents and caregivers are becoming more aware of what the law says around employing a nanny. The bad news is that there is still a huge amount of confusion and misinformation around the issue of salary.
So what’s the real scoop? The Fair Labor Standards Act says that all nannies must be paid for every hour they work and live-out nannies must be paid overtime for all hours over 40 worked in a work week. Which means that paying a nanny a salary, a set amount for a set period of time, is illegal. For nannies that work the same schedule week after week and that don’t track the extra 5 minutes here and there, being paid an hourly rate may seem very much like being paid a salary. It’s the same amount every week. But if that schedule suddenly changed, the earnings would need to change also.
So although people have a better understanding of this issue, most still don’t have a clear understanding. I still see a lot of misleading statements floating around. Below I tackle some of the ones I’ve seen most often.
“Live-in nannies don’t earn overtime so they can be paid a salary.” First, some states require that live-in nannies be paid overtime. But more importantly, live-in nannies still fall under the protection of the FLSA so they must be paid for every hour they work. Thus, they cannot be paid a salary.
“A nanny can be paid a salary as long as she’s paid overtime” Unfortunately I’ve even heard this one from nanny tax companies. The very definition of salary is that the employee is paid a fixed amount for however many hours she works. Saying she needs to be paid overtime means she’s not being paid a salary.
“I’m paid a salary for up to 45 hours a week. If I don’t work 45 hours, I still get paid for them. If I work more, I get overtime.” Getting guaranteed hours, when your employer pays you even when she doesn’t need you, isn’t the same as being paid a salary. It’s being paid an hourly wage with guaranteed hours.
“I work 50 hours a week but my daily schedule changes week to week so I’m paid a salary.” Even if you work a variable schedule, you’re still paid for the hours you work. Not a salary.
“My overtime is built into my salary.” The very idea of overtime negates the idea of salary. And again, if you work more hours than typical, you’re entitled to more pay.
The Correct Language
I encourage all my parent and nanny clients to throw the word salary out the window. It already has a common meaning and trying to change that meaning to fit the nanny world just results in confusion.
For negotiations, I suggest using an hourly rate based on a 40 hour work week. But I realize that’s probably never going to take hold so I suggest clients at least translate the salary into an hourly rate based on the typical work week. So an $800 salary for a 50 hour week would translate into $16 an hour. The key is to always frame the rate based on a typical week. $16 an hour for a 50 hour a week job is very different than $16 an hour for a 60 hour a week job. Of course when creating your contract, you have to then translate that rate into FLSA friendly terms. (The A to Z Nanny Contract makes this easy.)
For other conversations, I suggest clients use the terms hourly wage and guaranteed hours. Those 2 terms cover all other scenarios. And it makes it very clear what the family is offering and what is expected of the nanny.
And finally for the burning question; what’s the most misunderstood word in the nanny business? Light housekeeping.