When you first employ a nanny, you might at first be confused about the process of paying them legally, and if you called for a quote from a nanny payroll service, you will probably be surprised at the cost. But you have a number of choices to handle payroll, and they differ in various ways, such as payment means, time investment, cost of service, etc. Let’s consider the nanny payroll alternatives in a bit more detail.

Pay Under the Table

This is a poor choice for your nanny and illegal for you as the employer. For nannies, being paid “under the table” causes them to lose out on credit toward future Social Security benefits, unemployment benefits, a verifiable wage history to help them build their own credit history, and workers compensation should they get injured at work. Paying “under the table” may seem at first as the least expensive choice, but it will be more expensive in the long run for both you and your nanny,

Utilize a Full-Service Payroll Provider
Using a a full-service nanny payroll company is convenient, but very expensive, and you will still need to be involved to some extent with documenting your nanny’s hours, communicating those hours to the payroll company, and verifying payment amounts and tax forms are accurately prepared. If you can afford it, paying someone to ”do it for you” is nice, but the steep cost for this service can be cost-prohibitive for many young families, particularly if you plan on employing in-home help for several years until your children start school full-time.

Do All the Legwork Yourself
Although “doing it yourself” may seem difficult at first, all the information you really need to know can be found with a few Internet searches. Then every week you can calculate the wages and withholding deductions yourself and write a check to your nanny for the net pay. If you are technology savy, you can even create a spreadsheet to help you with these calculations. This is the most economical approach, but additionally the most time intensive and tedious.

DIY Nanny Payroll Software
A hybrid approach to either doing it all yourself, or paying an expensive service to do it for you, is DIY payroll software such as NannyPay. NannyPay was developed by household employers for household employers, and walks you through the initial tasks of setting up payroll for the first time. Thereafter, NannyPay handles the most tedious chores of doing payroll, including calculating all wage withholdings, creating and printing pay stubs, and generating year-end tax forms. With a low $149 a year cost, and a free 30-day trial period to start, NannyPay can save you time and money, both of which are precious commodities for young families.