Nanny Minimum Wage

[alancox]

We are hiring an in-home nanny (my sister-in-law) to watch our two children. She will bring along her own baby.

From a family perspective, nothing could be better. Our kids get to spend time with family, and we are able to help my sister-in-law financially.

We also want to be on the up-and-up, making sure we follow the law, pay taxes, and treat her fairly. Does the fact that she will watch her own child at the same time remove the legal necessity to pay minimum wage?

Thanks!

Edit
Some people appear to be horrified that I've even asked the question about minimum wage. Looking back over how I phrased the question, I can see that people could jump to conclusions and decide that I am evil. On most days I am not, so here's additional context:

• If there are genuinely legal reasons for her to be paid less than $7.25/hour (like eating our food, or if there were reductions due to watching her own child during the time), and we paid her $7.25 anyway, we would know we were doing more than what is required.
• Our initial agreement was for her to watch our kids for the same price we were paying daycare. She was abundantly thrilled, since she and her husband don't make much money, and the initial arrangement would close to double their household income. It wasn't until we were a couple of weeks into this that my wife asked, "Have we been paying her minimum wage, and if not, do we need to?" If we had been failing in our duty to provide her with the legal minimum, we would want to correct the problem really quickly.

[Dave76]

You want to pay below the minimum wage?

[greg24]

You want her to watch your two children, in your home, for below minimum wage? And want it to be "on the up-and-up"?

[lisaac]

Are you serious? She will take care of your two kids and you are trying to pay her less then minimum? My brother has two kids and pays the nanny $15/hour..

[supersharpie]

We are looking to hire an in-home nanny (my sister-in-law) to watch our two children. She will bring along her own baby.

From a family perspective, nothing could be better. Our kids get to spend time with family, and we are able to help my sister-in-law financially.

We also want to be on the up-and-up, making sure we follow the law, pay taxes, and treat her fairly. Does the fact that she will watch her own child at the same time remove the legal necessity to pay minimum wage?

Thanks!

This must be a joke. You want to pay your sister-in-law LESS than minimum wage to care for your children??? How is that "treating her fairly."

Use some common sense.

Also, your wife wants to pay her sister less than a burger flipper?

If anything you should be paying her more than the going rate since she is family.

::mind blown::

[toblerone]

The sister-in-law could be getting other types of compensation, such as free room and board, and who knows what else.

[AlohaJoe]

We also want to be on the up-and-up, making sure we follow the law, pay taxes, and treat her fairly. Does the fact that she will watch her own child at the same time remove the legal necessity to pay minimum wage?

(Disclaimer, I am not a lawyer, I just know how to use google.)

You didn't get many real answers. Let me try to be more useful.

If you are employing her on a casual basis, then she is exempt from minimum wage laws. Casual basis means "intermittent or irregular". That's why when you hire the neighbour's 14 year to watch the kids you don't have to worry about minimum wage.

If you hiring her on a regular basis (i.e. every Friday) then you need to pay minimum wage. If you are offering room or board then you can deduct up to 40% of wages to cover that, which would drop the effective federal minimum wage to $4.35.

I don't think federal law makes an exceptions for any other circumstances, including bringing their own child.

[Jill07]

How old are the children? Are they in school part of the day? Is this part-time or will your SIL be watching three children (hers included) 40 hrs a week? Don't underestimate how much work is involved watching 3 young children all day by yourself. She deserves to be well-paid. She might be better off working for a daycare center where she would get benefits (which often include free childcare).

[nordlead]

The sister-in-law could be getting other types of compensation, such as free room and board, and who knows what else.

exactly, people are over-reacting.

If they paid her $5/hr and she watched the kids 50hr/week, got free food and housing, that is $250 in her pocket without having any expenses. Not a bad deal. If she worked $8/hr at a daycare that won't give her 30hr/week (when my wife worked at a daycare 6 years ago she never got over 30 hours), that would be $240/week but she still has to pay for housing and food, which wouldn't leave much left over. (of course neither example accounts for taxes).

[sunnyday]

I'm surprised by some of the strong reactions. If your sister-in-law enjoys watching your children, is getting free place to live, free food, gets to watch her child at the same time and making some extra cash it sounds like it's a good set up for everyone.

I'm not sure what the minimum wage is, but it will be a PITA doing taxes. I had a similar post previous and pretty much everyone recommended giving my family member a cash gift (up to $14k a year) instead of formally "hiring"

[Buysider]

I don't think federal law makes an exceptions for any other circumstances, including bringing their own child.

Only one exception I can think of:

"immediate members of the family of an employer or persons dependent upon an employer for half or more of their support in the customary sense of being a dependent are exempt from both minimum wage and overtime laws"

Don't know where the sister-in-law falls in that category...

[mptness]

From a family perspective, nothing could be better. Our kids get to spend time with family, and we are able to help my sister-in-law financially.

It sounds like this is a better situation than hiring a stranger for minimum wage to watch your children.

We also want to be on the up-and-up, making sure we follow the law, pay taxes, and treat her fairly.

If this were my sister-in-law and I wanted to treat her fairly, I would ask her how much she wanted to be paid.

[Gnirk]

Please consider the following:
Is she living with you, or will she need to pack up her child and drive to and from your home each day? That commute becomes her cost in both money and time, just like a "regular job".
If you are paying normal payroll taxes, then she too will be paying them (social security, medicare, etc), since she is your employee.
She is providing you with convenience by coming to your home, so you don't have to pack up your children to drive them to and from daycare.
If you were taking your children to a daycare center, what would the cost be? Most likely more than paying her minimum wage, plus payroll taxes.

Caring for three small children is no easy task.
I think she deserves at least minimum wage. Just my opinion, of course.

[dbr]

We also want to be on the up-and-up, making sure we follow the law, pay taxes, . . .

Thanks!

If you really mean that then you will have to inform yourself of the body of laws and regulations both state and federal that apply to taxes, wages and hours, workers compensation, unemployment compensation, employers liability insurance and so on. Believe me, it is massive. Also, don't think you can skate on this by claiming the employee is a contractor. This is one of the classic categories where they are on to you if you try it.

As far as fairness, if this is a real job for the SIL then cut rate wages, not paying into SS and Medicare, not providing workers comp. and unemployment, not paying for overtime hours, etc. is hardly fair. I agree that there may be offsetting compensation and that could change the picture considerably.

If I had any one single fear it would be my personal liability for the SIL causing an injury to someone while acting as my employee. That is why one should consult an insurance agent about employer's insurance, which then cascades into all the other categories of doing things according to the drill . . . or not.

I have been there and done this though not with a relative as the provider of paid services.

Whether or not this is an alarmist view is open to opinion.

[dm200]

Just my 2 cents - while there are many good and valid points made by many of the posts, based on the information supplied, I think that the criticism of the OP question about "minimum wage" laws/requirements is very unfair. We do not know the ages of the two children, exactly what duties/tasks are expected, other financial matters between the families, number of days/hours involved, and so on. Neither do we know the employment/economic environment.

To the extent that is possible and practical, I do think she should be paid/compensated such that taxes are withheld, Social security is paid and so on. There may even be some win-win options relating to tax deductions for dependent care. if applicable - there might even be some mutually beneficial options under Obamacare if the SIL's healthcare situation might benefit.

While I have no idea of the financial arrangements that were involved, I have known several such family arrangements that were real winners for both families - not the least of which were that the children were extremely well cared for by a very competent family member.

[Grt2bOutdoors]

We are looking to hire an in-home nanny (my sister-in-law) to watch our two children. She will bring along her own baby.

From a family perspective, nothing could be better. Our kids get to spend time with family, and we are able to help my sister-in-law financially.

We also want to be on the up-and-up, making sure we follow the law, pay taxes, and treat her fairly. Does the fact that she will watch her own child at the same time remove the legal necessity to pay minimum wage?

Thanks!

You can't be serious! You want to treat her fairly? - take the going rate for one child and multiply times 2 and minus 15% for bringing her child (your niece or nephew along) but make sure to provide enough food and drink for a family of 4 while you are away at work. Minimum wage , arrrumph! I see nanny's all the time bringing multiple kids to and from their homes, they may not be direct family, but I assure you no one is doing that job for minimum wage, or even minimum wage * 2 with Social Security included. Not only will your sister in law be providing nanny services, its likely she'll be providing care that is likely to be better than if you hired a nanny off a list (though that is not always the case!). I think you ought to be having this discussion with your wife and sister in law both present - negotiate a reasonable wage, but if it were me I'd offer above minimum wage lest you make your prospective nanny feel she's valued just as much as a burger flipper at your local fast food eatery.

[Bogle101]

Thread has been locked due to insanity of OP

[tomd37]

Alancox,

You realize, I hope, in order to claim the Child and Dependent Care tax credit on your tax return that you are going to have to show your SIL's name and social security number on your tax return. Likewise she is going to have to show the income on her tax return using Schedule C or CEZ and Schedule SE as being self-employed.

Based on what you have indicated, I really don't think she will be hired as a "Nanny" but rather as a babysitter.

[Gnirk]

FYI: Nannys in our area are paid upwards of $40,000 for two children……and that doesn't include housework, except for preparing their meals. My daughter's best friend is a Nanny for three children, and is paid $60K per year, plus a retirement plan, allowance for health insurance, and overtime for anything more than 45 hours per week.

[dm200]

Based on what you have indicated, I really don't think she will be hired as a "Nanny" but rather as a babysitter.

OK, please "educate" me - what are the differences between the two 'designations'?

[tomd37]

In my opinion the terms "Nanny" and "Au Pair" are used interchangeably to refer to a person hired as a household employee to care for a child or children. I believe there are a different set of IRS tax rules pertaining to a household employee with certain reporting and withholding requirements imposed on the employer.

Your SIL appears to be just someone coming into your home to care for your child or children and does not live with you and probably would not be considered a household employee.

None the less she still has to report the income you provide to her on Schedule C or CEZ and Schedule SE. All income, cash or otherwise, must be reported to the IRS. She has to give you a statement as to the total of your payments to her along with her taxpayer identification number (probably her SSN in this case). You can use that annual statement to apply for the Child and Dependent Care Tax Credit. In doing so you must reflect her TIN on your tax return as a check and balance for the IRS on the two tax returns.

One final comment - - - "Don't Mess With The IRS"

[deanbrew]

FYI: Nannys in our area are paid upwards of $40,000 for two children……and that doesn't include housework, except for preparing their meals. My daughter's best friend is a Nanny for three children, and is paid $60K per year, plus a retirement plan, allowance for health insurance, and overtime for anything more than 45 hours per week.

You've got to be kidding. That's astounding, astonishing, jaw-dropping. Take your pick. Retirement? Overtime? For a nanny?

Just goes to show a dollar isn't a dollar everywhere, I guess. Nannys in my area get about $10-15 an hour with no retirement or insurance benefits. Not sure about overtime.

As for the OP: will the nanny be living in your home or in her own home? Room and board are certainly meaningful considerations when it comes to the appropriate wage.

[Iorek]

FYI: Nannys in our area are paid upwards of $40,000 for two children……and that doesn't include housework, except for preparing their meals. My daughter's best friend is a Nanny for three children, and is paid $60K per year, plus a retirement plan, allowance for health insurance, and overtime for anything more than 45 hours per week.

You've got to be kidding. That's astounding, astonishing, jaw-dropping. Take your pick. Retirement? Overtime? For a nanny?

Just goes to show a dollar isn't a dollar everywhere, I guess. Nannys in my area get about $10-15 an hour with no retirement or insurance benefits. Not sure about overtime.

As for the OP: will the nanny be living in your home or in her own home? Room and board are certainly meaningful considerations when it comes to the appropriate wage.

Nannies most certainly are entitled to overtime if they work more than 40 hours a week. Often it is mutually beneficial for the employer to pay a portion of health insurance (for both tax and health reasons).

[stoptothink]

FYI: Nannys in our area are paid upwards of $40,000 for two children……and that doesn't include housework, except for preparing their meals. My daughter's best friend is a Nanny for three children, and is paid $60K per year, plus a retirement plan, allowance for health insurance, and overtime for anything more than 45 hours per week.

NYC or Bay Area? I personally know several full-time in-home nannies (including my sister), none of which make anywhere near that or receive any of those benefits. I also happen to be in a very related field as the health director for a large public organization which has both Head Start programs and licensed childcare. If jobs like that were available in my area I would have no employees. All of my direct employees have at least an undergrad degree in early childhood development (or other related fields) and none make anywhere near $60k. Our childcare teachers, all of whom also have college degrees and are responsible for at least 4 children in a highly regarded licensed facility, make $26k-$30k depending on experience.

[Gnirk]

FYI: Nannys in our area are paid upwards of $40,000 for two children……and that doesn't include housework, except for preparing their meals. My daughter's best friend is a Nanny for three children, and is paid $60K per year, plus a retirement plan, allowance for health insurance, and overtime for anything more than 45 hours per week.

NYC or Bay Area? I personally know several full-time in-home nannies (including my sister), none of which make anywhere near that or receive any of those benefits. I also happen to be in a very related field as the health director for a large public organization which has both Head Start programs and licensed childcare. If jobs like that were available in my area I would have no employees. All of my direct employees have at least an undergrad degree in early childhood development (or other related fields) and none make anywhere near $60k. Our childcare teachers, all of whom also have college degrees and are responsible for at least 4 children in a highly regarded licensed facility, make $26k-$30k depending on experience.

Puget Sound area, Washington State. Employer couple are both in the tech field. She commutes to their home, and is not a live-in. And does have a 4 year degree. Her commute is 1 1/2 hours each way, since the family lives on an island and she must take a ferry, so it's a long day for her.

[dbr]

FYI: Nannys in our area are paid upwards of $40,000 for two children……and that doesn't include housework, except for preparing their meals. My daughter's best friend is a Nanny for three children, and is paid $60K per year, plus a retirement plan, allowance for health insurance, and overtime for anything more than 45 hours per week.

You've got to be kidding. That's astounding, astonishing, jaw-dropping. Take your pick. Retirement? Overtime? For a nanny?

Just goes to show a dollar isn't a dollar everywhere, I guess. Nannys in my area get about $10-15 an hour with no retirement or insurance benefits. Not sure about overtime.

As for the OP: will the nanny be living in your home or in her own home? Room and board are certainly meaningful considerations when it comes to the appropriate wage.

In my state overtime would apply with a penalty of back pay plus a fine of 100% of pay plus attorney costs incurred by the employee to recover wages. It would require a civil suit by the employee for anything to happen.

Companies that play tricks with this on a massive scale can be subject to criminal charges and prison time for principles, but that would be unheard of for a nanny case.

[stoptothink]

FYI: Nannys in our area are paid upwards of $40,000 for two children……and that doesn't include housework, except for preparing their meals. My daughter's best friend is a Nanny for three children, and is paid $60K per year, plus a retirement plan, allowance for health insurance, and overtime for anything more than 45 hours per week.

NYC or Bay Area? I personally know several full-time in-home nannies (including my sister), none of which make anywhere near that or receive any of those benefits. I also happen to be in a very related field as the health director for a large public organization which has both Head Start programs and licensed childcare. If jobs like that were available in my area I would have no employees. All of my direct employees have at least an undergrad degree in early childhood development (or other related fields) and none make anywhere near $60k. Our childcare teachers, all of whom also have college degrees and are responsible for at least 4 children in a highly regarded licensed facility, make $26k-$30k depending on experience.

Puget Sound area, Washington State. Employer couple are both in the tech field. She commutes to their home, and is not a live-in. And does have a 4 year degree. Her commute is 1 1/2 hours each way, since the family lives on an island and she must take a ferry, so it's a long day for her.

Being in the industry, and having been in three separate states, I can assure you that the anecdotal compensation of your daughter's friend is not remotely close to the norm in other parts of the country. Nannies in Texas, Arizona, and Utah (with college degrees and licensing) are making half of what she does, without the benefits. Might be helpful to the OP if the area was noted.

[Iorek]

FYI: Nannys in our area are paid upwards of $40,000 for two children……and that doesn't include housework, except for preparing their meals. My daughter's best friend is a Nanny for three children, and is paid $60K per year, plus a retirement plan, allowance for health insurance, and overtime for anything more than 45 hours per week.

NYC or Bay Area? I personally know several full-time in-home nannies (including my sister), none of which make anywhere near that or receive any of those benefits. I also happen to be in a very related field as the health director for a large public organization which has both Head Start programs and licensed childcare. If jobs like that were available in my area I would have no employees. All of my direct employees have at least an undergrad degree in early childhood development (or other related fields) and none make anywhere near $60k. Our childcare teachers, all of whom also have college degrees and are responsible for at least 4 children in a highly regarded licensed facility, make $26k-$30k depending on experience.

Puget Sound area, Washington State. Employer couple are both in the tech field. She commutes to their home, and is not a live-in. And does have a 4 year degree. Her commute is 1 1/2 hours each way, since the family lives on an island and she must take a ferry, so it's a long day for her.

Being in the industry, and having been in three separate states, I can assure you that the anecdotal compensation of your daughter's friend is not remotely close to the norm in other parts of the country. Nannies in Texas, Arizona, and Utah (with college degrees and licensing) are making half of what she does, without the benefits. Might be helpful to the OP if the area was noted.

But is there anywhere in the country where a nanny makes minimum wage ($15,000) for watching 2 kids? There shouldn't be.

[inbox788]

I'm surprised by some of the strong reactions. If your sister-in-law enjoys watching your children, is getting free place to live, free food, gets to watch her child at the same time and making some extra cash it sounds like it's a good set up for everyone.

I'm not sure what the minimum wage is, but it will be a PITA doing taxes. I had a similar post previous and pretty much everyone recommended giving my family member a cash gift (up to $14k a year) instead of formally "hiring"

I see 2 benefits. If employer is running for congress, won't get caught up in some nanny-tax scandal. Employee may be social security employment credit, and if so, be sure you're all paying both employer and employee share, and following all the employment laws and regulations.

The arrangement is very common, but 99% the time, it's not a formal employment agreement. Then again, disputes (arguments) are quite common among family. Having a formal employment arrangement can make disagreements more complicated.

BTW, the gift is $14k/person giving, so for couples it's double, $28k total. Giving gifts to SIL's child may be extra.

[Gnirk]

FYI: Nannys in our area are paid upwards of $40,000 for two children……and that doesn't include housework, except for preparing their meals. My daughter's best friend is a Nanny for three children, and is paid $60K per year, plus a retirement plan, allowance for health insurance, and overtime for anything more than 45 hours per week.

NYC or Bay Area? I personally know several full-time in-home nannies (including my sister), none of which make anywhere near that or receive any of those benefits. I also happen to be in a very related field as the health director for a large public organization which has both Head Start programs and licensed childcare. If jobs like that were available in my area I would have no employees. All of my direct employees have at least an undergrad degree in early childhood development (or other related fields) and none make anywhere near $60k. Our childcare teachers, all of whom also have college degrees and are responsible for at least 4 children in a highly regarded licensed facility, make $26k-$30k depending on experience.

Puget Sound area, Washington State. Employer couple are both in the tech field. She commutes to their home, and is not a live-in. And does have a 4 year degree. Her commute is 1 1/2 hours each way, since the family lives on an island and she must take a ferry, so it's a long day for her.

Being in the industry, and having been in three separate states, I can assure you that the anecdotal compensation of your daughter's friend is not remotely close to the norm in other parts of the country. Nannies in Texas, Arizona, and Utah (with college degrees and licensing) are making half of what she does, without the benefits. Might be helpful to the OP if the area was noted.

Stoptothink: Anecdotal? Really??!!! Sorry, but my facts are straight.

[Iorek]

I'm surprised by some of the strong reactions. If your sister-in-law enjoys watching your children, is getting free place to live, free food, gets to watch her child at the same time and making some extra cash it sounds like it's a good set up for everyone.

I'm not sure what the minimum wage is, but it will be a PITA doing taxes. I had a similar post previous and pretty much everyone recommended giving my family member a cash gift (up to $14k a year) instead of formally "hiring"

I did all the taxes myself and did not think they were that much trouble. The fed taxes can be done on your personal return, and the W-2 and many state taxes can be done online.

I didn't see your earlier thread, but I expect that the IRS would disagree that the amount you paid to a family member caring for your kid was a "gift," regardless of whether you lacked a piece of paper formally "hiring" her (unless of course you had a record of giving her, and comparable relatives, similar amounts in other years).

Just as you can't make an employee into a contractor with a piece of paper, you can't make wage compensation into a gift with a piece of paper.

[deanbrew]

Stoptothink: Anecdotal? Really??!!! Sorry, but my facts are straight.

Anecdotal doesn't mean untrue or even of questionable truth. It simply means it's one example that may not be representative of most instances. Relax, dude.

[stoptothink]

FYI: Nannys in our area are paid upwards of $40,000 for two children……and that doesn't include housework, except for preparing their meals. My daughter's best friend is a Nanny for three children, and is paid $60K per year, plus a retirement plan, allowance for health insurance, and overtime for anything more than 45 hours per week.

NYC or Bay Area? I personally know several full-time in-home nannies (including my sister), none of which make anywhere near that or receive any of those benefits. I also happen to be in a very related field as the health director for a large public organization which has both Head Start programs and licensed childcare. If jobs like that were available in my area I would have no employees. All of my direct employees have at least an undergrad degree in early childhood development (or other related fields) and none make anywhere near $60k. Our childcare teachers, all of whom also have college degrees and are responsible for at least 4 children in a highly regarded licensed facility, make $26k-$30k depending on experience.

Puget Sound area, Washington State. Employer couple are both in the tech field. She commutes to their home, and is not a live-in. And does have a 4 year degree. Her commute is 1 1/2 hours each way, since the family lives on an island and she must take a ferry, so it's a long day for her.

Being in the industry, and having been in three separate states, I can assure you that the anecdotal compensation of your daughter's friend is not remotely close to the norm in other parts of the country. Nannies in Texas, Arizona, and Utah (with college degrees and licensing) are making half of what she does, without the benefits. Might be helpful to the OP if the area was noted.

Stoptothink: Anecdotal? Really??!!! Sorry, but my facts are straight.

It's a single individual whom you have a limited relationship with, have you ever signed her paycheck or even seen her w2? I currently have as my direct employees over 100 child caretakers and 20+ childcare teachers, and this is the 3rd organization (in the 3rd state) that I have done this with over the past 8yrs. My own child is also taken care of by these childcare teachers, which I just so happened to hire (for $26-$29k). Just Google average wage of nannies or au pairs or degreed childcare teachers, your example is nowhere close to the norm. It is the very definition of anecdotal.

[Epsilon Delta]

Technically an au pair is a foreign student performing child care. Au pairs are in the US under a particular part of immigration law and the rules for au pairs are unique to their situation.

It is probably best not to use "au pair" and "nanny" interchangeably, if sister in law is a US resident she is not an au pair.

[dm200]

Stoptothink: Anecdotal? Really??!!! Sorry, but my facts are straight.

Anecdotal doesn't mean untrue or even of questionable truth. It simply means it's one example that may not be representative of most instances. Relax, dude.

Absolutely correct/true.