New Pension Law for Nannies

Parents who use a nanny to look after their children should know that their nanny is legally, in the majority of cases, seen as their employee and as such they have certain legal employment obligations such as the provision of regular payslips, entering into an employment contract and enrolling them into a qualifying pension scheme.

As of 1 June 2015, all employers with 50 employees or less, including parents who employ a single nanny will have to auto-enrol their employees into a qualifying pension scheme. However please note that each employer will be notified by the Pensions Regulator when their staging date is 18 to 12 months in advance. The Staging Date is the date by which you have to have set up the scheme so if you haven’t been notified you have some time.

Here are some further points to be aware of:

• A parent will only have to auto-enrol their nanny if they are classed as an “eligible worker” who:
  
  • is not already in a workplace pension scheme;
  • is at least 22 years old;
  • has not yet reached State Pension Age;
  • earns more than the minimum earnings threshold (currently in 2015/2016: £10,600 per year or £192 per week); and
  • works or ordinarily works in the UK according to their contract.

• If your nanny qualifies, then you both will have to pay a minimum contribution based on “qualifying earnings”. These are currently the amount between an annual gross salary of £5,824 and £42,385.

• Contributions start at one per cent from both the employer and the employee and will increase by October 2018 to three per cent from the employer and four per cent from the employee. The employee contributions will be treated as pre-tax deductions, so the individual’s PAYE liability will be reduced by 20 per cent of their pension deductions.

• Pension contributions will be based on your nanny’s gross earnings so it is therefore very important to agree a gross salary with your nanny or you could end up paying a lot more.

• Anyone employed for less than three months will not need to be enrolled by their employer automatically, although they can join of their own accord.

• If your nanny does not want to be enrolled in a pension, you are still legally obliged to enrol him / her but once registered the nanny has a month in order to opt out from the day he / she officially becomes a member of the scheme. So an employer will still have to set up a pension scheme and register before the employee can opt out.

• Nannies who opt out can rejoin at any time and employers will also have a duty to automatically enrol employees back into the scheme approximately every three years provided that the employee is still eligible.

• Parents should contact their payroll provider who should do all the administration and calculations for them, including all the paperwork. Parental Choice can guide parents through their obligations and take the stress and hassle out of enrolling their nannies as part of our payroll service.