After hours of research and soul-searching, you’ve decided that of all your childcare options, hiring a nanny is the best choice for your family. So you find a reputable nanny agency, go through an extensive screening and interviewing process to select just the perfect person to care for your child, and hire her. Suddenly, you’re a household employer, with all the legal, tax, and insurance implications that brings. Now what?
Nannies as Employees
You may be thinking that all of this sounds overly complicated. Couldn’t you just call your nanny an independent contractor and make life a lot easier? In most cases, the answer is no.
The question of whether a nanny is an employee or an independent contractor is one that can sometimes have gray areas, but in almost all cases under both federal and state law, nannies are employees.
There are several legal criteria used to determine a nanny’s employment status:
- Amount of control: Another factor for whether a person is an employee centers on the issue of control. If you exercise control over how the person does his or her job in your own home—and in almost every case you would exercise such control over how your nanny interacts with your child—then you likely have an employee, not an independent contractor.
- Economic reality test: Is this the nanny’s only job? Even if it’s not, does she rely on this specific job for a considerable amount of her income? Is her financial livelihood entirely or largely dependent on this job? If the answer is yes to any of these questions, then she’s almost certainly an employee.
- Regular and substantial hours: The more regularly a nanny works for a family, the stronger the case that she is an employee. It is when her hours are minimal and/or fluctuate from week to week (or month to month) that she is more likely to be considered an independent contractor.
The important thing to remember is that it’s the law that determines who is and who is not an employee. How the nanny refers to herself, how the family defines her status in an employment contract, or whether she is paid hourly or is salaried do not necessarily matter in determining her employee status.
Although there are limited exceptions to the employee definition for certain family members or if you take your child to another person’s home for care, the general rule is that if you control how she performs her duties in your home, she is your employee and you are required to pay employment taxes for her work. Bear in mind that these tests can be applied to other household employees as well, such as elder care providers.
