Net vs Gross Pay for Nannies: Why It Matters for Employers

Gross pay is the total salary you agree before any tax, National Insurance, or pension deductions are taken out. Net pay is the "take-home" amount left after all deductions. You must always agree on a gross salary with your nanny to protect yourself from unpredictable, spiralling costs and to be legally compliant.

When you're hiring a nanny, the salary discussion will be one of your first and most important. You might find a candidate asks for a "net" (take-home) salary of, for example, £500 per week.

It can be tempting to agree. It sounds simple. You both know exactly what they'll receive in their bank account.

This is a critical mistake.

Agreeing to a net salary is one of the biggest financial risks a nanny employer can take. In fact, it's like signing a blank cheque. UK employment is built around gross pay, and agreeing to a net arrangement puts all the financial risk and legal liability squarely on you.

Here's exactly why it matters.

What Is the Difference?

• Gross Pay: This is the full, total amount you pay your nanny before any deductions. This is the figure you must use in your employment contract. Your nanny's taxes, National Insurance, and pension contributions are then calculated and deducted from this amount.
• Net Pay: This is the "take-home" pay. It's the amount left after all those deductions have been made.

The Dangers of a Net Pay Agreement

If you agree to a fixed net pay of £500 per week, you are legally guaranteeing that £500 will land in your nanny's bank account, no matter what.

This means you, the employer, are responsible for paying all the deductions on top of that £500. And those deductions can change without warning.

1. The Tax Code Trap (The Biggest Risk)

This is the number one reason to avoid net pay. Your nanny's tax code tells you, the employer, how much tax to deduct. This code can change for many reasons that have nothing to do with you:

• Underpaid tax from a previous job: HMRC might discover your nanny underpaid tax in a job two years ago. To reclaim this, they will change her tax code, demanding higher tax deductions now.
• A second job: If your nanny takes on weekend work, their tax-free allowance will be used on their first job (yours), and their tax code will change.
• Student Loan Repayments: These repayments are calculated and collected through payroll.

Under a net pay agreement, if HMRC demands more tax, you have to pay it. Your nanny's take-home pay is protected at £500, so the extra £50 or £100 a week in tax comes straight from your pocket. Your costs can skyrocket overnight.

2. You Will Pay Their Pension

By law, you must enrol your nanny in a workplace pension if they are eligible. This requires both you and your nanny to contribute.

Under a net pay agreement, you can't deduct the nanny's employee contribution, because that would lower their agreed-upon net pay. Therefore, the employer (you) ends up paying both the employer's contribution and the employee's contribution.

3. Your Costs are Unpredictable

A net pay agreement means you are agreeing to pay an unknown amount. You are effectively paying:£500 (Net) + Income Tax (?) + NI (?) + Pension (?) + Student Loan (?)

You have no control over your biggest cost.

The Benefits of a Gross Pay Agreement

Agreeing on a gross salary (e.t., £35,000 per year) solves all of these problems. It is the professional, compliant, and only sensible way to employ someone.

• Fixed, Predictable Costs: You know exactly what your liability is. Your cost is the gross salary + your Employer's National Insurance + your Employer's Pension Contribution. That's it. It's fixed and easy to budget for.
• Your Nanny Manages Their Own Tax: If your nanny's tax code changes because of a past job, it is their responsibility. The deduction will come from the gross salary, and their net pay will adjust, as it does for every other employee in the UK.
• You Both Contribute to Pension: You can legally deduct the nanny's employee pension contribution from their gross pay.
• HMRC Compliance: HMRC only speaks in gross terms. Your payroll, payslips, and end-of-year documents must all be in gross figures. Starting with gross pay makes your payroll legal and simple.

What if my nanny only gives me a net figure?

This is common, as many nannies are used to talking in take-home terms.

Don't just agree to it. Instead, use a "net to gross" calculator. This will show you what the equivalent gross salary is.

Calculator: Use our Nanny Salary Calculator to see exactly how a net figure converts to a full gross salary and a total cost for you as an employer.

Then, you put the gross figure in the contract.

The Simple Way to Manage Payroll

Getting payroll right is a legal must, but it's confusing. This is exactly what Quinn was built for.

Once you've agreed on a gross salary with your nanny, our payroll service takes care of everything for you: From registrations and filings to payslips and payments. We make sure the correct tax and NI are paid every time.

Fully digital, no paperwork, no stress.