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Benefits you should offer a nanny or caregiver

Written by: Elizabeth Walker
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Published on January 25, 2023.

As a household employer, providing your nanny or caregiver competitive wages and a robust benefits package is essential. While not required by law, employee benefits show that you consider your nanny’s health and wellbeing a top priority.

Offering benefits helps you attract and retain the perfect nanny to care for your loved ones. They also help your nanny avoid burnout, make their job more enticing, and encourage them to stick around for the long haul.

When drafting your nanny's offer letter, knowing which benefits make an appealing compensation package is essential. To get you started, we’ll review the typical benefits offered to nannies and how you can provide them.

Learn more about how a qualified small employer HRA (QSEHRA) can support your nanny in our guide

What are common nanny and caregiver benefits?

According to Zippia1, more than 217,213 nannies are employed in the U.S. However, employee benefits aren’t offered to many nannies outside their standard compensation because no federal law requires employers to offer them.

Nanny benefits vary from state to state, even from family to family. You can design your benefits package based on your nanny’s specific needs. However, the sections below highlight five standard benefits typically offered to nannies and caregivers.

1. Health insurance

It’s no surprise that health insurance coverage is a popular benefit nannies and caregivers ask for in their compensation packages. Health insurance coverage can be challenging to offer, but you have a few options as an employer.

Some nannies want a healthcare reimbursement method as a health benefit, like a health reimbursement arrangement (HRA). The qualified small employer HRA (QSEHRA) works well for nannies because it’s designed for employers with only a handful of employees, or even only one. And because QSEHRAs are a form of non-taxable compensation, they won’t impact your nanny’s annual wages during tax season.

If your nanny qualifies for premium tax credits, offering a monthly health stipend allows them to spend their allowance on a health plan and other medical items while also collecting their full tax credit.

Each of these easy-to-administer options will benefit your nanny’s health and wellness and boost your overall benefits package.

2. Guaranteed pay and overtime

Guaranteed hours protect your nanny’s income when childcare services aren’t required, such as during a family vacation. They work by ensuring the nanny receives their regular wages for a guaranteed number of hours during the work week.

Guaranteed pay also protects the employer, as they’re not at risk of losing their nanny to another employer due to loss of income while their services aren’t requested.

According to the Fair Labor Standards Act2 (FLSA), domestic employees, like nannies and caregivers, are considered non-exempt workers. Therefore, they’re entitled to overtime pay. Full and part-time nannies that provide childcare for 40+ hours a week should receive 1.5 times their hourly rate for each overtime hour worked.

Live-in nannies typically don’t receive overtime pay, but it varies from state to state, so check your state’s laws if you have one.

3. Paid time off and paid holidays

While a few states require some paid time off (PTO), there’s no federally mandated time off policy, so offering it to your nanny is a great perk.

The average paid vacation amount is five to 15 days a year, but you can determine how much time to offer based on your family and your caregiver’s needs. You can also decide if the PTO will roll over annually or if it will reset each calendar year.

Paid time off doesn’t include holidays, so they should be considered a separate benefit. It’s typical for employers to offer either all federal holidays or five to seven holidays of their choice. Some states have rules about overtime on holidays, so be sure to check your state’s laws.

4. Paid sick days

Paid sick days are important for any employee. But, they’re essential for nannies and caregivers because they work closely with your child and your elderly relatives. Nannies need to ensure they’ll get paid if they’re ill and need to take a sick day to recover. If you offer your nanny sick days, it’s good to have backup care on hand, such as daycare.

There are currently no federal laws requiring paid sick leave, but some states and cities have their own regulations on the number of days an employer must offer, the method of accrual, and how employees can use the leave.

5. Mileage reimbursement

If your nanny uses their personal car for your household services, like errands, or to drive your child to school, you should consider a mileage reimbursement benefit. The IRS has a standard annual mileage rate3 to help you calculate how much reimbursement you should allow.

If your nanny is driving your kids in your family car, there’s no reimbursement needed unless your nanny pays for gas while using it during their duties.

Federal law doesn’t require mileage reimbursement. However, some states require reimbursement for the miles your nanny drives in their own car while working, so check your state’s requirements.

Why you should offer benefits to your nanny or caregiver

These days, hiring the best nanny candidate or keeping your preferred caregiver requires more than offering competitive wages. The nanny industry is competitive and getting quality nanny care means being willing to provide benefits to attract and retain good employees. Great benefits can give you an edge over other families also looking to hire a domestic worker.

Providing benefits to your nanny is advantageous because it:

  • Helps your job listing stand out from others.
  • Attracts more experienced and qualified candidates from a reputable nanny agency.
  • Shows your nanny you value their work, health, and wellbeing.
  • Improves job satisfaction and morale.
  • Incentivizes your nanny to stay with your family long-term.

Remember, nannies are professionals at what they do. And like other professionals, nannies expect standard employment benefits with their job.

How to find a nanny

Having a nanny can make your life easier, but it can be hard to find a great one. You can start your search by asking friends and family members for recommendations, especially if they already have a nanny they love.

There are several caregiver websites that can also help. These sites typically list several prescreened nannies outlining their experience, availability, salary requirements, background check, and references to help you determine if they would be a good fit. You can also search local message boards and nanny placement agencies to find potential candidates.

PeopleKeep’s partner, Nanniest, is an excellent option if you're going the online route. As a nanny recruiting provider, Nanniest helps working parents employ a qualified part-time or full-time nanny through their comprehensive search and employment process so they can focus on growing their families and careers.

How PeopleKeep can help you provide benefits to your nanny or caregiver

Offering benefits is an excellent way to improve your hiring efforts. Due to the pandemic, nannies are even more aware of the importance of having an employer-sponsored benefits package. For families, this means providing benefits is a necessity.

Luckily, there are cost-effective and tax-advantaged benefits options available, and PeopleKeep can help. By offering a pre-tax health benefit, such as an HRA, your childcare provider receives a formal health benefit, and you can reduce your overall nanny tax amount.

Below we’ll show you how PeopleKeep’s QSEHRA can set you up for success when offering a health benefit to your nanny and how our stipend administration software WorkPerks can help you cover other eligible expenses, too.

Qualified small employer HRA (QSEHRA)

A QSEHRA is an IRS-approved, tax-free health benefit designed to reimburse a household employee for individual health insurance premiums and other out-of-pocket medical expenses. Over 200 qualified healthcare expenses listed in IRS Publication 502 are eligible for reimbursement with a QSEHRA.

Like other HRAs, the QSEHRA’s reimbursement structure is simple. The employer sets an allowance for their nannies to spend on medical items. When the nanny makes a qualified purchase, the expenses are reviewed, and if approved, they are reimbursed for their healthcare costs up to their available allowance.

As an employer, you can determine if you want to set up your QSEHRA to reimburse your nanny for health insurance premiums only or premiums and qualified out-of-pocket expenses.

It’s important to note that QSEHRAs have maximum contribution limits set annually by the IRS. However, there are no minimum contribution requirements. Additionally, if you have multiple full-time caregivers, you must offer the HRA to all of them at the same allowance amount, even if they don’t want to use it.

Advantages of providing your nanny a QSEHRA health benefit:

  • Employer contributions to a nanny’s HRA are tax-deductible.
  • Nannies can purchase the individual health insurance policy that meets their needs on a health insurance marketplace, from a broker, or directly from a health insurance company.
  • Reimbursements are income tax-free as long as your nanny has a health insurance plan that meets minimum essential coverage (MEC).
  • Employers can set a budget-friendly monthly allowance.
  • Funds can carry over from year to year if allowed by the employer.
    • If administrating your QSEHRA through PeopleKeep, only monthly rollovers are allowed.

As a household employer, managing a formal health insurance benefit on your own can seem daunting. But with a payroll service and an HRA administrator like PeopleKeep, we’ll do all the heavy lifting for you. We review documentation, handle HRA compliance, and keep receipts on file according to IRS regulations.

WorkPerks

WorkPerks is a software solution powered by PeopleKeep that helps you offer reimbursable employee stipends to your nanny. With WorkPerks, household employers can provide fringe benefits to their domestic workers and create a more robust employee benefits package.

The employer sets a flat allowance amount for each employee class, which they can spend wherever they want. You can decide which expenses within your eligible categories, such as health and benefits, are eligible for reimbursement, and you’ll only pay out benefit funds once you approve your nanny’s expenses. However, unlike a QSEHRA, stipends are considered taxable wages.

WorkPerks is customizable and flexible enough to suit the needs of you and your household employees. With our user-friendly dashboard and award-winning customer support, offering comprehensive benefits with PeopleKeep has never been easier.

Conclusion

As a parent, your nanny or caregiver is an integral part of your family. While household employers have no legal obligation to offer benefits, most find that providing benefits is integral to a stable and long-lasting relationship with your domestic worker.

At PeopleKeep, we’re here to provide you with straightforward benefits for nannies. With a QSEHRA or stipend, you can help your nanny offset the cost of health insurance, their monthly premiums, and various other expenses. Schedule a call with one of our personalized benefits advisors, and we’ll help you offer benefits to your nanny.

This article was originally published on May 4, 2022. It was last updated on January 25, 2023.

1. https://www.zippia.com/nanny-jobs/demographics/

2. https://www.dol.gov/agencies/whd/flsa

3. https://www.irs.gov/tax-professionals/standard-mileage-rates

Originally published on January 25, 2023. Last updated January 25, 2023.
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