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Benefits you should offer a nanny or caregiver

Written by: Elizabeth Walker
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Published on May 4, 2022.

As a household employer, providing your nanny or caregiver with competitive wages and a robust benefits package is essential. While not required, 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 provide care for your loved ones. Not to mention they 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, it’s essential to know which benefits make an appealing compensation package. To get you started, we’ll go over typical benefits offered to nannies and how you can provide them.

What are common nanny and caregiver benefits?

According to Zippia, there are over 217,213 nannies employed in the U.S. But because they’re not required by law, employee benefits aren’t offered to many nannies outside their standard compensation.

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 comes as no surprise that health insurance is a popular benefit that nannies and caregivers ask for in their compensation package. Health insurance can be tricky to offer, but you have a few different 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.

If your nanny qualifies for premium tax credits, offering a monthly health stipend allows them to spend their allowance on healthcare 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.

Learn the average cost of health insurance in your state with our chart

2. Guaranteed pay and overtime

Guaranteed hours protect your nanny’s income when their childcare services aren’t required, such as during a family vacation. They’re designed so that the nanny receives their normal 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 being requested.

According to the Fair Labor Standards Act (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 they work.

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 it’s a great perk to offer your nanny. 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 rollover 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 make sure to check your state’s laws.

4. Paid sick days

Paid sick days are important for any employee. But for nannies and caregivers, because they work closely with your child and your elderly relatives, they’re essential. Nannies need to ensure they’ll still be paid if they get 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, how they’re accrued, and how they can be used.

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 rate 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.

A few key advantages to providing nanny benefits are:

  • 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.

Check out more benefits that can help you attract and retain your employees in our blog

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 out there, and PeopleKeep can help. By offering a pre-tax health benefit, such as an HRA, not only does your childcare provider receive a formal health benefit, you can reduce your overall nanny tax amount.

Below we’ll show you how PeopleKeep’s qualified small employer HRA (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 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 nanny employer sets an allowance amount for their nannies to spend on healthcare items. When the nanny makes a qualified purchase, the expenses are reviewed, and if approved, they are reimbursed up to the allowance amount.

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 plan that meets their needs.
  • 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, it can seem daunting to manage a formal health benefit on your own. 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.

Get our complete guide to the QSEHRA to learn more about how it can work for you

WorkPerks

WorkPerks is a software solution powered by PeopleKeep that helps you offer reimbursable employee perks to your nanny. With WorkPerks, household employers can offer 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 the categories of health and wellness are eligible for reimbursement, and you’ll only pay out benefit funds once you approve your nanny’s expenses.

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.

Get our complete guide to employee wellbeing to learn more about stipends

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 easy and straightforward health benefits. Schedule a call with one of our personalized benefits advisors, and we’ll help you offer a QSEHRA or employee stipend to your nanny.

Originally published on May 4, 2022. Last updated May 4, 2022.
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