Nanny Payroll Service Options Comparison

When you hire a nanny, you may be surprised at the complexity involved to simply pay her.  There are several different options to handle payroll.

Payroll Option  Time Investment   Cost of service per year Drawback
 Paying under the table Very Low $0 Illegal, Nanny gets no benefits
 Full Service Payroll provider Low $1,000+ High cost
 Do it all yourself High $0 Lots of time required
 Nanny Pay Advisor Medium-Low $60 Some time required

Let’s look at each of the nanny payroll alternatives in a little more detail.

  1. Pay under the table.  This is bad for the nanny and bad for you as the employer.  If you are paying $2,200 or more to your nanny in 2020, it considered tax evasion to go this route.  For the nanny, she loses out on accruing Social Security benefits, unemployment benefits, a verifiable record of employment to help build her credit history, and worker’s compensation benefits should she get injured on the job.  Luckily, there are tax breaks available to you as a household employer which can cover much of the extra cost required to pay legally.
  2. Use a full service payroll provider.  Using a company such as HomePay by Breedlove will take care the initial registration as a household employer, handle all payroll for you, and file quarterly and yearly reports on your behalf.  However, there is a steep price for this, and you may pay over $1,000 for a year of such a service.
  3. Do all the legwork yourself.   You can find out the federal, state and local requirements of what and when to register and pay for.  Then on a weekly basis calculate the required withholdings, give your nanny a pay stub, retain required records, and write a check to your nanny.  This is the cheapest of the legal options, but also the most time-consuming and tedious.  Use this handy checklist to see what is involved.
  4. Nanny Pay Advisor.  Nanny Pay Advisor is a mobile app for Android phones and tablets or your iPhone and iPad that takes care of the most tedious and regularly recurring parts of nanny payroll, and guides you through the rest.  With a $5 a month price tag and even a free trial, you can’t go wrong to give it a try.  Download it from the Google Play Store or the Apple App Store.

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