The Financial Side of a Nanny Share

Finding affordable childcare can be one of the biggest struggles that parents face.  One solution that is gaining momentum is a Nanny Share.  This means that one nanny is caring for the children from two (or possibly three) families at the same time.  This allows for the families to enjoy the benefits,  flexibility and ease that a nanny offers, at a reduced rate.
Nannies earn more when working in a nanny share agreement. This typically is about 20-30% more than her rate when working for one family. For example, if the nanny charges $18 per hour for one family, she would charge $21-23 per hour for a nanny share, and the parents would split this, thus each family having to pay $10 or $12 per hour.

Payments to the nanny can be handled in 2 ways, says Deborah Shure from Nanny Tax.

1) The families can create a partnership, where there would be one pay stub, one T4, etc.  The two families split the amounts and claim what they have each paid.  One thing to bear in mind is that in a partnership, if one partner is negligent in paying, the other partner becomes liable.

2) The other option is for each family to pay the nanny separately.  With 2 different sole proprietorships, the liability is not an issue, but the employers/employee need to make sure that the taxes are done correctly.  If the employee ends up getting treated as if each is the only job, he/she could end up owing a lot of money on their tax return.  For example, if the nanny earns $15,000 with each family, almost no tax would be deducted from each pay cheque.  At the end of a year, the total of $30,000 should have had over $3,000 deducted which would mean that this is owed by the nanny to the CRA at tax time. The other important point is that each family needs to ensure that they are paying at least minimum wage, even if the nanny is earning far above minimum wage when the pay slips are combined.  To avoid this, it is recommended that the families split the hours, rather than the wage.

If you have questions surrounding Nanny Shares, please contact Kate McGeachin at Nannies on Call or Deborah Shure at Nanny Tax. We love to help!
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