Avoiding Costly Nanny Payroll Mistakes: What Every Family Needs to Know

Hiring a nanny is a deeply personal decision. Most families are genuinely committed to doing the right thing — from offering fair pay to creating a respectful working relationship. But when it comes to nanny payroll and employment law, even well-meaning employers can make expensive mistakes.

At HomeWork Solutions, we’ve seen the same legal and payroll pitfalls trip up families year after year. The good news? These issues are completely avoidable — with the right knowledge and support.

Common Nanny Payroll Mistakes (And How to Avoid Them)

Mistake #1: Misunderstanding Overtime Pay Rules

It’s a common misconception: “I pay my nanny $22/hour. She works 45 hours, so I owe her $990.”

Actually — that’s not correct under the Fair Labor Standards Act (FLSA). Nannies are classified as non-exempt employees, meaning they must be paid time-and-a-half for hours over 40 in a workweek.

Here’s how it breaks down:

• First 40 hours at $22/hr = $880
• 5 overtime hours at $33/hr (1.5x base rate) = $165
• Total due for the week = $1,045

Several states have daily overtime rules, in addition to the Federal requirements. Household employers must follow both state and federal requirements to be compliant.

Mistake #2: Assuming Your Homeowner’s Insurance Covers On-the-Job Injuries

If your nanny is injured while working, homeowner’s insurance won’t usually cover it — and the medical bills, rehabilitation costs, and lost wages could fall squarely on your family.

Many states require Workers’ Compensation Insurance for household employers. If you're not covered, you could be liable for tens of thousands of dollars.

Mistake #3: Not Having a Written Work Agreement

Whether you’re hiring for 15 hours a week or a full-time schedule, a written nanny work agreement is one of the best ways to protect both you and your caregiver.

It sets expectations clearly, helps avoid misunderstandings, and serves as an essential reference if questions arise later.

The Easiest Way to Stay Compliant? Let Us Handle It.

At HomeWork Solutions, we make household payroll stress-free. With our full-service payroll and tax compliance solution, here’s what we handle for you:

• Obtaining all required tax ID numbers – federal, state, and local
• Setting up federal and state unemployment insurance accounts
• Running payroll, including:
  • Built-in time tracking at no extra charge
  • Calculating overtime
  • Accurate tax withholding
  • Secure direct deposit for your employee
  • Paystubs and recordkeeping
  • Help with Workers’ compensation policy setup
• Filing all required household employment taxes – quarterly and annually
• Preparing year-end tax documents, including:
  • Schedule H for your personal tax return
  • Form W-2 for your employee
  • Electronic filing with the IRS and Social Security Administration

Our team has specialized in household employment compliance since 1993 — and we’re just a phone call away (1-800-626-4829) if you have questions. Or if you prefer, book a complimentary consultation with one of our household payroll specialists.

Final Thoughts

Most nanny payroll and legal mistakes don’t happen out of malice — they happen because families didn’t know what to watch for. By being informed early, you protect your caregiver, your family, and your peace of mind.

Let us take the guesswork out of being a great household employer.