Monday, January 14, 2013

Cost of Nanny in London - breakdown of the real costs

Cost of nanny in London
Providing one to one care for the little ones costs a fortune (photo by World Bank Photo Collection)

Many of us are fortunate enough to have our a parent (mothers more often than not) staying at home when we were kids. Even though we were sometimes bored stiff having being cooped up at home for the entire day, there was at least someone by our side at all times. Someone to constantly keep an eye on us, someone to cuddle us when we fall and to reassure us when things weren't going our way.

The irony is that with rising standard of living and perhaps expectation itself, we no longer can afford to have a spouse stay home to look after our kids. I guess the closest to that level of care would be having a nanny who will provide the one to one care, which we took for granted when growing up.

I did a comparison of cost of childcare in London across the different options sometime back. In that, the nanny option is the most expensive at around £8 - £12 per hour in central London. But that is at best a ballpark figure. Here's a list of the real costs of nanny in London.

1. Nanny agency fees

There are a number of free access websites that connects parents to nannies. Many parents turn to free sites like Gumtree or, the latter being a childcare specialists of the former. The downside of using these free sites is that you got to sift through a multitude of applications. You'll be surprised how many people would ignore your requirements (OFSTED registered for instance) and apply all the same.

There are of course more reputable sites such as that charges £25 for a job posting. But you still need to go through a number of CVs before going through the hassle of contacting the applicants yourself.

Nanny agencies, on the hand, do the groundwork for you. They make sure all your requirements (or most of it anyway) are met before sending you the CVs. The agencies are supposed to do the background checks (qualifications and CRB or Criminal Records Bureau certs). Their job basically ends the moment they help you fix up the interviews between you and the nannies.

Their services don't come cheap though. Once a nanny accepts your offer, the nanny agency will require a fee equivalent of 6 weeks of the nanny's wages plus VAT. Let me put that in numbers. If you have a nanny for five days a week, 10hrs a day at £10 per hour, you are looking at a nanny agency fee of £3,600. In most cases, they'll only be a partial refund if the nanny leaves you within six weeks. If she leaves you after that, tough.

2. Nanny tax

As the nanny's full time employer, you are liable to pay both employer and employee taxes as well as her National Insurance (NI). The amount you pay is a sliding scale but for the above example of £500 nett per week, the taxes and NI amounts to £235. A whooping figure of £735 per week.

3. Nanny payroll agency

You get a payslip for your job, so should the nanny. There are nanny payroll agencies around that will do not only that but calculate your taxes, remind you to pay for it and issue a P65 when your nanny leaves. All that for a fee of just over £100 per year. Considering what you pay your nanny, this is a spit in the ocean but still an expense nevertheless.

4. Nanny paid leave

The number of paid leave is to be agreed between you and your nanny but having 20 days per year is the norm. Ten of which would be decided by you while the remaining to be taken at the nanny's discretion.

That means between you and your partner, you got to set aside 20 days of your annual leave for this.

5. Food, heating, toys and activities

The fee paid to a nursery would pretty much covers everything. With a nanny at home, it's a totally different matter. Some nannies eat whatever your child eats. That'd bump up the costs of food by quite a bit.

As there will be long periods when the nanny stays at home with your child especially during the winter months. That means extra heating costs. While it may not be astronomical, it all adds up.

Not having the benefit of toy pools in a nursery means that you would have to indulge your kid with more toys. Before long, your place would look like a private nursery.

Of course, to further engage your child, you'd sign her up for sing-along, dancing, art, swimming classes during the day. Guess what? They don't come free either.

6. Sick leave and time off

If your nanny is sick, you'd very much prefer that she would rest for the day and not pass it onto your child. That means taking emergency leave on your end.

The nanny might request for time off (say an hour or two) to attend to some personal matters. Of course, you're not obliged to grant that if it's requested at short notice. But seriously, if your child is under her care, you are pretty much held hostage.

Evening Standard (3rd Jan 2013) published that the average Londoner couple spend a crippling 51% of their after-tax income on childcare. With parents across the UK feeling the pinch when childcare benefit for those earning above £60k per year gets axed as of 7th Jan 2013, the costs of having a nanny is prohibiting. However, with the cost of private nursery care in central London hitting £1,500 per month, it might work out to be the cheaper option if you have more than one child.

Do you employ a nanny? How do you find it? 

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