Avoiding Risk When Employing a Nanny


Posted on September 2, 2012 by admin | in Background Check

Hiring a nanny can feel like risky business. In addition to the risk you take when hiring someone to come into your home and care for your children, there are other risks, as well as ways for reducing them, that nanny employers should also consider.

The IRS Risk

The penalties are high for misclassifying or failing to report your employee. Fines and penalties can exceed more than you’d ever imagine a nanny could cost you. To avoid the IRS risk, hire your nanny as an employee and comply with tax regulations. While many employers try to pass their nanny off as an independent contractor, she’s not. Reporting her as such can put you at risk.

Payroll Errors

If you fail to pay your nanny properly it can come back to haunt you. Many nannies have sued their employers for back wages, and have won. Nannies are entitled to be paid for each hour worked, and live-out – and in some states live-in – nannies, are entitled to overtime pay. Nannies must also be paid according to the Fair Labor Standards Act. Reduce the risks of payroll errors by hiring a qualified household payroll and tax service provider.

Risk of Injury

While Workman’s Compensation isn’t mandatory in all states, all employers should strongly consider purchasing it, required or not. Employees who accept Workman’s Compensation coverage, in some states, forfeit their right to sue their employer’s for pain and suffering that result from on the job injuries. Having Workman’s Compensation may reduce the risk of being sued by an employee for a work related injury.

The Risk of Misunderstandings

Miscommunication and misunderstandings are popular reasons why the nanny and family relationship end badly. Using a work agreement that outlines the terms of employment, including salary, benefits, hours, responsibilities, duties and tax responsibilities, can reduce the risk of misunderstandings.

The Auto Accident Risk

Many nannies transport their children for work related purposes. Checking your nanny’s driving record can help you make an educated and informed hiring decision. Having the proper automobile insurance coverage can also reduce your risk. If your nanny is using her own vehicle to transport the children then you’ll want to be sure she has the proper coverage to use her vehicle for work related purposes. If your nanny is using your vehicle, you’ll want to be sure she’s an insured driver and also confirm with your agent that your policy will extend to your nanny as well.

Risk of Theft

Conducting a thorough background screening, including reference checking, can help parents make an educated and informed hiring decision. If you have a live-in nanny, you’ll want to be sure your home owner’s policy will extend coverage to your live-in nanny’s personal belongings should they be stolen from your home.

Additional Risks

Suppose your nanny is caring for a friend’s children at your home? Or hosting a play date at your home? Having an umbrella or general liability coverage may reduce any risks you may incur in these types of situations. Since homeowners insurance typically will not extend to your employee, adding on additional coverage that does extend coverage to household employees may reduce your risk.

If you’re concerned about the risks involved with hiring a nanny as your employee, another option is to utilize a nanny placement agency that has their own nanny employees on staff. If the agency sends one of their employees to your home, the agency typically has extensive liability coverage. Since the nanny would then be a guest in your home, rather than an employee (since you are paying the agency, not the nanny), your homeowners’ insurance may extend coverage to the nanny.

There’s a lot to think about when hiring a nanny. Reducing your risks as an employer must be one of them.

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