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If your nanny was self-employed, it would mean that you wouldn’t need to deal with their income tax and National Insurance. However, the employment status of your nanny can have implications for everyone so whether they are employed or can be self-employed are key considerations prior to hiring.
What is a worker
A nanny is a worker rather than an employee for several reasons. People are classified as workers if they are contracted or have an arrangement to provide services or work for a reward which can either be money or a non-financial benefit. The employer has to provide work for the duration of the contract and even if they don’t want to, the worker still has to report for work. They cannot be working for their own limited company and the option to send anyone else to perform the work on their behalf is limited. Workers have lots of employment rights including but not limited to, the right to work no more than 48 hours a week, statutory holiday, National Minimum Wage and protection from unlawful discrimination.
What does it mean to be employed
There are several ways to define this. They should work a certain number of hours and be paid hourly, weekly or monthly. They can also receive overtime or bonuses. They must undertake the work themselves and at any time they can be told when, how and where to carry out the work. They can also be moved between various tasks that are considered to be part of the employment.
What does it mean to be self-employed
For worker to be self-employed, they must provide all the equipment they need to do their job and must be the one to decide what they do, when, how and where they will work. They should be regularly working for more than one person and can engage other workers to work on their behalf. They should work for a fixed price, regardless as to the length of time the work takes and should be risking their own money. Any unsatisfactory work should be put right at their own expense.
These definitions indicate that a nanny cannot be self-employed as their remit fits either the worker or employee profile. However, there are exceptions. For a nanny to be self-employed according to HMRC, they must be working in several temporary positions or working for more than three families. Every situation is different and HMRC will look at each case individually.
For nannies with a history of self-employment there are things to be aware of as a potential employer. The employer has to request written confirmation from HMRC of the nanny’s self-employed status. The employer is liable for unpaid tax if it later transpires that the nanny is not self-employed after all. Importantly, if a nanny has previously been self-employed, that does not mean they will be self-employed in another position.
A reputable agency such as Little Ones can provide further advice and support for nannies and parents alike as to employment status and its implications.