Independent Contractor vs. Employee?
Although there is less paperwork required when hiring an independent contractor, under federal law, a nanny is almost always considered an employee. Since the household or employer designates the hours the nanny must work, as well as specific tasks such as when to pick the children up or perform other household chores, a nanny typically does not meet the requirements to be classified as an independent contractor.
Workers classified as independent contractors set their own hours and can generally work however they choose to get the job done. For a nanny to qualify as an independent contractor, they would need to set their own schedule, be available to the general public, and only be obligated to complete a specific job regardless of how it’s done—conditions that are generally not realistic for childcare arrangements.
Creating an Employment Agreement
When you hire your nanny, it’s a good idea to have a comprehensive Nanny-Family Employment Agreement. This document should include details such as the hours the nanny will work, how much and when they will be paid, job duties, and conditions or procedures for termination. You may also want to include additional terms like confidentiality, paid time off, or transportation arrangements.
You can easily create a customized Nanny-Family Agreement with Rocket Lawyer to help ensure that both parties understand their rights and responsibilities.
Work Eligibility
Before a nanny starts work, you must verify their eligibility to work in the United States. Have the nanny complete an Employment Eligibility Verification form (I-9). Review the directions on the form carefully and check the documents provided as proof of eligibility.
The prospective nanny should be ready to show a combination of documents as evidence of their ability to work legally in the U.S. Acceptable documents can include a Social Security card, driver’s license, birth certificate, passport, green card, or work permit (or a combination thereof). You should make copies of these documents and keep them with the completed I-9 form in your records.
Tax Responsibilities
If you hire a nanny as an employee, you may have federal and state tax responsibilities as a household employer. Typically, this includes contributing to Social Security and Medicare and possibly withholding federal income taxes from your nanny’s pay.
When your nanny starts employment, ask them to complete a Form W-4 so you can determine how much federal income tax to withhold, if applicable. You’ll also need to provide your nanny with a Form W-2 each year to report their earnings to the IRS.
Overtime Pay
Under federal law, all household employees, including nannies, must be paid for overtime work. Generally, any time worked beyond 40 hours in a 7-day workweek must be compensated at 1.5 times their regular hourly wage.
Live-in nannies are typically exempt from federal overtime requirements, though state laws may differ. Always review your state’s labor laws for specific rules and additional compensation requirements.
Please note: This page offers general legal information, not but not legal advice tailored for your specific legal situation. Rocket Lawyer Incorporated isn't a law firm or a substitute for one. For further information on this topic, you can Ask a Legal Pro.
