Paying nannies and people who perform work in and around your home isn’t always a simple transaction. But having a household payroll service can help you comply with the household employee tax and other employer obligations.
Nanny payroll compliance
Depending on how much you pay your nannies or other household employees, you may have to withhold employment taxes from their wages. Failing to do so can result in a Canada Revenue Agency (CRA) audit, in which case, you might have to pay back taxes, along with interest and penalties.
Making payments “off the books” can also be detrimental to your employees. Without a tax record, they may not be able to build an employment history or access employment insurance in the event you no longer require their services.
You must comply with provincial guidelines and regulations:
Gather required paperwork
Track hours worked
Calculate and pay wages
File payroll taxes
Understanding Nanny Taxes - What is the nanny tax?
The term “nanny tax” refers to the taxes that an employer must pay for a nanny – a type of “household employee,” or someone who performs work in and around other people’s homes. The CRA provides specific guidelines on how to determine who is subject to this tax. Among other criteria, an individual may be a household employee if you control both what work is done and how it’s done. Those who control how their work is done and provide their own tools and supplies are typically self-employed.
Nanny income tax
The payroll deductions and contributions hub from the CRA gives you quick access to frequently asked questions (FAQ) and direct links to T4000 series forms, TD1s, and more.
Provincial deductions may also apply. Check with provincial agencies in your area for specific withholding requirements.
Nanny payroll services and software
One of the best ways to avoid a compliance misstep when paying your nanny is to work with a payroll provider that’s capable of meeting household employer needs. Look for those who offer:
- Automatic payroll processing
Automation may reduce the time it takes to pay your nanny and minimize errors. - Tax withholding
Payroll providers usually can calculate and withhold the correct amount of taxes from your nanny’s wages and send it to government agencies. - Help managing federal and provincial compliance
Some payroll providers offer easy access to employment forms and may notify you about regulatory changes. - Employee self-service with mobile capability
Your nannies may be able to view their pay information anytime, anywhere. - Flexible pay options
You may have the option of paying your nanny via cheque or direct deposit - 24/7 support
Get answers to questions about paying nannies when you need them most.
How to set up nanny payroll
No matter how eager you and your nanny are to start working together, it’s best to have your payroll process in place first. Here are some basic steps to setting up household payroll:
- Verify which taxes apply to your nanny
- Determine if you need to setup a CRA payroll program account.
- Have your nanny complete the necessary employment documents, and note if they are coming from another country.
- Determine the provincial worker safety insurance requirements.
- If applicable, file a new hire report with your province.
Nanny payroll calculator
By estimating your nanny’s earnings, you’ll have a better idea of which taxes may apply. Use the ADP Canada Canadian Payroll Calculator below to see how much take home pay your nanny can earn.
The payroll calculator from ADP is easy-to-use and FREE. It is perfect for small business – especially those new to payroll processing. Use this simple, powerful tool whether your employees are paid salary or hourly, and for every province or territory in Canada*. To start, complete the easy-to-follow form below.
* The ADP Canadian Payroll Calculator is for directional use only. We recommend that users contact their accountant or bookkeeper to reconcile and verify accuracy. Note that the calculation accuracy depends on the accuracy of the information used.
Why choose ADP® for nanny payroll?
At ADP, we understand the needs of small business employers, even those who might not think of themselves as one. That’s why our small business payroll has built in capabilities for household payroll that can reduce the time it takes to pay nannies and others who work in or around your home. Best of all, our software is backed by experts who know the ins and outs of household employee taxes to help you avoid costly mistakes.
