In this step-by-step guide, I am going to show you how I create the bi-weekly pay stub for our nanny.
Before you start, please read our disclaimer: I am showing you how I have created nanny pay stubs for multiple nannies. However, I am no tax or payroll expert, and you are responsible for making sure that the pay stub you give your nanny is correct. In addition, applicable rules and regulations vary widely depending on where you live in the US. My family lives in Seattle in Washington State. Your state and maybe even your city and county might impose their own requirements on what you have to include on your pay stub.
I will take you through the main parts of the pay stub spreadsheet I am using. Then we will go over every individual entry.
The main sections of the pay stub are:
This section of the pay stub is the easiest of all. When you hired your nanny, you needed her name and address details for several pieces of paperwork. For example, for filing the I-9 form. Put the same information on the pay stub. You should also tell your nanny that you need to be informed of any address changes.
In this section of the spreadsheet, put down the service dates this pay stub is covering. In my case, I prepare a pay stub every two weeks. So, the service dates are typically the Monday of the first week to the Friday of the second week. The payroll date is typically the last day of the service period. If the pay stub covers nanny services from 7/22 to 8/2, I will choose 8/2 as the payroll date. This is also the date I give the paycheck to my nanny.
The year-to-date (YTD) hours on previous paycheck are just that: the nanny hours this year before the current payroll period. Let’s consider an example and say the pay stub covers nanny services from 7/22 to 8/2. To calculate the year-to-date hours, I am looking at the previous pay stub. Then I add the year-to-date hours and the number of hours on that pay stub.
This section is the heart of the payroll spreadsheet. The good news is that once you have set up your nanny’s hourly pay rate and the tax rates, most of this section will be automatically calculated by Excel. Let’s go over the fields one-by-one:
One additional item to point out is that the spreadsheet I am using does not include an entry for withholding federal income tax. According to this IRS document, you are not required, in 2019, to withhold federal income tax for your household employee. I did withhold this for one nanny we employed, and it is an additional hassle. You can do it if your nanny really wants you to, but I don’t recommend it. In any case, you should have a discussion with your nanny and tell her that she will have to pay federal income taxes. This further reduces the net amount that she gets paid in the end.
In summary, what you can see in the example spreadsheet is that the nanny’s gross pay was $780 for 40 hours. However, she will only get a check for $718.35. And we are not withholding federal income tax, which means that she will have to pay that additional tax as well.
From an employer perspective, the employer section of the pay stub is very important. It tells me how much money I really have to pay to employ our nanny. It also shows the nanny that I am actually paying her more than the hourly rate we agreed on. In our example, the nanny’s gross pay was $780 for 40 hours. However, as the employer, I will have to pay $840.68. In other words, I ultimately pay an hourly rate of $21.02. Personally, I think it is important for me to see this, and also for the nanny. That is why I include it on the pay stub. The hourly rate is $19.50. And while she will make less than $19.50 per hour after taxes, I am paying $21.02 per hour!
Note that I am not paying the employer portion of the Washington State Paid Family and Medical Leave program. According to this site, at the time of writing this article in late 2019, employers with less than 50 employees are not required to make any contributions. However, as a household employer we need to withhold and pay the employee portion of the program.
I put my name and address into this section of the pay stub.
There are many layers of government, and each layer can impose their own paperwork requirements. The City of Seattle, where I live, has a Paid Sick and Safe Time ordinance. Find more information about this here. This ordinance comes with its own pay stub reporting requirements. In our example spreadsheet, I put in the ‘PSST reduced’ and the ‘PSST used this year’ fields. The other fields I have set up so they calculate automatically.
If you don’t live in Seattle and you want to adapt our spreadsheet process, just delete the PSST section.
In this section of the pay stub, I keep track of the amount of paid holidays and vacation. Regarding paid holidays, I agree with the nanny every year what holidays will be paid and send her an email to make sure we have the details in writing. In 2019, we paid for 5 holidays. I handle the agreement for paid vacations similarly.
Preparing the pay stub for your nanny yourself is not a lot of effort once you have the right process in place. However, keeping up with changing regulations requires time and effort. If you think this is not for you, consider using any of the many nanny payroll services.
If you have any questions, don’t hesitate to contact me on Twitter (see my Twitter handle below.)
Good luck! And happy parenting!