The Importance of having an Employment Contract with your Nanny

13th April 2021

When a nanny comes to work for you looking after your house and your children, she is working for you in her capacity as an employee and you will be her employer.  In the vast majority of cases, a nanny cannot be self-employed and therefore as an employer you have the same obligations as a commercial employer. These responsibilities are to provide good working conditions, a reasonable salary, an employment contract and make tax and national insurance arrangements to cover yourself and your nanny.

In April 2020, the law changed regarding the information to be provided to employees and workers and it is now a requirement to provide terms of employment (the employment contract) to employees and workers on or before their first day of work regardless of their length of service.  

In addition the law requires you to:

  • Register as an employer
  • Set up and operate a PAYE (Pay As You Earn) scheme on your nanny’s behalf
  • Keep tax records on their behalf
  • Provide your nanny with regular pay slips
  • Provide them with an employment contract
  • Pay regular income tax and National Insurance Contributions
  • Pay employer’s National Insurance Contributions
  • File an employer’s annual tax return
  • Have employer’s liability insurance in place.

This all sounds very onerous but in fact if you get a payroll agency to do the registration, payslips and tax for you (e.g. PC Payroll & Legal) and talk to a childcare insurer for the insurance, all of these can be easily taken care of, leaving the employment contract.

Written Employment Contract

For both nannies and employers, having a written employment contract is essential and as explained above, it is now a requirement to have a written terms in place on or before the start date.. The contract should include all the terms and conditions that have been agreed you and your nanny, thereby preventing any miscommunications and misunderstandings over duties, responsibilities and expectations.

By law the contract should include the following:

  • Name and address of the employer and the nanny;
  • The start date and end date (if the position is temporary);
  • Place of work;
  • Working pattern – the hours and days of work, whether there is any variability and how that variation is determined;
  • Job title, or a brief description of the job;
  • Starting salary (which should specify the gross or net salary; whether it is hourly, daily, weekly or monthly; whether it is paid in advance or arrears; when it is paid and finally that the employer is to operate PAYE and make National Insurance contributions on the nanny’s behalf );
  • Details of any probationary period;
  • Entitlement to paid leave (in addition to sick leave and holiday), for example, maternity and paternity leave;
  • Holiday entitlement;
  • Disciplinary procedure;
  • Any benefits which you are making available to your nanny ;
  • Any training requirements, and
  • Period of notice.

Conditions particular to you:

Each employment relationship is different and there are so many variations and differences that a standard template contract with the above set provisions may not cover the reality of your agreement with your nanny.

Duties and Rules: The employment contract should include a bulleted list of specific duties. Avoid vague terms like “light housekeeping” and instead specify what those terms mean. The list of duties may include prepare nutritious meals and snacks, transport children to and from activities, outings and appointments, do the children’s laundry three times per week, feed the family pet once per day and read to each child at least 20 minutes each day. In addition it should include a list of house rules. These rules may include what medication may be administered, whether photos or videos are allowed to be taken, whether guests are allowed in the house and any other family policies the nanny must know to do her job well. 

Salary and Benefits: The employment contract should clearly state the nanny’s salary as well as the rate to be paid for any overtime, which is usually 1.5 times their hourly base wage for any hours worked over 40 in a 7-day period. The contract should clearly state the figures in gross terms. By agreeing to pay a gross wage your total employment costs are protected and any changes in your nanny’s personal tax situation are borne by your nanny, which is fair and reasonable. On the other side of the coin, by agreeing a net wage, the nanny risks missing out on any changes in personal allowances or income tax cuts as the employer will not be obliged to pass these savings on.The contract should include how often the nanny is paid and how she will be paid. 

The contract should set out what benefits the nanny is entitled to: will a car be made available for work or for general use? What holiday is she entitled to take for the number of days per week that she is working and how are such days to be divided up between the nanny and the employer? How many sick days leave will be compensated or will the employer just operate SSP?

In addition if your nanny is going to be living in then your contract will need to contain a license to occupy the accommodation provided. This license stops your nanny having any squatter rights or any right to the property in the future but gives your nanny to live in a property without creating a tenancy.

Termination Terms: PC Payroll & Legal often advises parents in situations where the terms of their contract are not clear when it comes to termination. Most importantly we often see contracts that do not contain a “Pay in lieu of Notice” clause, which is helpful when the relationship has broken down to such an extent that although the parents have an obligation to pay the nanny her notice, they do not wish her to be in the house. The contract should outline any reasons for immediate termination, how much notice is required to end the contract by each party, any severance pay arrangements and any other pertinent information agreed upon in relation to ending the employment relationship.

Legally Binding

Nanny employment contracts are legally binding and enforceable in a court of law, so it’s important that nannies and parents clearly understand the nanny contract prior to signing it. It is also vital that the contract covers every aspect that is important to you as a parent when it comes to your children. A written contract clarifies what has been agreed verbally. Your relationship may be great at the beginning but if misunderstandings and problems arise, then the verbal agreement that you had will be harder to enforce.

Sample V. Bespoke

There are many sample contracts that can be found on line or through a nanny agency which will cover the basic requirements that are needed by law. Although for the most part these will be fine, please note that employment law is a rapidly changing arena and many contracts may not be up to date legally and a parent may well find that the contract they enter into is not legally binding because the relevant provision has been updated by law. Most templates will only cover the bare minimum so as legally you have to provide your nanny with a written statement of employment it makes sense to make sure that every detail is covered, particularly since the April 2020 changes outlined above require a more strict approach as to what information an employer must provide an employee or worker. It is often far most cost-effective in the long run to make sure your contract is tailored to you, covers every detail that is important and is legally secure.


As a result of the Pandemic, there are specific issues and scenarios which an employer might want to cover in any new contract of employment. Whether it is furlough pay, self-isolating or regular testing (to name a few),  it will be an important consideration for any parent employing a nanny. It may be that is it more appropriate to go into a policy, particularly given that rules and guidance from the government change all the time, however, a clause to cover some important aspects of this new era we find ourselves in will be sensible and PC Payroll & Legal can help provide this. For information on whether you can force your nanny to have the vaccine, please see our article.

Need more help?

Contact us about your payroll or legal needs

We have a comprehensive range of payroll, pension and legal services to help you save time. Speak to our highly experienced and friendly team to get started.

Need more help?

Contact us about your payroll or legal needs

We have a comprehensive range of payroll, pension and legal services to help you save time. Speak to our highly experienced and friendly team to get started.

About PC Payroll & Legal

PC Payroll & Legal was established in 2011. We help families stay legal and save time with our nanny payroll, pension and legal services. We help small business owners and the self-employed focus on running their businesses by offering outsourced payroll, workplace pension administration, business administration, HR advice and legal services. 

PC Payroll & Legal is part of the Working Life Solutions Group of companies. The Working Life Solutions Group includes Your Employee Wellbeing which offers wellbeing support programmes for businesses of all sizes.

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