5 Legal Steps Every Parent Must Know When Hiring a Nanny

When you're welcoming a nanny into your home, it’s not just about finding someone who clicks with your children. The UK has specific employment laws that apply when you hire household staff, and these can't be overlooked—even if the working relationship feels informal or takes place in your home.

1. Verify Your Nanny’s Right to Work in the UK

Before anything else, you must confirm your nanny’s eligibility to work in the UK. This is a legal requirement and the first step in establishing a compliant nanny payroll setup.

For British citizens, you’ll need to see their passport or birth certificate along with proof of their National Insurance number. If your nanny is from overseas, ensure they have the correct visa allowing them to work as a nanny. Some visas restrict employment types or hours—review these carefully.

Failure to perform proper checks could result in fines of up to £20,000 per illegal worker. Always:

• Check documents in the presence of the holder
• Verify they look genuine
• Confirm the photo and date of birth match
• Make copies of all documents
• Record the date of the check

Keep these records for the duration of employment and for two years afterward. Professional nannies will expect this process—it’s standard practice, not a sign of distrust.

2. Employment Contracts Are Essential

After confirming eligibility, the next step in proper nanny payroll setup is providing a written employment contract. This is required by UK law within two months of the nanny starting work.

The contract should include:

• Working hours
• Salary
• Holiday entitlement
• Sick pay
• Notice periods
• Job description and duties

Include practical scenarios like occasional evening babysitting, overtime rates, or school holiday arrangements. A confidentiality clause is also wise, as your nanny will be privy to private family matters.

You can also include a probation period (3–6 months) and agree to review the contract as circumstances change. Templates are available online, but tailor them to your family’s needs.

3. Register as an Employer with HMRC

Hiring a nanny means becoming an employer, which brings nanny payroll responsibilities. You must register with HMRC before the first payday—ideally at least four weeks in advance.

Once registered, you’ll receive a PAYE reference number and an Accounts Office reference. These are used for tax and National Insurance contributions.

Don’t try to sidestep this by paying cash-in-hand or misclassifying your nanny as self-employed—HMRC almost always considers nannies as employees. Missteps can lead to fines and backdated taxes.

You’ll also need to:

• Run PAYE (Pay As You Earn)
• Deduct tax and National Insurance from wages
• Pay employer NI contributions

HMRC offers Basic PAYE Tools for small employers, but many parents prefer using a nanny payroll service for accuracy and convenience.

4. Simplify Payroll Management

Once you're set up, ongoing payroll can feel daunting—especially when juggling family life. Monthly nanny payroll tasks include calculating tax, generating payslips, reporting to HMRC, and managing pension contributions.

This becomes more complex with:

• Overtime
• Holiday pay
• Sick leave
• Tax code changes

A professional nanny payroll service simplifies the process. For example, services like NannyPayPro calculate deductions, generate payslips, manage tax submissions, and support pension compliance—saving you time and ensuring peace of mind.

5. Understand Your Nanny’s Employment Rights

As part of a compliant nanny payroll setup, you must ensure your nanny receives all their legal rights:

• At least the National Minimum or Living Wage
• 5.6 weeks of paid holiday per year (including bank holidays)
• Statutory sick pay and maternity/paternity leave
• Rest breaks and days off
• Pension auto-enrolment if they earn £10,000+ per year
• Protection from discrimination

If your nanny earns above the pension threshold, you must enroll them in a pension scheme and contribute to it. Even if they don’t meet the criteria, they can opt in voluntarily.

Understanding and respecting these rights builds a strong, professional relationship. Nannies who feel secure and fairly treated are more likely to provide outstanding, consistent care.

Conclusion: Use a Compliant Nanny Payroll System with Confidence

Managing nanny payroll may sound intimidating, but by following these five steps—right to work checks, contracts, HMRC registration, payroll processing, and respecting employee rights—you’ll build a solid foundation for a safe, legal, and supportive childcare arrangement.

Whether you manage payroll yourself or use a specialist service, understanding your responsibilities protects both your nanny and your family.

Sign up with Nanny Pay Pro and we will guide you through all of these steps!