The Real Cost of Employing a Nanny, Beyond the Hourly Rate

The wage is the beginning of the number, not the end. What the all-in cost actually includes.

Families often budget for a nanny by the hourly rate alone, then are surprised by the true figure. Employing someone properly costs more than their wage, and understanding the full picture before you hire prevents both sticker shock and the temptation to cut corners that come back to haunt you.

Start with the wage itself. A full-time career nanny commonly earns $35 to $45 or more an hour, and overtime is part of the law: household employees are generally owed one and a half times their regular rate for hours worked beyond forty in a week, with some live-in arrangements treated differently by state. If your needs run long, build overtime into the budget from the start.

Then the employer taxes. As a household employer you owe Social Security and Medicare (7.65 percent of wages as your share), federal unemployment tax, and, in most states, state unemployment tax. These sit on top of the wage, not within it. Many states also require workers' compensation insurance, and the penalties for going without it can be steep. We cover this in detail in our guide to nanny taxes, but the short version is to plan for meaningful employer costs above the salary, and to use a payroll professional so it is done correctly.

Next, benefits. While not all are mandated, the standard package that makes a role competitive typically includes around two weeks of paid vacation, health insurance or an allowance toward it, several paid sick or personal days, paid holidays, and mileage reimbursement for work travel. Live-in roles may require providing a vehicle for work and personal use, and travel or overnight stipends are common where the role calls for them. Executive-level household professionals often expect more still, housing, a retirement contribution, bonuses.

Finally, the cost of doing it well rather than cheaply. Paying at or above market, offering real benefits, and treating the role professionally is what attracts and keeps experienced people, and turnover is far more expensive than fair pay. A placement that lasts years, ours average more than five, costs less in the end than a series of cheaper hires who leave. The honest way to budget is all-in: wage, overtime, employer taxes, insurance, and benefits, viewed as the cost of a lasting professional relationship rather than an hourly line item. It is the standard that has defined Nannies + more…® for more than twenty-five years.

Note: tax and insurance obligations vary by state and change yearly. This is general information, not tax or legal advice; confirm specifics with a qualified professional.