Legalities

Points to consider when employing a Domestic Worker
If you employ a nanny/housekeeper in the UK and pay her more than £97 (tax year April 2006-2007), you are required by law to register straightaway as an employer with the Inland Revenue and operate a PAYE scheme. You may also have to register as an employer later on if you pay her less per week, although you will have no tax or NI liability if your employee has no other job.

Self employment is not an option for a nanny employed by you (with the exception of maternity nurses), as nannies do not meet the Inland Revenue criteria for self-employment. If liability to pay tax is not declared to the Inland Revenue, and then come to light, then it is you, the employer, and not your nanny, who will be pursued for payment.

Failure to register as an Employer when paying a wage above the weekly threshold is a criminal offence. The Inland Revenue also imposes stringent penalties for well - intentioned employers who register but are late with their paperwork and tax/NI payments. Failure to file returns can result £100 per late month.

Nannies and Nanny agencies often agree a Net (i.e. take-home) wage with parents, but reality a nanny is always paid a gross wage; tax and national insurance withheld and paid over to the Inland Revenue by the employer on the nanny's behalf. Although employees tend to look as this as an additional cost, it is actually part of the employees (gross) wage. On top of the gross wage, employers also have to pay an Employers National Insurance contribution for each employee. Therefore there is a considerable difference between the net wage and the true cost of employing a nanny, and employers are advised to find out the true cost of employment before agreeing to pay a net wage.

Insurance
Do check with your home insurance policy that you are covered to employ a domestic worker in your home. Quality Insurance policies typically provide cover under Public Liability.