A minimum wage salary may seem like a bargain but there are other expenses to consider
Every parent who has ever bundled cranky preschoolers into snowsuits and delivered them to daycare before heading off to work has at least briefly wondered whether a nanny would be a better solution.
Daycare fees in Toronto can vary significantly. Depending on the age and stage of the child, they can be as high as $2,000 a month. A nanny can take care of several children and do other light household chores. If paid the minimum wage of $11 per hour, for a 40-hour week, it comes to $1,905 per month.
This may sound like a bargain if you have more than one preschooler, but experienced nannies can command higher salaries. In addition to the salary you must also pay employer contributions to the Canada Pension Plan (CPP), Employment Insurance (EI) and Workplace Safety and Insurance Board premiums.
Here are six things you need to know if you are considering the economics of hiring a nanny.
Live in or live out? The advantage of a live-in nanny is that you don’t have to worry that she’s going to be late as you head out the door in the morning. You do need to have a big enough space so she can have her own room. If your nanny lives in, you can deduct $85.25 per week from her pay for room and board if she has a single room. If she shares a room, it is $53.55 per week.
Domestic or foreign? The Live-in Caregiver Program lets families hire foreign live-in caregivers when a Labour Market Assessment confirms Canadian citizens and permanent residents are not available to do the job.
However, the process can be expensive and protracted. You must pay a non-refundable fee of $1,000 each time you apply to cover the cost of the assessment. You also have to pay for health insurance until your nanny is eligible for OHIP. It can take months or even years to process the visa. An agency may be able to help, but add further expense.
Source deductions. Your nanny is an employee so you must deduct and remit to the Canada Revenue Agency her CPP and EI contributions, and the required employer contributions. In addition, you have to register with the Workplace Safety and Insurance Board and pay premiums to protect you both from costs associated with an injury on the job. If you are paying your nanny a minimum wage, CPP, EI and WSIB costs will add up to about another $190 per month. Even if you deduct room and board for a live-in nanny, source deductions are based on her gross pay.
Working conditions. The provisions of the Employment Standards Act apply to the wages and working conditions of nannies. Part-time or full-time domestic workers have the same rights whether they live in or out of their employer’s home. For example, they are entitled to 4 per cent vacation pay, public holidays, pregnancy and parental leave and termination notice and/or pay in lieu of notice.
Overtime. The ESA overtime rules lay out what must be paid. Overtime pay is 1½ times the regular rate of pay and the threshold is more than 44 hours per week. In a recent case, an Ontario Labour Relations Board awarded a live-in nanny $10,000 in overtime pay for watching the children when her employers went to the gym and caring for the family pets when they were on vacation.
Income tax deductions. Like daycare fees, a portion of your nanny costs are tax deductible. You can deduct $7,000 annually for each child age 6 or under and $4,000 for each child between 7 and 16. The total child care deduction must be taken by the lower-income spouse or partner. Amounts paid for your live-in caregiver’s airfare, interim medical premiums and advertising or agency fees are also deductible up to the maximum allowable amount per child.
Of course, the daycare vs. nanny decision is not purely an economic one. Many parents prefer the convenience of a nanny who becomes like a member of the family. Others want their children cared for in a more professional setting surrounded by their peers. Each family will select care for their children based on a unique combination of economic, social and cultural factors.