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Employing a live-in nanny can oftentimes be a little confusing. Many parents think that because a live-in nanny is receiving "free" room and board, they can pay their nanny less by deducting room and board from their nanny's monthly income, or pay them a lower hourly rate, or simply have their nanny work in exchange for room and board. A nanny who doesn't have to pay any rent, electricity, water, internet, cable, food, etc. surely should make less money per hour! While I understand how at first glance this seems like a fair deal, the industry standard is to pay a live-in nanny their full hourly rate...not a reduced rate. Legally live-in nannies must be paid for all hours worked, including applicable overtime (live-in overtime laws vary state by state, so it's important to check your specific state laws). In fact in some markets, such as Chicago, live-in nannies actually make MORE per hour than live-out nannies. Why? Because being a live-in nanny is extremely hard work and a huge sacrifice.
Plus, the reality is, it really does not cost a family that much more in bills to have a live-in nanny in their home, so there is no need to "charge" the nanny anything for being there -- especially since they are only living there because their employer has requested them to do so. A nanny should not have to "pay" to work for you. In addition, it's important to note that more and more states are enacting Domestic Workers Bill of Rights that very specifically protect nannies. Currently New York, Hawaii, California, Oregon, Massachusetts, and Illinois have passed a Domestic Bill of Rights -- in fact, Illinois just enacted theirs January 1, 2017, so it is likely that within the next few years, this will become the norm throughout all states. Let's take a look at Massachusetts as an example:
- Food and drinks - An employer may only deduct the cost of food and beverages from the worker’s pay if the worker chooses it voluntarily, and is allowed to store, prepare, and eat and drink the foods s/he prefers. The employer must not charge more than $1.50 for breakfast and $2.25 for lunch or dinner, and the deduction must not be for more than the actual cost.
- Housing - An employer must not deduct the cost of your room (housing) if s/he requires you to live in that place. An employer may deduct the cost of your room (housing) only if you choose to live there and your housing meets the local and state health code standards for heat, water, and light. The employer must not charge more than: $35 a week for a room with 1 person; $30 a week for a room with 2 people; or $25 a week for a room with 3 or more people.
Let's break this down a bit. First, you are probably shocked to see just how little parents can "charge" their live-in nanny for room and board. Considering the maximum amount of deductions in a 7 day period, an employer can only deduct $77 per week for room AND board. That's only $308 per month...even if you live in a very nice home and could rent the room to a stranger for $1,000/month. You might be reading this thinking that sounds crazy -- but these bills are getting passed for a reason, and it's because people are wising up on just how much live-in nannies can get taken advantage of.
The next important thing to note is that an employer can only deduct the cost of the nanny's room, if the employer doesn't require the nanny the live there. So basically, any family who advertises a live-in nanny position, cannot deduct the cost of housing, because the family is the one requesting the nanny to live on the premises. The only way it would be possible to deduct "rent" would be if a parent hired a live-out nanny and then the nanny came to them and asked if they could be a live-in for their own benefit. The reason the law is written this way is because it determines WHO is benefiting from the nanny living in. If a parent is seeking a live-in nanny, it's obvious they are doing so for their benefit and living-in is simply one of the job requirements.
While the laws in the example above only reflect Massachusetts, it's important to realize that no matter where you live, having a live-in nanny benefits the parents, not the nanny. Sure, the nanny doesn't have to worry about rent and other expenses, but the nanny is literally living at their job. Please take a moment to imagine living at your job. This means, when a nanny is "off" work, they are still at their job. This means they cannot just have friends come over whenever they please or out of town guests visit and stay with them. This means that even if the parents have told them they have "free run" of the house, it's still not their house and the reality is, they can't do whatever they want in it. Usually a live-in nanny finds themselves "working" even during their off hours, because many of their off hours are spent intermingled with their nanny kids and their bosses. A live-in nanny makes huge sacrifices for their nanny family, and those sacrifices benefit the family greatly, which is why families hire a live-in nanny in the first place.
Most families who hire a live-in nanny do so because they need a lot of flexibility. They might travel a lot for work, so a live-in nanny just makes sense. Or they might simply work a job with unpredictable hours (i.e., surgeons) and a live-in nanny provides the most consistency and stability. Families should not be hiring a live-in nanny as a means to save money. If you are looking at the cost of employing a nanny and trying to figure out a way to make it work with your budget because you can't afford one, hiring a live-in is not the solution. Families on a budget should look into doing a nanny share or hiring an Au Pair.
Another tricky problem I encounter is nannies who are hired part-time in exchange for room and board. Again, this is not okay. A close friend of mine just last year was a live-in nanny (she has since quit and moved into her own apartment because she realized how much she was being taken advantage of). The family lived in an affluent area, so they charged her the market rate for her bedroom. She worked 20 hours per week and in exchange, she received a $1200 per month bedroom. She didn't get a private bathroom and had to share with the kids. Hmm. First of all, it makes no sense for parents to value their room at ''market,'' because even if they live in a great area, no one would spend the same money on a room living with their employers and the kids they care for as they would living with people who aren't their employers. Would you pay market value for a room in the middle of your office living with your boss? I bet your answer is a hard no. Also, by deducting market value for the room you're providing for a nanny, you're forcing the nanny to pay rent according YOUR budget. If your nanny was a live-out, they would have the freedom to find a place to live within their own budget, so it could potentially be costing a nanny much more to live-in than it would to live-out.
The last point I'm going to make is a big one and not something many parents think about. I spoke with a representative at Homework Solutions (the nanny tax/payroll company) and asked them what they do when a parent wants to charge their live-in nanny rent and they don't live in a state that has a Domestic Workers Bill of Rights. Homework Solutions knows that the industry standard is to not deduct any sort of room and board, however, since in most states there are no laws regarding when/how much parents can deduct, it gets tricky. The rep I spoke with, Joe Frisbee (Joe is an enrollment specialist and assists families understand their obligations as household employers), informed me that he highly discourages families from deducting room and board from their live-in nanny's income because as soon as they do that, they become landlords in addition to employers. This means, a family who deducts the cost of the nanny's bedroom must have a landlord/tenant contract as well as an employer/employee contract. If this doesn't seem like that big of a deal, think again. Remember the "Nightmare Nanny" in California back in 2014? The family fired their live-in nanny, and she refused to move out. The live-in nanny in this situation was protected by California tenant laws because she was hired in exchange for room and board. Therefore, the family could not force her to move out immediately. When a nanny is "paying" rent, it is a landord/tenant situation that is subject to higher laws than a live-in nanny whose employment status is at will. In light of the "Nightmare Nanny" incident, California has since passed their Domestic Workers Bill of Rights.
So what's the takeaway? Live-in nannies are residing in their employer's house to benefit their employer. Live-in nannies should not be paid a reduced rate simply for providing a service requested by their employer. Parents should be careful when deciding whether or not to "charge" their nanny rent because it opens them up to possible legal implications regarding tenancy, should problems arise. And most importantly, parents should be careful when deciding whether or not to charge their nanny rent because plain and simply, it's NOT the industry standard to do so...and as soon as their nanny learns this, they will likely leave for a different position where they are paid fairly for their hard work.