In addition to standard nanny industry benefits, there are several other categories of benefits that individual nannies may ask for (or that you can choose to offer!) to create a more lucrative Total Compensation Package. These optional benefits often offer major tax breaks for families, which can help you increase the nanny’s gross annual income without drastically increasing the amount you pay annually.
These professional benefits will also attract higher-caliber candidates who are invested in their career and intend to stay with a family for as long as possible. If implementing these additional benefits seems overwhelming, take heart—your nanny payroll company will be able to help you implement them and make sure you get all the important tax benefits!
Here are the most common optional benefits offered to professional nannies:
1) Health Insurance Stipend
According to the Affordable Care Act, nannies are federally required to be covered by health insurance. However, as employers with usually only one or two employees, nanny families are not required to offer health insurance options to their employees! To help meet this need and to help ensure that all nannies are able to afford and maintain health insurance, the federal government has created a program through which nanny employers are able to pay up to $5300 (tax-free) annually toward a nanny’s health insurance plan. By contributing toward their nanny’s health insurance as part of the nanny’s total compensation package, families are able to save money annually, and nannies are better able to get medical attention as needed to help keep them healthy and happy.
2) Educational Assistance
Nanny employers can pay up to $5250 annually (again, tax-free!) toward their nanny’s undergraduate or graduate schooling. This is a benefit provided by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Families who want to invest in their nanny’s future can easily do so by including Educational Assistance as part of the nanny’s total compensation package, with the immediate benefit being that this tax-free contribution saves them money annually.
3) Student Loan Assistance
The CARES Act has also included a provision that nanny employers are able to pay up to $5250 annually (tax-free!) towards their nanny’s student loan debt. This provision will expire January 1, 2026. Until then, families are able to help their nanny pay off their student loan debts as part of their total compensation package and, since it’s a tax-free contribution, the family will save more money annually than if they included these funds in nanny’s regular payroll.
4) Retirement Contributions
Household employers can contribute up to 25% of their nanny’s annual pay toward their retirement savings account. These contributions are also un-taxed! Including retirement contributions to their nanny’s total compensation package provide taxs breaks to the family that help them save money annually.
5) Professional Development
Professional, career-minded nannies are constantly seeking out opportunities to grow their knowledge base around early childhood education and add more tools to their nanny toolbox. Offering a bucket of annual professional development dollars will encourage your nanny to take advantage of industry-related trainings, classes, and conferences. The immediate benefit is that your nanny bring their new education and tools to your home, so your investment in their education is returned by their continued investment in providing the best care for your children and your family!
Want to learn more about how these optional benefits work to save your family money?
Our Preferred Payroll Partner, GTM Payroll & HR, provides a thorough Employee Benefits Overview to help families learn more about these benefits and why they matter. Read more at https://minannysolutions.com/wp-content/uploads/2023/03/Employee-Benefits-Overview-GTM-Payroll.pdf.
Feeling overwhelmed with implementing benefits?
Hiring a payroll company that specializes in household employment makes it easy for families to set up and maintain employment benefits. Payroll companies are especially helpful in making sure families get all the available tax breaks involved in paying their nanny and providing these benefits. Get a free consultation from our Preferred Payroll Partner GTM Payroll & HR by going to https://gtm.com/household/michigan-nanny-solutions/.
Have more questions about how to create a job offer that will attract a high-caliber professional nanny?
Advice is always free at Michigan Nanny Solutions, and we would love to learn more about your family’s needs and discuss further how offering a lucrative compensation package can help you hire the nanny of your dreams! We can help you brainstorm childcare solutions for your family, and would be honored to take the lead for your part-time or full-time nanny search. Email Jaynie at email@example.com to start a conversation!
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