Are nannies, caregivers and au pairs independent contractors or employees?

The Ministry of Business, Innovation and Employment outlines a number key differences between contractors and employees on their website:

• Employees have employment agreements with your household, while contractors are free to work for other families or businesses.
• You pay PAYE and KiwiSaver on behalf of your employees, while contractors are responsible for their own taxes
• Employees will work where and when you tell them to. Contractors can decide how they work and even employ other people to help them.
• Employees generally use their employer’s equipment, while contractors use their own.
• Employees are required to work set weekly or monthly hours and may get paid overtime for working extra. Contractors work to agreed timeframes.

These tests are applied across a number of different industries but are just as relevant to nannies, au pairs and household employees. The key difference here is that contractors have more control of how, who for and when they work.

The Employment New Zealand website is also an excellent, and more comprehensive, resource around the difference between employees and contractors.

When deciding whether you nanny is an employee, start by asking yourself some of the following questions:

• Do you set the nanny’s hours?
• Do you provide the equipment or tools for the nanny?
• Do you provide the equipment or tools for the nanny?
• Do you dictate what work will be done, and when it will be done?
• Does the nanny work mainly for your household?
• Is the work continuous? (i.e not a one-off project)
• Do you pay your nanny an agreed wage, rather than based on an invoice from the nanny?

While this is certainly not a definitive list of questions, if you did answer YES to the majority of these questions then your nanny should be treated as an employee.

The majority of nanny, au pair and caregiver arrangements will form a relationship of employer and employee.

Therefore, households need to ensure that they treat them as employees correctly:

• Make sure you have an employment contract signed by both parties
• Ensure you are paying your nannies the minimum employee entitlements (minimum wage, leave entitlements, kiwisaver, maternity leave etc)
• Deduct the correct taxes and deductions and remit these correctly to the IRD
• Ensure your nannies have the correct right to work in New Zealand
• Set clear pay-cycle expectations and issue a payslip with each pay
• Ensure expectations are clear around taking time off and applying for leave

Again, this isn’t a definitive list of how to treat employees but it gives a summary of where to begin.

Check out the IRD website, which has a list of employer responsibilities.

Some households classify nannies and au pairs as contractors not realising the possible consequences of their mistake. Whether the mistake is intentional or accidental, the consequences are the same and households may find them liable for extra costs including:

• Unpaid PAYE tax
• Unpaid minimum wages
• Holidays and leave entitlements
• Kiwisaver requirements
• IRD penalties and interest
• Employment Relations Authority penalties

When hiring a nanny or household worker, it can sometimes be easier to employ them as a contractor (or even pay them off the books). However, the risk of hiring them as contractors, when they are really employees, can be hugely costly.

We recommend that you review how you are engaging your nanny. If there is any doubt, or uncertainty around whether you should be engaging your nanny as a contractor or employee, then get in touch and we’ll help point you in the right direction.

Our mission is to make it as simple as possible for households to manage payroll for their nannies.​

Pay The Nanny provides friendly, accurate and flexible nanny payroll services to nanny employers. We take care of everything to do with PAYE, ACC, holiday pay, sick pay, maternity leave and Kiwisaver.

For more information, check out our website at www.paythenanny.co.nz. Make sure you give us a like over on our Facebook page too.