Using a Payroll Service vs DIY for Your Nanny: Risks, Costs and Benefits

Hiring a nanny comes with more responsibility than most families expect. Once you become an employer, you’re responsible for PAYE tax, KiwiSaver, leave entitlements, ACC levies and compliant payslips. The question is whether to manage it all yourself or use a payroll service designed specifically for nanny employers.

The DIY Approach: What You Take On

Doing payroll yourself can feel empowering at first. You’re in control, and online calculators or templates might make the process seem manageable. But beneath the surface, it’s complex.

You’ll need to:

• Register as an employer with Inland Revenue
• Set up PAYE schedules and file employer returns on time
• Calculate KiwiSaver contributions correctly
• Track annual leave and public holidays
• Manage changes to pay rates and minimum wage
• Keep compliant employment records

For a typical family, this can mean two to three hours each pay period once you factor in updates, holidays, and reconciliations.

Risks of DIY Payroll

Many families underestimate how easy it is to make payroll errors. A small mistake can quickly snowball into compliance issues.

Common problems include:

• Incorrect PAYE or KiwiSaver calculations – even one missed adjustment can trigger IRD penalties or late filing fees.
• Misunderstanding holiday pay rules – for example, paying holiday pay as you go when it doesn’t apply, or failing to include regular overtime in annual leave calculations.
• Missing employer deductions like ACC levies – these are mandatory for every household employer in New Zealand.
• Treating your nanny as a contractor – a frequent error that breaches employment law and can lead to backdated tax and leave liabilities.

For a clear overview of your PAYE and tax obligations, see our article What You Need to Know About PAYE and Tax for Nannies.

Using a Payroll Service: The Simple Solution

A dedicated nanny payroll service like Pay The Nanny removes the stress from the process entirely. The setup is fast, and the service handles:

• PAYE and KiwiSaver filing directly with IRD
• Correct leave tracking and entitlements
• Professional payslips every pay period
• Annual summaries for tax time
• ACC levy management
• Ongoing compliance with changing NZ laws

Families save hours each month and eliminate the risk of penalties or miscalculations.

Costs vs Benefits