Personal Risk Management: Hiring a Nanny
By Ashley Western, ACSR, MSM RMI
Business Development Manager
Many people consider their various childcare options and lean toward a solution becoming increasingly more common among young professional parents-hiring a nanny. Once the decision to hire a nanny is made, there are several factors to consider. Below we will discuss the risks of hiring a nanny as an independent contractor versus hiring a nanny through a contracted service.
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Risk |
Recommendation |
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The risk of hiring a nanny as an Independent Contractor, and letting the Nanny file all taxes. |
A safer alternative is to apply for an FEIN number with the state, and do the tax withholding yourself. |
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There is a risk for law suits, in the event the nanny gets hurt on the job. |
Purchase a Workers Compensation policy, which will transfer the risk to the insurance company. Then, any injuries & lost time will be paid by a company you’ve outsourced the risk to. Policies for a typical nanny are only a few hundred dollars per year. |
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Employer’s Liability Risks- The risks of a lawsuit due to inability for the nanny to provide for her own family, or responsibilities outside of her work as your nanny. |
The Workers Compensation policy automatically covers Employers Liability in Texas. One more reason to buy WC. |
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Hassle of making payroll deductions correctly |
Mitigate this risk by hiring a nanny service. Or, better yet, use a Professional Employer Organization, such as G&A Partners (www.gnapartners) in order to provide payroll administrative services for your employee. |
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Risk of Child Injuries |
Your health insurance should cover any injuries to your child. Or, you can require the nanny to carry Professional Liability Insurance. |
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Being aware of who you are hiring |
Have the nanny provide a background check, or spend the $100 to have it done yourself. |
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Risks of injury in transportation (auto accidents) |
Have the prospect provide you with a copy of her Motor Vehicle Record. Anyone with a prior suspended license or a pattern of behavior (ie 3 tickets for speeding per year) should be reconsidered. Also, require limits of at least $100,000 on her personal auto policy. |
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The risk of absences |
Have a backup sitter, that can be called on short notice. Or, hiring a nanny service allows you to rely on the service to already have a qualified replacement on short notice. |
Benefits of a Nanny Service versus Hiring a Fully Insured Independent Contractor
A Nanny Service provides you with a great number of benefits. The screening, background checks, and references are already approved, even before you meet the individual. Replacements are quick & easy. The service handles the taxes. However, be prepared to pay proportionally more for the convenience of such a service. Shop around, though. Nannies are common in the Houston area, and there are many different options available. Some services allow the nanny to bring her own small child with her to a job, which may discount the fee. Also, for parents of multiples, there may be a discount provided.
Ultimately the choice is yours. However, if managed correctly, hiring a nanny can be a safe and wonderful experience for you, and your baby.
Call the experts at Cravens Warren if you need further information on how your Homeowners and Umbrella policies can help to protect you.
