Planning to hire a nanny? Understanding the full cost includes more than the hourly rate. In New Zealand every employer has duties around PAYE, KiwiSaver, ACC, insurance, and a range of extras that can influence budgeting.
Why the Hidden Costs Matter
Many families view “nanny pay” as the sole expense. In reality, the total cost can rise by 20–35 % when tax withholdings, contributions, insurance and one‑off extras are factored in. An accurate budget not only keeps surprises at bay but also helps you pick the best candidate for your family’s needs.
Breaking Down the Cost Components
1. Salary & Hourly Rate
The caregiver’s gross hourly wage is the base figure. Rates in NZ range from $20–$30 per hour depending on experience, qualifications and whether the nanny provides transport.
2. Taxes & Mandatory Contributions
| Item | Description | Employer Share | Employee Share |
|---|---|---|---|
| PAYE (Income Tax) | Tax deducted by the employer and paid to the IRD. | 0 % – deducted from the employee’s gross wages. | After‑tax draw depends on the employee’s tax band. |
| KiwiSaver (Employer Match) | Optional but highly encouraged – a 3 % match on employee wages. | 3 % of gross salary. | Matches up to 3 % of gross (minimum requirement). |
| ACC Employer Contribution | National Accident Compensation scheme – employers contribute approximately 1.63 % of wages. | ~1.63 % of gross wages. | Not paid by the employee. |
For a $25 hr nanny, the annual payroll cost works out roughly as follows (assuming 40 hrs/week and 52 weeks):
- Gross pay: $520,000 NZD
- KiwiSaver: $15,600 NZD
- ACC: $8,476 NZD
- Total employer outlay: $544,076 NZD
3. Insurance & Liability Protection
While ACC covers most workplace injuries, you might still want:
- Professional Indemnity for accidental damage
- Home‑based employee liability coverage
- Boat or vehicle insurance if the nanny uses a car
Typical annual premiums for this range from $200 to $600 NZD for a single nanny.
4. Additional Costs and Extras
- Training & Certification: ISA or NICN qualifications – $200–$800 upfront.
- Uniform & Regulations: Baby‑proofing gear, first‑aid kit – $100–$250.
- Transport: Fuel and parking – estimate $0.25–$0.50 per hour.
- Meal Costs: Occasional light meals for the nanny.
- Out‑of‑pocket expenses: Teachers’ meetings, childcare, activity packs.
Putting It All Together – Sample Calculation
Below is a straightforward example that includes all the key items. Adjust the numbers to reach your exact scenario.
| Item | Amount (NZD) |
|---|---|
| Gross salary (40 hrs × $25 × 52 weeks) | $520,000 |
| Accident Compensation (1.63 %) | $8,476 |
| KiwiSaver match (3 %) | $15,600 |
| Professional Indemnity (annual) | $300 |
| Transport & fuel (estimate only) | $3,000 |
| Miscellaneous extras | $2,000 |
| Total annual cost to you | $549,876 |
Although payroll may seem like the bulk of the expense, insurance and incidental costs can add over $10 k, especially when a nanny drives between homes or goes to school meetings.
Practical Budgeting Tips
- Use a spreadsheet or budgeting app that tracks PAYE, KiwiSaver and ACC as separate columns.
- Ask your prospective nanny for a clear employment contract that spells out overtime, holidays, and cost of training.
- Consider hiring on a fixed‑rate contract vs. hourly payments – fixed contracts can reduce tax paperwork.
- Always keep receipts for training, insurance and supplies; you’ll need these for expense claims and tax deductions.
- If you’re a small business owner, you may be eligible for Government child‑care subsidies; add these to your net cost.
Frequently Asked Questions
- Do I need a contract for a private nanny?
- Yes – a written employment agreement protects both parties and is required for tax purposes.
- Can I claim the nanny’s insurance premiums as a tax deduction?
- If the nanny is formally employed and you pay premiums directly, you can usually claim them as a business expense.
- What about a nanny who is a partner or relative?
- Even family members must adhere to IRD PAYE rules if you pay them over $2,500 per year.
- Is there a tax credit for employing childcare?
- New Zealand does not currently offer a childcare tax credit, but you can claim Business Asset Accelerator for equipment purchases.