What Are the Extra Costs Associated With Hiring a Nanny?

When families start thinking about hiring a nanny, they usually calculate the hourly rate first.

That makes sense. The nanny’s hourly pay is the largest part of the cost.

But it is not the full cost.

A nanny is not casual help. A nanny is a household employee, which means families need to budget for more than the hourly wage. Payroll, employer taxes, workers’ compensation, paid time off, holidays, benefits, backup care, and job-related expenses can all affect the true cost of hiring a nanny.

If you only budget for the hourly rate, the total cost can feel surprising later.

The Hourly Rate Is Only the Starting Point

The nanny’s hourly rate is the base of the budget, but it does not show the full picture.

For example, if a nanny is paid $30 per hour for 40 hours per week, the wages alone are about $62,400 per year.

But that does not include:

• Payroll service

• Employer taxes

• Workers’ compensation insurance

• Paid time off

• Paid holidays

• Backup care

• Health insurance stipend

• Retirement contribution

• Continuing education stipend

• Outings, mileage, and food expenses

• Agency fees, if using a placement agency

These costs are not unusual. They are part of hiring a nanny legally, competitively, and professionally.

Payroll System

Most families use a household payroll system or nanny payroll provider to make sure the nanny is paid legally and taxes are handled correctly.

A payroll system usually helps with:

• Paychecks

• Tax withholding

• Employer tax calculations

• Direct deposit

• Year-end tax documents

• Payroll records

A reasonable planning estimate for a nanny payroll service is about $50–$100 per month, depending on the provider and level of service.

Some families choose a more DIY payroll option, but most families prefer having this managed correctly because household employment taxes can be confusing.

Employer Taxes

Employer taxes are one of the most important extra costs to budget for.

If you hire a nanny, you are generally considered a household employer. If you pay a household employee $3,000 or more in cash wages in 2026, Social Security and Medicare taxes apply. The employer’s share of Social Security and Medicare is 7.65% of wages: 6.2% for Social Security and 1.45% for Medicare.

Families may also have federal and state unemployment tax responsibilities depending on the wages paid and other details of the employment arrangement. The IRS also notes that household employers may need to file Schedule H with their federal tax return when wages are subject to FICA, FUTA, or federal income tax withholding. 

For planning purposes, many families should budget roughly 8–12% of wages for employer payroll taxes.

So if your nanny earns $62,400 per year, employer taxes could be roughly $5,000–$7,500 per year, depending on the final tax details.

Paying Legally Is Not Optional

One of the biggest misunderstandings families have is thinking they can simply pay a nanny cash and avoid the employment side of hiring.

That is not how professional nanny employment works.

If someone is working in your home and you control their schedule, duties, and how the work is performed, they are a household employee, not an independent contractor. The IRS Household Employer’s Tax Guide explains that household employment taxes may include Social Security, Medicare, federal unemployment tax, and federal income tax withholding depending on the situation. 

This applies even when the role feels personal or informal. A nanny is still an employee.

Paying legally protects the family and the nanny. It also creates a more professional role, which helps attract candidates who take their work seriously.

Workers’ Compensation Insurance

Workers’ compensation is another cost families often forget.

In Ohio, household workers who earn $160 or more in cash in a calendar quarter from a single household are included in the workers’ compensation coverage language under Ohio law. 

This matters because if a nanny is injured while working in your home, workers’ compensation helps provide a proper path for coverage.

Most parents do not think about this until something happens.

But what if your nanny falls while carrying laundry? Slips on ice walking into your home? Gets hurt while lifting a child? Is injured while working in your house?

Workers’ compensation is one of those costs that may not feel important when everything is going smoothly, but it matters a lot if there is an injury.

For budgeting, families may want to estimate a few hundred dollars per year for workers’ compensation insurance, though the actual cost can vary based on payroll, coverage, and Ohio requirements.

Paid Time Off

Paid time off is expected for professional nannies.

This is not really an “extra” payment to the nanny. It is part of the compensation package. But it is an extra cost families need to understand because they are paying for time when the nanny is not physically working.

For full-time nannies, families commonly offer paid vacation days and sick time. The exact amount depends on the role, schedule, and market expectations.

The important thing for parents to understand is that professional nannies expect PTO just like other professional employees.

If the nanny is on paid time off and the family still needs childcare, the family should also budget for backup care during that time.

Paid Holidays

Paid holidays are another common part of a nanny compensation package.

Families should expect to pay the nanny for agreed-upon holidays, even when the nanny is not working that day.

Common paid holidays may include:

• New Year’s Day

• Memorial Day

• Independence Day

• Labor Day

• Thanksgiving

• Christmas

Some families include additional holidays depending on their work schedule, family needs, and the nanny’s agreement.

This should be clearly outlined in the work agreement before the nanny starts.

Backup Care

Backup care is one of the most overlooked nanny-related costs.

Even with a wonderful nanny, there will be days when the nanny is unavailable. They may be sick, on vacation, attending an appointment, or using PTO.

If the family still needs coverage, they may need to pay for backup care in addition to paying the nanny if it is a paid day off.

That can feel surprising if parents did not budget for it.

This is one reason families should plan ahead for backup care. It is not a sign that the nanny is unreliable. It is part of employing a real person who will occasionally need time off.

Health Insurance Stipend

Many families offer a health insurance stipend as part of the nanny’s compensation package.

This helps make the role more competitive and shows the nanny that the family values them as a professional employee.

For part-time roles, we often see health insurance or similar stipends around $50–$200 per month.

For full-time roles, we often see stipends around $150–$500 per month.

The amount depends on the schedule, the nanny’s experience, the competitiveness of the role, and what the family is offering overall.

Retirement Contributions

Some families also offer a retirement contribution or stipend.

This is not always required, but it can make a role stand out, especially when trying to attract a highly experienced nanny.

For part-time roles, this may be included in the same general stipend range of about $50–$200 per month.

For full-time roles, families may offer around $150–$500 per month toward health insurance, retirement, or a combination of benefits.

The more competitive the role, the more likely professional candidates are to look at the full package, not just the hourly rate.

Continuing Education Stipend

Some families offer a continuing education stipend, especially if they value professional development.

This might help cover:

• CPR renewal

• Child development trainings

• Newborn care courses

• Safety courses

• Professional nanny education

This does not have to be a large expense, but it can be a meaningful benefit.

A simple planning estimate may be $100–$500 per year, depending on what the family is willing to support.

Outings and Activities

If the nanny will take the children to outings, classes, museums, parks, play spaces, or activities, families should budget separately for those expenses.

This may include:

• Children’s admission fees

• Activity fees

• Parking

• Mileage reimbursement

• Food for both the children and nanny while on outtings

• Nanny admission when required

Families should not expect the nanny to personally cover costs related to the children’s activities or job duties. If the nanny is taking the children somewhere as part of the job, the family should provide funds or reimburse those costs.

Mileage Reimbursement

If the nanny uses their own car to drive children, mileage reimbursement should be included in the budget.

This may apply for:

• School pickup

• Activities

• Camps

• Playdates

• Appointments

• Errands for the children

The family should also make sure the nanny has a clean driving record, proper insurance, and that driving expectations are clearly outlined.

Mileage can add up, especially for families with busy school-age children.

Agency Fees

If a family uses a nanny agency, there will usually be an agency fee.

That fee is separate from the nanny’s pay and employment costs.

An agency fee typically covers the work involved in sourcing, screening, vetting, reference checks, background checks, interview coordination, offer support, and helping the family structure the role properly.

Not every family chooses to use an agency. Some families prefer to hire privately.

But families should understand that hiring privately means they are responsible for managing the full process themselves, including screening, references, background checks, payroll setup, and the work agreement.

A Simple Example of Extra Nanny Costs

Let’s say a family hires a nanny for 40 hours per week at $30 per hour.

The nanny’s wages alone would be about $62,400 per year.

A realistic additional-cost estimate might include:

• Employer taxes: roughly $5,000–$7,500 per year

• Payroll system: roughly $600–$1,200 per year

• Workers’ compensation insurance: a few hundred dollars per year, depending on coverage

• Health or retirement stipend: $1,800–$6,000 per year for many full-time roles

• PTO and paid holidays: already included in wages, but paid even when the nanny is not working

• Backup care: varies depending on how often it is needed

• Outings, mileage, and food: varies by family schedule and lifestyle

• Agency fee: varies by agency and placement structure

This is why a $30 per hour nanny does not only cost $30 per hour.

The full cost includes the employment structure around the nanny.

Final Thoughts

The extra costs associated with hiring a nanny are not random add-ons.

They are part of employing someone legally and professionally in your home.

Beyond the hourly rate, families should budget for payroll, employer taxes, workers’ compensation, paid time off, paid holidays, backup care, benefits, outings, mileage, food, and any agency fees.

A nanny is a professional employee. Treating the role that way protects the family, supports the nanny, and creates a more stable long-term match.

At Elite Nannies on Demand, we help families understand the full cost of hiring a nanny before they begin the search so there are no surprises later.