Top 5 Payroll Mistakes Parents Make (and How to Avoid Them)

Hiring a nanny doesn’t just make you a calmer parent – it makes you an employer in the eyes of HMRC. That means tax, National Insurance, payslips, pensions and a few legal rules that are easy to trip over when you’re already juggling everything else.

Here are the top 5 payroll mistakes parents make with nannies – and simple ways to avoid them.

1. Paying “net” instead of “gross”

The mistake
Agreeing a net (take-home) salary – e.g. “We’ll pay you £500 a week after tax” – and then discovering later that, once tax codes or thresholds change, you’re suddenly covering far more tax and NI than you expected.

Why it’s a problem

• You’re taking on all the risk of tax changes.

• If your nanny’s tax code changes (for example they start or stop another job), your cost can jump overnight.

• It’s harder to compare offers fairly, because every family’s tax position is different.

How to avoid it

• Always agree gross pay (before tax and NI), not net.

• You can still talk about approximate take-home, but the number in the contract should be gross per hour / per year.

• Use a salary calculator (like Hirelo’s) to show both gross and estimated net so everyone’s clear.

2. Not registering as an employer or running PAYE

The mistake
Paying your nanny in cash or via bank transfer with no PAYE, tax or NI – assuming it’s fine because it’s “just one employee” or “only part-time”.

Why it’s a problem

• HMRC expects nannies to be treated as employees, not self-employed.

• If tax and NI aren’t handled correctly, you could face back-dated bills and penalties.

• Your nanny misses out on proper employment records, payslips, statutory rights and pension contributions.

How to avoid it

• Register as an employer with HMRC when you hire a nanny.

• Use proper payroll (software or a nanny payroll service) to:

  • Calculate tax and NI

  • Submit Real Time Information (RTI) reports

  • Produce payslips and year-end forms (P60, P45)

• Treat nanny pay exactly as you’d expect a company to treat your own salary.

3. Forgetting about holiday pay and bank holidays

The mistake
Paying the same amount every month but never really working out holiday entitlement – or assuming that if your nanny doesn’t work bank holidays, they don’t need to be paid for them.

Why it’s a problem

• Nannies are workers with a legal right to paid annual leave.

• If you underpay holiday over time, you may end up owing a chunk of back-dated holiday pay if the relationship ends badly or is ever challenged.

• It can cause quiet resentment if your nanny realises friends in similar roles get more.

How to avoid it

• Work out holiday entitlement in days or hours based on your nanny’s pattern (including pro-rata for part-time).

• Decide in advance how bank holidays are treated:

  • Included in holiday allowance, or

  • Additional paid days off

• Show holiday clearly on payslips or in a simple tracker so everyone can see what’s been taken and what’s left.

4. Ignoring overtime, extra hours and “odd jobs”

The mistake
Letting extra hours creep in (“just stay a bit later”, “could you come early on Thursdays?”) without discussing pay – or adding new duties (more housekeeping, extra school runs) without reviewing the salary.

Why it’s a problem

• Your nanny may effectively be working more hours than they’re paid for, which can push their hourly rate below minimum wage when averaged out.

• It damages trust if they feel their role has grown without recognition.

• It makes disputes about hours and pay much more likely.

How to avoid it

• Set a clear contracted number of hours and an overtime/extra hours policy (rate, rounding, when it applies).

• Review pay if duties change significantly – extra children, extra cleaning, more cooking, etc.

• Use a simple hours log or payroll system that separates:

  • Basic hours

  • Overtime/extra hours

5. Getting sick pay and maternity pay wrong

The mistake
Guessing what to pay when your nanny is off sick or pregnant – or assuming that because they “only work part-time”, they don’t qualify for statutory sick pay (SSP) or statutory maternity pay (SMP).

Why it’s a problem

• SSP and SMP have specific rules (earnings thresholds, length of service, notice, etc.) that can be misapplied.

• Underpaying statutory rights can lead to claims, back pay and stress.

• Overpaying without understanding reclaim rules means you might miss out on money you can recover.

How to avoid it

• Check eligibility for SSP / SMP based on:

  • Average earnings

  • Employment start date

  • Due date / length of sickness

• Use payroll that calculates statutory pay correctly, shows it clearly on payslips, and handles any HMRC reclaim where allowed.

• Keep simple written records of sickness dates, maternity leave dates, and what was paid.

How Hirelo helps you avoid all five mistakes

Hirelo is built specifically for parents employing nannies, so it quietly takes care of the bits that usually go wrong:

• Gross–net clarity: set agreed gross pay and see estimated take-home instantly.

• PAYE handled: tax, NI, RTI submissions and year-end forms all done automatically.

• Holiday & overtime tracked: add extra hours in a few clicks and keep holiday pay transparent.

• Statutory pay calculated: SSP and SMP worked out according to current rules and shown clearly on payslips.

• Clean records: payslips, summaries and reports stored in one place if HMRC or your nanny ever need evidence.

So you stay compliant, your nanny gets paid fairly and on time – and payroll stops being another 10-tab spreadsheet job on your to-do list.