Total compensation is a term familiar to anyone who has ever worked in an office setting, but it rarely comes up in negotiations surrounding household employment. To get a real picture of total comp, you need to think through not only fringe benefits that might provide tax advantages to the employer and employee but also through specific situations that are likely to come up, like overtime and overnight/travel care. Making the most of the dollars a family has available for their nanny budget benefits all parties involved. Each specific employment situation will be different, but here are a few points you might want to consider.
Most household employment situations are not nine-to-five jobs. Many involve overtime, travel, or overnight shifts. Each of these play a significant roll in budget, and should be thought about ahead of employment starting, and correctly compensated for when they occur.
In all states (other than CA), overtime for a live-out employee is calculated using a 40 hour per week rule. This means that all hours worked over 40 hours in a 7 day work week are considered overtime and must be paid at an overtime differential of 1.5 x the regular rate of pay. This adds up quickly, and can really eat away at a budget, so addressing it upfront is crucial. There are some exceptions for live-in employees in some states, so be sure you know the rules where you live.
Remember that while jetting off to a beautiful location after Covid restrictions are lifted, might be amazing, it is a work trip for a nanny. Keep in mind additional expenses should be reimbursed or provided for, whether overtime will accrue, and if there is a need for a food stipend on days when the nanny will not be dining with the family.
Due to the nature of nanny positions, families often ask if a nanny is available to work overnight. If overnights are something everyone is open to, make sure everyone also understands what that means when it comes to compensation, as costs can add up quickly. Keep in mind, while FLSA allows for a sleep time exemption, some states have laws requiring that time to be paid. Make sure you know what the laws in your state, and plan accordingly in your total comp package.
The name itself can be misleading. Fringe doesn’t mean only a select few should have access to these benefits, it simply means that they are in addition to the wages an employer pays to their employee. The inclusion of these benefits in any total compensation package can be a real win-win for everyone involved. There are a host of great benefits that are tax-advantaged to the employer and/or the employee. Moving some of the wage budget over to benefits can stretch the dollar further. You can view a list of some tax-advantaged benefits, as well as their parameters, here. Below is also an example of just how these benefits can mean real dollars and sense when putting together a total comp package. As nannies are hourly non-exempt employees, an overtime differential has been factored into displayed hourly rate.
As you can see, thinking about total comp instead of just wages benefits all sides. Employers can offer their nanny more while staying within budget, and the nanny receives additional benefits and pays less in taxes. The next time you are negotiating employment, try taking a look at the bigger picture. You just might be able to get more in the frame than you thought.
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