Payroll & Deductions How-To

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When it comes to paying your nanny, it's hard to know where to start. If you're not a business owner and have never had the responsibility of paying employees, then this probably doesn't seem all that self evident. Here are the basics:

What You Need to Know:

Your nanny needs to be paid right?...RIGHT. You can pay your nanny bi-weekly or monthly and I'll get to payment methods further down in the post.

It is your responsibility to deduct income tax, CPP, and EI from your nanny's pay. It is also your responsibility to make employer contributions of CPP and EI, and to submit these along with the employee deductions to the CRA monthly. You must do this by the 15th of the month for each month prior (i.e. you must make your remittances for February's payroll by March 15).

You will need to obtain a business number from the CRA in order to pay your nanny, which you can do quite quickly online (see my post on this HERE).

Keep records! File away your remittance summary (whether it be via a software that you use, or the CRA calculator summary...I'll get to that decision later) and make sure that you have access to your payslips (whether it be in the form of your bank's direct deposit record, or the confirmation of a cheque deposit). Not only are records required by the CRA, but that way when you go to create a T4 slip at the end of the tax year, you will have all of the information readily available. You are required by the CRA to keep copies of your records for 6 years.

Payment Methods:

So how do you go about actually paying your nanny?...

First and most importantly...don't pay cash! It is important to have a paper trail (this is for your benefit, as well as the nanny's). You can pay by cheque, e-transfer/direct deposit. 

Online Calculators and Tools Comparisons

You will need to calculate your nanny's salary, as well as monthly CRA remittance. Most people choose one of two options for doing this: 1) the free CRA Payroll Deductions Online Calculator, or 2) one of the many online softwares out there. 

Here's the rundown with these options:

The CRA online tool is free, it calculates your payroll and your CRA remittance amounts, but it won't automate any of these processes so you'll need to submit the monthly CRA payments, and pay your nanny. While many people say that it's very easy to use, I certainly find it confusing with all of the boxes available to check. I couldn't figure out how to factor in the room/board deductions either, and I was worried about my capacity to use it correctly and obtain accurate year-to-date figures needed for my WSIB account and CRA. Looking for something more full service?...

NannyTax came highly recommended by a friend of mine. The thing I love about NannyTax is that the company was built around servicing families with nannies so they've really thought of everything! Their service includes everything from payroll calculations and CRA remittance to factoring in room/board deductions and even managing WSIB payments. I value customer service, and when I contacted NannyTax to inquire about their services, they responded immediately. They offer clients over the phone support when needed and are always happy to answer questions. 

Wave is an accounting software designed for small-businesses. For just $9/month (the cheapest I found), they will calculate your payroll and CRA remittance amounts, as well as automate these processes for you (ie. they manage the direct deposit for your nanny, as well as paying the CRA) and file a monthly summary. They're designed for small business though so they haven't quite considered all of the angles for families hiring nannies (WSIB, room/board deduction etc). They only offer online support (email and instant messaging) which didn't sit well with me, but might be just fine for others. They come recommended by Nanny&Me readers who use them and like their product. 

For me personally, going the free route of CRA's calculator is a bit daunting (even though I'm a numbers person). Although Wave does offer low rates, I love the tailored product, excellent customer service and personal referral that comes with NannyTax so I'll be using them!

I chatted with NannyTax and set up a deal for my readers where if you sign on to use NannyTax's service using the Nanny&Me coupon code, you will receive your first month of service FREE! 

Just call Deborah at 1-877-626-6982 (1-877-NANNYTAX) and tell her that you are a Nanny&Me reader and voila, one month free service!

Wave and NannyTax seem to be the big players in the industry, but check out the chart below for comparisons on all of the options:




Have a question that this post didn't answer?...Let me know in the comments section below and I'll do my best to find the answer. 




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1 comment:

  1. ShanayaJanuary 17, 2018 at 12:41 AM

    Excellent and helpful post.I am so glad to left comment on this. This has been a so interesting ..I appreciate your effort..

    ReplyDelete

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I am SO excited to have my son, Logan, provided with the one-on-one care of a nanny in our home. The process of recruiting and keeping a nanny seems intimidating at times and there are so many things to think about and consider. The goal of my blog is to support, encourage and empower parents who are considering and pursuing the path of a nanny.

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