Lethbridge Herald

Hiring a nanny has tax and legal implicatio­ns

Canadians need to be aware of costs and options

- Christophe­r Reynolds THE CANADIAN PRESS

Until her daughter Clara became a toddler, entreprene­ur Josee-Anne Sarazin-Cote and her husband were able to juggle work and parenthood.

But at 18 months, Clara was walking and talking and “it was starting to be really difficult to work at the same time,” says Sarazin-Cote, an author and workshop organizer focused on wellness.

“We rarely have time for the three of us — or as a couple,” she said. “At one point we were like, ‘we need help.’”

With sky-high daycare costs remaining out of reach for parents in many parts of the country, nannies can offer a more flexible and affordable alternativ­e — albeit one that comes with tax and legal implicatio­ns.

First the couple — based in France at the time — turned to an au pair, a livein caregiver with a nominal salary. Sarazin-Cote’s work includes frequent, wide-ranging travel in locales ranging from Portugal to Costa Rica. Daycare didn’t make sense, and the au pair could travel along with her and Clara.

Upon moving to Quebec’s Eastern Townships last year, Sarazin-Cote applied for a subsidized space in the province’s famously affordable daycare. But getting a spot proved difficult, so she looked again for hired help.

After flipping through profiles on nanny agency websites, Sarazin-Cote turned instead to her online community for recruitmen­t, posting a “help wanted” ad in a newsletter she runs.

She found someone last week who, for $15 per hour, will work four hours each weekday morning to play with Clara — who turns three in March — and make her lunch, freeing up time for Sarazin-Cote to work.

While subsidized daycare in Quebec costs roughly $8 per day, or $240 per month, parents seeking private spaces in Toronto and Vancouver sometimes shell out upwards of $2,000 per month.

Daycare is “comparable to a mortgage payment,” said Jason Heath, a financial planner and income tax profession­al at Objective Financial Partners.

For families with more than one child, he said, it can make more economical sense to hire a nanny.

The hourly rate for a nanny typically ranges from $15 to $20, but more experience­d employees often charge up to $25 per hour, says Jayne Wigfield, founder of boutique agency Nooks and Nannies in Vancouver.

That adds up to $52,000 per year, before contributi­ons to the Canada Pension Plan and Employment Insurance.

Hiring a nanny makes you an employer, which means you must deduct and remit to the Canada Revenue Agency the nanny’s contributi­ons to CPP and EI, as well as paying employer contributi­ons. CPP and EI contributi­ons for a full-time nanny making $15 per hour would cost you about $200 per month, on top of premiums to the provincial workers’ compensati­on board.

“If something happens with a knife in the kitchen, if they fall down some stairs — if you don’t have that coverage, you could be in big trouble,” said Jamie Golombek, managing director of tax and estate planning with CIBC in Toronto. “It’s not very expensive, but you still have to pay it.”

Peter Guay, a portfolio manager and financial planner with PWL Capital in Montreal, says it’s important to begin by setting out clear expectatio­ns about what the job will entail — vacation time, work hours and daily tasks, for example.

“Will they be able to drive the kids to school or not, will they cook — can they cook?”

As the father of three children under six, Guay has mulled the nanny option.

“This is somebody you’re leaving your children with, this is somebody who is almost a part of the family,” he said. “So the more transparen­t, open, up-front you can be ... the better you set the stage for a successful relationsh­ip going forward.”

Transparen­cy with the government is also essential, Golombek says.

“You really want to be above board on this. Some people are paying cash to their nannies and they’re not reporting it, and that’s very dangerous.”

Under-the-table employment risks penalties and interest on back taxes for both parties and it could also jeopardize your own job if you’re found to have defrauded the government, he said. Nanny agencies and individual accountant­s can handle payroll and tax services for a fee of roughly $60 per month, Guay said.

Whether you’re opting for daycare or a nanny, you can deduct up to $8,000 in childcare costs from the lower income earner in your household for every child age six or younger, and up to $5,000 for children between seven and 16. In Quebec you can reclaim even more through a refundable tax credit, which gives back between 26 per cent and 75 per cent of childcare spending (depending on income). The higher the household income — $160,000 is the threshold — the lower the percentage.

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