How to Pay a Nanny Legally in California: A Family's Guide

Paying your nanny legally in California means withholding and remitting payroll taxes, providing a W-2 at year end, paying overtime correctly, and meeting California's sick leave requirements. It is more involved than writing a check, but the process is straightforward once it is set up.

Why Legal Pay Matters

Paying a nanny off the books creates tax exposure for you as the employer, leaves your nanny without unemployment or disability benefits if they lose the job or get injured, and invalidates most workers' compensation coverage. In California, the risk of audit for household employers has increased significantly in recent years.

What You Need to Set Up

You need an Employer Identification Number (EIN) from the IRS, a California employer account with the EDD for state taxes, and a payroll system. Most household employers in LA use a payroll service like HomePay, NannyPay, or GTM Payroll that handles the filings automatically. The cost is typically $50 to $150 per month and is worth every dollar.

What Gets Withheld From Each Paycheck

Federal income tax, Social Security (6.2%), and Medicare (1.45%) are withheld from the nanny's gross pay. California state income tax and SDI (State Disability Insurance) are also withheld. You as the employer match Social Security and Medicare and pay Federal and California unemployment insurance on top of that. Total employer overhead runs approximately 10 to 12% above gross wages.

California Overtime Rules for Domestic Workers

California's Domestic Worker Bill of Rights sets overtime at 1.5x after 9 hours in a day or 45 hours in a week (not 40). Daily overtime is the rule that catches most families off guard. A nanny working 10-hour days Monday through Friday will trigger daily overtime every single day.

Required Sick Leave

California requires at least 5 paid sick days per year for domestic workers. Sick leave accrues at one hour per 30 hours worked. Include the sick leave policy in your work agreement and track it.

The W-2

Issue a W-2 by January 31 each year. If you use a payroll service, they handle this. If you are processing manually, you file through the SSA Business Services Online portal. Your nanny needs the W-2 to file their taxes. Failure to issue one is a federal penalty.