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.
Quick Answer
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.
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.
Frequently asked questions
Do I need to pay payroll taxes for my nanny?
Yes. If you pay a household employee more than $2,700 in a calendar year, you must withhold FICA taxes, pay employer FICA match, and remit federal and California state unemployment insurance. Paying cash does not eliminate this obligation.
What are guaranteed hours for a nanny?
Guaranteed hours mean your nanny is paid for an agreed minimum number of hours per week regardless of whether you use them. If you agree to 40 hours and only need 30 one week, you owe 40 hours of pay. California household employment law treats scheduled hours as wages owed.
Do I pay my nanny if I take a vacation?
If your nanny has guaranteed hours and you are not using them because you are traveling, you generally owe their guaranteed pay. If you negotiate a reduced vacation rate in advance and in writing, that may apply. Unilaterally not paying for weeks you are away is a wage violation.
Can I pay my nanny as an independent contractor?
No. In California, a household employee who works regular hours for one family is an employee, not an independent contractor. Misclassifying them as a contractor to avoid employer obligations creates retroactive tax liability and potential penalties.
Do I pay my nanny during holidays?
California does not legally require holiday pay, but paying for major holidays is standard in Los Angeles. Most work agreements list specific paid holidays. If your nanny works on a holiday, they should receive their regular pay plus any applicable overtime.
What are the real costs of hiring a nanny in Los Angeles?
Beyond hourly pay, expect: employer payroll taxes (roughly 10 to 12% of gross wages), paid sick leave (required by California law), 10 days paid vacation (competitive standard), and potentially a health contribution. Placement agency fees are typically 20% of first-year gross salary.
How does California overtime work for household employees?
California's Domestic Worker Bill of Rights sets overtime at 1.5x after 9 hours in a single day or after 45 hours in a week. Daily overtime is the rule most families miss. A nanny working 10-hour days Monday through Friday triggers daily overtime every single day.
Is it illegal to pay a nanny under the table in Los Angeles?
Yes. Nannies are household employees under California and federal law. Paying off the books exposes families to back taxes, penalties, and potential liability. It also leaves the nanny without workers compensation, unemployment protection, or Social Security credits.
How does California nanny overtime work?
California law entitles most nannies to overtime after 9 hours in a day or 45 hours in a week, and double time after 12 hours in a day. Personal attendant rules apply differently - families should confirm with a payroll specialist how their specific arrangement is classified.
Can I pay a nanny in cash in California?
Cash is a payment method, not a classification. You can pay in cash but must still report wages, withhold appropriate taxes, and issue a W-2. Paying cash without tax reporting is what is illegal, not cash itself.
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