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Understanding Gross vs Net Pay- What You Need to Know
Something we hear a lot from nannies and au pairs is that they find gross vs net pay can be very confusing. Just like any other industry, salary for nanny jobs should always be agreed upon in gross form. Let’s explore why this is so important to ensure you’re being paid correctly.
Originally many nanny jobs were paid cash in hand and therefore a net pay was used when referring to salary. More recently, rightly so, professional nannies are insisting on being employed legally. This means you are eligible for worker's rights, holiday allowance, sick pay, maternity/ paternity/ adoption leave & pension contributions. For that reason pay should only be agreed in gross terms to ensure you are getting everything you are entitled to.
Gross pay is the total amount earned before any mandatory or voluntary amounts such as tax deductions, student loans, national insurance and pension payments. This is the figure that should be in your signed contract when you begin a job.
Net pay is the amount you are left with after all these deductions are made. Also known as ‘take-home pay’
Why the Distinction Matters
Net pay means any tax rebates are issued to you rather than your employer.
You can choose to pay more into your pension if you wish.
If you are taking out a mortgage, a new loan or starting a rental contract you will need to show your salary in gross figures to prove your income to be eligible.
You will get the benefit of any government changes to tax allowance e.g annual April tax allowance increase
It ensures that your employers are legally employing you
How Net Pay is Calculated
You can use this nannytax calculator to work out your gross to net figure to ensure you are happy with the salary before agreeing to a contract when beginning a new job.