Nanny Contracts and Employment Law: A Quick Guide for UK Families

Hiring a nanny means becoming an employer, with all the legal responsibilities that come with it. It's one of the areas families ask us about most and it's easy to see why. There's no single rulebook handed to you when you take someone on and the consequences of getting it wrong (unpaid tax, an unfair dismissal claim, a dispute over holiday pay) can be costly and stressful.

This guide covers the essentials every UK family should know about nanny contracts and employment law before their nanny's first day.

You Are an Employer, Not a Client

The moment you pay someone to work in your home on a regular basis, under your direction, using your equipment and routines, you become their employer in the eyes of the law. This applies whether your nanny works two days a week or five, whether they're full-time or a temporary maternity cover.

Being an employer brings specific legal duties: registering as an employer with HMRC, running PAYE, providing a written statement of terms and meeting statutory obligations around pay, holiday and pension. Treating your nanny as "self-employed" to sidestep these duties is a common mistake, and one HMRC actively investigates. In almost all cases, a nanny working in your home does not meet the criteria for self-employment.

The Written Statement of Terms

Under UK law, employees are entitled to a written statement of the main terms of their employment from day one. For a nanny, this document should cover:

• Job title and a summary of duties

• Start date and, if relevant, end date

• Hours of work, including any flexibility required

• Salary, pay date and method of payment

• Holiday entitlement

• Notice periods on both sides

• Sick pay arrangements

• Pension arrangements

• Probationary period, if applicable

• Confidentiality expectations, particularly around your family's privacy

• 
  

Many families use the term "contract" loosely to mean any agreement, verbal or written. Legally, a proper written contract protects both parties. If a dispute ever arises, whether over pay, dismissal or working hours, a clear written contract is often what determines the outcome.

Pay and the National Minimum Wage

As of April 2026, the National Living Wage for workers aged 21 and over is £12.71 per hour, with £10.85 for ages 18 to 20 and £8.00 for under-18s. These rates usually increase every April, so contracts should be reviewed annually to stay compliant.

A few practical points that trip families up:

Live-in nannies. If you provide accommodation, this can be offset against pay up to a fixed daily amount set by the government, but the nanny's overall gross pay still has to meet the minimum wage once hours worked are calculated properly.

Overnight care. If a nanny is required to be present overnight but is asleep for most of it, only the waking hours generally count as working time for minimum wage purposes, though this is a genuinely complex area, and worth getting proper advice on before agreeing an overnight rate.

Tax and National Insurance. As the employer, you're responsible for deducting Income Tax and National Insurance through PAYE and paying employer's National Insurance contributions. This is where most families choose to use a nanny payroll service rather than manage it themselves.

Holiday, Sick Pay, and Pension

Holiday. Nannies are entitled to at least 5.6 weeks of paid holiday per year (pro-rated for part-time hours), which usually includes bank holidays unless your contract states these are given in addition.

Statutory Sick Pay (SSP). If your nanny is off sick and meets the eligibility criteria, including minimum earnings thresholds, they're entitled to SSP. The rules around eligibility have been changing, so it's worth checking current thresholds each year rather than assuming last year's figures still apply.

Pension. If your nanny earns above the qualifying threshold and is aged between 22 and State Pension age, you're required to automatically enrol them into a workplace pension scheme and make employer contributions. This applies to household employers exactly as it does to any other business.

Notice Periods and Ending Employment

Notice periods should be set out clearly in the contract and, at minimum, meet statutory requirements based on length of service. Dismissing a nanny, whether for performance, conduct, or because your circumstances have changed, needs to follow a fair process. Employees gain protection against unfair dismissal after two years of continuous employment, but even before that point, discrimination and certain automatic unfair dismissal protections apply from day one.

If you're ending the arrangement, put the reason and the notice given in writing, and pay out any outstanding holiday entitlement.

Getting the Payroll Right

Running PAYE correctly, calculating pension contributions and staying on top of annual rate changes is a genuine administrative burden for a busy household. Most families we work with use a dedicated nanny payroll service such as Way2Paye to handle registration, payslips, HMRC submissions, and pension compliance, so nothing gets missed.

---

How Nanny Scout Can Help

Getting the contract right from the outset saves everyone stress later. When we place a nanny with a family, we talk you through what a solid contract needs to include and point you toward trusted payroll partners so the legal and administrative side is covered from day one.

If you're about to take on a nanny and want guidance on getting the paperwork right, get in touch with Nanny Scout and we'll help you through the process.

This guide is intended as general information for UK families and does not constitute legal or tax advice. Employment law and minimum wage rates change regularly, so always check current government guidance or consult a professional such as a nanny payroll specialist or employment solicitor before finalising a contract.