We receive a lot of questions from potential clients who are just beginning on their journey into hiring a nanny such as, is my nanny considered an employee? Why do I have to withhold taxes for my nanny? What are my responsibilities when hiring a nanny?
In simple terms, the CRA (Canada Revenue Agency) determines you are an employer if you:
- Hire someone
- Establish the working hours
- Assign and supervise the tasks performed
Let’s look a little deeper into it and review 5 factors that are considered when determining whether a worker is considered an employee. The following are indications the nanny is considered an employee:
- Control: This is defined as who has the right to exercise control in the manner in which the work is done. When the parent(s) will decide what tasks they want the nanny to complete in a day and will train or direct them in the tasks assigned.
- Tools & Equipment: When the parent provides the tools & equipment needed for the nanny (ie. Stroller, toys, etc) and are responsible for the repair and maintenance of the equipment.
- Subcontracting work or hiring assistants: If the worker does not have the ability to hire or send a replacement caregiver and has to perform the services personally.
- Financial Risk: When the worker is not responsible for any operating expenses and the relationship is continuous. The parent(s) would determine and control the method and amount of pay.
- Opportunity for profit: When a nanny is compensated for work done and is paid on an hourly, daily, weekly or similar basis. They will not incur drastic expenses to carry out the terms of their work.
Now that we have reviewed what determines your nanny to be considered an employee, let’s review your responsibilities as an employer:
- You must register for a business number with the CRA
- You must withhold federal & provincial income tax, CPP contributions and EI premiums from your nanny’s pay and remit those to the CRA, along with your employer contributions to CPP and EI.
- You are responsible for maintaining employment records for up to 6 years which include nanny’s SIN, hire date, rate of pay, hours worked, wages earned, taxes, CPP and EI premiums that were withheld, TD1 form you need to have the employee complete, any other applicable deductions, vacation pay and time taken.
- You must provide your nanny with a pay stub each pay period detailing hours worked, rate of pay, gross wage, all deductions and net pay.
- You must provide a T4 to your nanny and file that with a T4 summary to the CRA by the deadline each year, which is the last day of February for the year before.
- You must provide your nanny with a Record of Employment (ROE) when their employment with you ends and file a copy with Service Canada
- You may need to register for insurance (WSIB in Ontario, WCB in BC & Alberta). Each province has different specifications and requirements.
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It is a big responsibility to hire a nanny and everything that needs to be done on a continual basis can be overwhelming. If you’d like us to manage your payroll needs for you, please call us at 1-855-339-2369 or email us at [email protected] today! See www.canadiannanny.ca/nanny-tax-payroll for details on our payroll service.
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