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Dear Tax4Nanny, As the New Year begins I am thinking of giving my caregiver a raise in salary. Are there any amounts that you suggest for a raise? Is an annual raise expected every year? Sincerely, Chris P Dear Chris P, A salary increase is common at the beginning of a New Year for employees of caregivers. However the amount of the raise varies significantly between employers. One significant thing to keep in mind is “has there been any changes in the job description”? For example, a new child being born into the family or perhaps children moving into school part or fulltime. These and other changes in your family situation will result in an increased or decreased work load for the caregiver. This should be taken into account when looking at the ranges I am suggesting. Also I find a significant difference is between employers of “live in” and “live out” caregivers. As I am not sure of your personal situation I will elaborate on both. Live Out Most “live out” caregivers are paid weekly and on a net basis. Net salary is what the employee takes home after deductions for CPP, EI and Tax. Please note, it is not common in most other industries to quote salary in this manner. Usually when you are offered a job you are given a gross salary (pre deductions for CPP, EI and tax). From the gross salary deductions are taken and your take home pay “net pay” usually is much lower then the gross salary you were expecting. Given that most live out nannies are used to being told their salary as net “take home” and weekly, I suggest anywhere between a $10 to $25 net increase in salary per week. An important thing to keep in mind is that a net salary increase will result in increased to remittances to CRA and WSIB. A general rule of thumb would be your cost would increase by 1.5 times the actual raise. For example a $10 net increase in salary would result in a $15 increase in cost to you (1.5 times the $10 raise) Live In Most “live in” caregivers are paid based on a certain amount of hours at a specific gross hourly rate (for example 44 hours at $10.25/hr). It is very important that the hourly rate paid is at least minimum wage under the live in caregiver program. It is important to note that most provinces gross hourly rate has increased effective January 1, 2012 (for example Ontario’s new hourly rate is $10.56/hr). If you are thinking of giving your caregiver a raise I suggest a 5-10% increase above their current hourly rate. If they were paid minimum wage, I would suggest 5-10% above the new minimum wage (not the 2011 minimum wage). In Ontario for example, if your nanny was being paid $10.25/hr in 2011 I suggest increasing it to 5-10% above $10.56/hr. This way you are raising their salary not only to the level you need to but actually raising them above minimum wage. In summary, an annual raise for your employee should not be considered mandatory. Each family situation is very different and personal. Sincerely, Gila Ossip, CA, MBA, CFP Tax4Nanny
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