Nanny shares: A solution to the child care dilemma

Here's how they work

By Anna Bahney, CNNBusiness
iStock/Clint Scholz

(CNN) - Child care is getting more expensive and harder to find for many families.

The monthly cost of infant day care in the United States ranges from $453 in Mississippi to $2,020 in Washington DC, according to the Economic Policy Institute. Hiring a nanny is a lot more convenient, but usually a lot more expensive.

That's one reason why many parents are looking to team up and split the cost. Nanny shares offer quality care at a manageable price. But by coming together, parents also take on more responsibility and additional costs as partners and co-employers.

Still, the arrangement is an attractive compromise for a lot of families, says Tom Breedlove, senior director of HomePay a payroll business for household employees. "You get the quality and flexibility of a private nanny and the cost is closer to that of a day care."

According to Care.com, which allows families to find, manage and pay for in-home care, the number of searches on the site for nanny shares increased 45% in 2018 over the year before in ten of the biggest cities, including Washington DC, New York, Chicago, San Francisco, Denver, Seattle, Baltimore, Los Angeles, Philadelphia, and Portland.

 

Choosing a nanny share

 

After Amy Barone's daughter was born four months ago, she and her husband considered all the options -- daycare, an in-home care center, a nanny, or even one of them quitting and staying home with the baby.

She was put on years' long wait lists at daycare centers that would have cost about $2,000 a month.

Though she was willing to pay, she couldn't seem to find a center that was a good fit and had availability. So she started thinking about a nanny share.

"It is a nanny's market, because daycare spots are so few," said Barone, a pediatric oncologist in Washington DC. "But to have a full-time nanny was beyond our means. So I started looking for nanny shares."

She scanned queries on online neighborhood parenting groups and listservs and responded to a few that sounded promising. She said it felt strangely like a combination of dating and a job search.

She'd meet with the mom first and discuss whether they were a logistical match, before interviewing potential nannies. She had a long list of questions.

"I asked them all the same questions: Are there pets in the home? Smokers? Are you and your children vaccinated? Are there guns in the house?" she said.

One convenience of having a nanny is that the caretaker comes directly to the home. But in a share situation, participating families need to hash out who hosts, or take turns. Barone did not want to host the nanny share because she occasionally works from home, so she also needed to find a family who could host.

 

Managing co-employment

 

She eventually chose to share a nanny with a neighbor Mariana Gomez. Gomez, a lawyer at a trade organization, was looking to replace a family that had left a nanny share she set up for her youngest child.

Gomez wanted a partner family who was willing to pay a good wage with taxes, health insurance and transportation costs considered.

Together the families use an automated payroll system that withholds Social Security, Medicare and Unemployment. They also drew out a contract with their nanny that includes five paid sick days and 10 paid vacation days, as well a health care plan in which the nanny pays 20% and each family pays in 40%.

At a total cost of $2,500 a month, the nanny share is more expensive than Barone expected, which is taking a toll on the amount she and her husband save.

"You're an employer, so there are more things you pay for -- it adds up more than you expected," Barone says. "But the convenience of taking our daughter one block away every day and the fact that it is a safe space for her makes it work."

Breedlove suggests each family set themselves up with the nanny's W-4 tax form on an automated payroll system like HomePay. For example, a caregiver is being paid a certain amount each a week, half would come from one family and half from the other. After a percentage is withheld, the nanny is paid in one check as if she has one employer, but it is coming out of two pockets.

This kind of set up makes it easier if one family moves on or ages out of the nanny share. That way another family can plug in more seamlessly.

Similarly, he suggests that the nanny select a health care plan from a federal or state exchange, and families reimburse the costs, making the coverage portable if a nanny should go to work with another family.

Breedlove says the best practice between families is to establish an agreement about the expectations for the caregiver, the finances and the logistics so that everyone involved has peace of mind.

"Then parents can focus on the kids and how they want them to be reared and not worry about the taxes," he said.

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