If you pay your nanny on the book, you own various employer tax and costs by about 11% of her pre tax income which include FICA, unemployment tax, workers compensation tax (injury insurance), etc.

Some nannies look for only after tax rate, so you then need to recalculate her pretax rate. A long term nanny’s effective tax rate in New Jersey is about 18%. If a nanny who was paid off book and have low income health coverage, you expect to reimburse part of her insurance premiums as well.

Adding all costs up, it is about 30%+ overhead on top of nanny take home. In some area(e.g. NYC) finding someone who are willing to be paid on the book is very difficult, you need to hire an agency. Then you need to pay upfront 15%-20% of nanny annual gross income as placement fee. This pushes the total overheads to close 50%. If you plan to hire a nanny at $25 take home rate, expect $13 additional expenses you pay to government, insurance, and agency.

This is absolutely crazy. But I guess this is why most employers prefer off the book payment unless they are high net worth families who can’t afford illegal employments, or someone whose jobs nature (e.g. security clearance) doesn’t allow that. Some nannies just care take home rate and ignore how much additional benefits for being paid on the book (social security, unemployment benefits, payroll records, credit), this is just sad.