Do you give your nanny a holiday bonus?

Nov. 22, 2019
Do you give your nanny a holiday bonus?

Your nanny cares for your kids and keeps your life running smoothly all year long. Come the end of the year, it's important to say thank you for those efforts by giving a holiday bonus.

According to the 2019 Cost of Holidays Survey, 80% of families polled (four out of five) say they give holiday tips, and 56% say their child care provider is the No. 1 person they tip. Plus, 20% of the people polled say they plan on spending more on holiday tips this year.

So how much should you give your nanny this year? We’ll discuss the ins and outs of holiday bonuses and the typical going rate, as well as answer some of the most frequently asked questions about them.

Why should you give your nanny a holiday bonus?

You may feel a bonus isn't necessary because you pay your nanny well and show your appreciation in other ways. However, a holiday bonus is customary. Many caregivers count on it as part of their income.

Though Jennifer Kuhn, executive editor at "Nanny Magazine" and a former nanny, believes no nanny should ever expect a holiday bonus, she says it can go a long way toward letting the caregiver know her employer appreciates the work she does. “A nanny may feel unimportant or undervalued if she receives no holiday bonus while every other nanny on the block does,” Kuhn says.

And if your nanny feels short-changed, they may start looking for a new job in the new year.

"My wife and I have always paid our nannies a holiday bonus," says Graeme Gibson, a Seattle father. "There are a number of reasons why, but the main one is that we want her to feel appreciated."

When would you NOT give your nanny a bonus?

Bonuses are an extra thank-you for a job well done. Don't give your nanny a bonus if you're about to let them go for poor performance or because things aren't working out. Doing so will lead them to believe you're pleased with their work and give them a false sense of job security.

How much should you give your nanny as a bonus?

If you employ a full-time nanny, it’s typical to pay a bonus of one to two week's salary. Some will get more (or less), but one week is the norm. If you live in a major city, the bonus might be more; if you're in a rural area, it might be less. Kuhn suggests you do a little research and ask what other nearby parents are giving their nannies.

The size of the bonus also depends on your family's financial means. Some working parents can only afford a half-week's pay, while others may give their nanny two weeks' pay or bonuses that include airfare home for the holidays, a Caribbean cruise or an iPad. While those are generous bonuses, an extra week's salary is the typical tip.

Whatever you decide, just make sure it's consistent. If your longtime nanny has grown accustomed to receiving a certain bonus, it could cause confusion and even resentment if you cut corners this year.

In addition to the bonus, you may want to give an inexpensive gift from your kids. Personal items such as a new scarf or something related to a hobby are always great ideas. 

What if you can't afford a bonus this year?

Unexpected expenses may leave you with a tight holiday budget. For this reason, Kuhn recommends that you factor a bonus into your budget when you first hire your nanny. If you find yourself unable to afford the usual holiday bonus, explain this to your nanny. They'll probably understand. Maybe rather than giving them one lump sum, break it down into smaller more manageable amounts over a period of time.

Can I give a bonus another time of the year?

Some families give nannies their bonuses during their annual review. This is certainly allowed, as long as your nanny is aware of the timing.

Do I have to pay taxes on the bonus?

You typically don't think of taxes while you're handing out presents, but your nanny's bonus (whether you present it during holidays or a performance review), is considered taxable income, and you need to pay taxes on it, along with the rest of their income. Because you're an employer, the bonus doesn't qualify as a "gift." Learn more about paying nanny taxes.

Is a gift acceptable?

While a holiday gift is always nice, a monetary bonus is traditional. Your nanny is a professional and deserves to be treated like one. Many employees receive end- of-the-year bonuses and so should nannies.

If your nanny is used to receiving a cash bonus, switching to a gift could be taken as a sign of dissatisfaction. But for a new nanny who has spent little time with your family, a thoughtful gift can be appropriate.

Tips and stories from parents and caregivers who’ve been there.

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