Total Cost of Employing a Nanny

The cost of employing a nanny is more than the agreed gross salary. A household employer may also need to budget for employer National Insurance, workplace-pension contributions, paid annual leave within the wage arrangement, Employers’ Liability insurance, payroll administration and the agency fee. The exact total depends on the actual salary and the employee’s circumstances.

By Filipino Nanny | Updated 22 August 2026

What should a family include in the nanny budget?

Start with the actual agreed gross salary, then add the employer-side costs that apply to your arrangement. Do not confuse gross salary with the nanny’s take-home pay, and do not treat the agency fee as part of the employee’s salary.

Gross salary: the contractual pay before employee tax and National Insurance deductions.
Employer National Insurance: a separate employer cost where the employee’s earnings and NI category create a liability.
Employer pension contribution: where automatic-enrolment or opt-in duties apply.
Paid holiday: a statutory entitlement that must be budgeted correctly; for a fixed annual salary it is normally paid within that annual salary rather than added as a second percentage on top.
Employers’ Liability insurance: generally required when you become an employer, subject to the statutory exceptions.
Payroll administration: software or a payroll-service cost if you do not manage payroll yourself.
Agency fee: a separate recruitment cost. Filipino Nanny’s current permanent-placement fee is 15% of agreed gross annual salary, with a £2,000 minimum.
Practical extras: agreed travel, benefits, accommodation or other role-specific costs.

For the agency charge itself, use our fees and pricing page. For PAYE and NI administration, use the nanny payroll guide.

Employer National Insurance in 2026–27

For 6 April 2026 to 5 April 2027, the standard employer Class 1 National Insurance rate is 15% above the £5,000 annual Secondary Threshold. The exact calculation depends on the employee’s NI category and pay pattern.

HMRC also states that employers cannot normally use Employment Allowance against someone employed for personal, household or domestic work such as a nanny, unless the worker falls within the care-and-support-worker exception.

Sources: HMRC rates and thresholds 2026–27 and Employment Allowance eligibility.

Workplace pension contributions

For 2026–27, the automatic-enrolment earnings trigger is £10,000 a year. In most schemes using qualifying earnings, the band runs from £6,240 to £50,270. GOV.UK states that the minimum employer contribution is normally 3% of qualifying earnings, although scheme rules can require more.

That means a pension calculation should not simply be “3% of the whole salary” unless the scheme is set up that way. Check the actual pension scheme and the employee’s eligibility.

Sources: The Pensions Regulator 2026–27 thresholds and GOV.UK workplace pension contributions.

Worked example: £35,000 gross annual salary

This is an illustration, not a London nanny salary benchmark. It assumes a £35,000 gross annual salary, a standard adult category-A style employer-NI calculation, no special NI relief, an employee eligible for automatic enrolment, a scheme using qualifying earnings, and Filipino Nanny’s current permanent-placement fee. It excludes provider-specific payroll fees, insurance premiums, travel, benefits and the household value of live-in accommodation.

Gross annual salary: £35,000
Illustrative employer NI: 15% × (£35,000 − £5,000) = £4,500
Illustrative minimum employer pension: 3% × (£35,000 − £6,240) = £862.80
Agency fee: 15% × £35,000 = £5,250
First-year subtotal before insurance, payroll-service and other practical extras: £45,612.80

The ongoing annual subtotal after the one-off placement fee would be £40,362.80 on the same assumptions, again before insurance, payroll-service and other practical extras.

Worked example: £50,000 gross annual salary

Using the same assumptions:

Gross annual salary: £50,000
Illustrative employer NI: 15% × (£50,000 − £5,000) = £6,750
Illustrative minimum employer pension: 3% × (£50,000 − £6,240) = £1,312.80
Agency fee: 15% × £50,000 = £7,500
First-year subtotal before insurance, payroll-service and other practical extras: £65,562.80

These examples deliberately use hypothetical gross salaries so they do not pretend to be current placement-rate data. The actual agreed salary must come from the real role and candidate.

Do not double-count paid holiday

Workers are generally entitled to 5.6 weeks’ paid statutory holiday a year. For a nanny on a fixed annual salary that continues during annual leave, the salary already funds that paid time; adding another flat holiday percentage on top of the annual salary can double-count the same cost.

Irregular-hours and part-year arrangements have separate holiday-pay rules, so use the arrangement that actually applies. See GOV.UK holiday entitlement.

Insurance, payroll and practical extras

GOV.UK says employers generally need Employers’ Liability insurance as soon as they become an employer, with at least £5 million of cover, subject to stated exceptions. The premium is provider-specific, so this page does not invent a standard household price. See GOV.UK Employers’ Liability insurance.

Payroll software or a payroll bureau can also create a separate cost. Families should add the quote from the service they actually use rather than applying an assumed amount.

For a live-in role, accommodation also has a practical household cost. The National Minimum Wage accommodation offset is a statutory wage-calculation rule, not the rental value of the room. See our live-in nanny accommodation guide.

From our current fee terms

Filipino Nanny’s current client Terms and Conditions state that the permanent-placement agency fee is 15% of the agreed gross annual salary, with a minimum fee of £2,000. This fee is an agency charge; it is not pay to the nanny and should not be mixed into gross-to-net salary calculations.

The terms say temporary-placement pricing should be confirmed with the agency rather than applying the permanent formula. That is why this page uses the permanent fee only in its examples.

See the current client Terms and Conditions and the simpler agency fees page.

How to calculate your own first-year budget

Start with the actual agreed gross salary.
Calculate employer NI using the employee’s real NI category and the current tax-year threshold.
Check pension duties and the actual scheme basis.
Add the agency fee that applies to your placement.
Add the actual quoted cost of Employers’ Liability insurance and any payroll service.
Add agreed travel, benefits, accommodation or other role-specific costs.
Check whether paid leave is already contained in the annual salary so you do not count it twice.

For the employer setup itself, use our UK nanny employment guide. If you are ready to define the role, start a staffing enquiry.

Build the budget from the real role

The examples above show the employer-cost structure, not what your nanny “should” earn. Start with the candidate’s actual agreed gross salary and your household’s real working arrangement.