Hiring a nanny makes a family a legal employer, with payroll, overtime, and tax obligations that surprise most parents. The contract is where the arrangement gets professional: hours that are guaranteed, pay that satisfies the FLSA, duties with boundaries, and an exit both sides can live with.
This template covers the terms nanny placements actually negotiate: guaranteed hours, hourly pay with overtime, defined duties, paid time off, driving, and notice, built on the household-employee rules that apply to every nanny in the country.
A nanny is a W-2 employee. Full stop.
The IRS classifies nannies as household employees because the family controls the work: the schedule, the duties, the location. Paying a nanny as a 1099 contractor is misclassification, and it unravels badly, back taxes, penalties, and an employee who cannot collect unemployment when the job ends. The obligations are manageable: families paying a household employee above the annual threshold (IRS Publication 926 sets the current figure) withhold and pay Social Security and Medicare, pay federal and state unemployment tax, and issue a W-2. Several states add paid sick leave, workers' compensation coverage, and domestic worker bills of rights with written-agreement requirements of their own.
The three money terms that prevent every common dispute
- Hourly, never salaried: the FLSA entitles domestic workers to minimum wage and overtime at 1.5x after 40 hours per week. A flat weekly salary for a 50-hour schedule violates it; the lawful version is an hourly rate with overtime built into the weekly total.
- Guaranteed hours: the nanny reserves the week for the family, so the family pays the agreed hours even when grandparents visit or the family travels. This is the industry norm and the single biggest retention term.
- Scope-defined duties: "childcare plus children's laundry, no housekeeping" survives contact with reality; "help around the house" becomes a renegotiation every month. Exclusions in writing protect the relationship.
Pay on the books helps both sides
Legal payroll gives the nanny a verifiable income for apartments and credit, unemployment coverage between jobs, and Social Security credits, and gives the family access to dependent care FSAs and the child and dependent care tax credit, which often offset most of the employer taxes.
The household terms worth writing down
Beyond money, nanny relationships run on expectations that deserve ink: sick-child protocols, discipline philosophy, screen time, photos of the children on social media, and what happens on snow days. The contract's house-rules clause anchors these to written guidance the family can update. Families formalizing the hire can pair the contract with an employment offer letter and a child medical consent form so the nanny can authorize treatment in an emergency. Occasional evening babysitting by a neighbor does not need any of this; a regular schedule does, and the general framework of an employment contract applies with the household-specific terms this template adds.
Frequently asked questions
Can I pay my nanny as a 1099 independent contractor?
No. The IRS treats nannies as household employees because the family directs the work, sets the hours, and provides the workplace. 1099 treatment is misclassification, exposing the family to back employment taxes and penalties, and stripping the nanny of unemployment and Social Security coverage.
Does my nanny get overtime?
Yes. Live-out domestic workers are entitled to 1.5x pay after 40 hours per week under the FLSA, and live-in nannies are entitled to overtime in several states. The lawful structure for a 45- or 50-hour schedule is an hourly rate with overtime included in the guaranteed weekly amount.
What are guaranteed hours and are they required?
Guaranteed hours are the weekly minimum the family pays regardless of actual need. No law requires them, but they are the industry standard because the nanny holds the schedule exclusively for the family. Contracts without them see turnover the first time a family vacation cuts a paycheck in half.
What taxes does the family owe?
Above the annual IRS threshold: the employer half of Social Security and Medicare (7.65%), federal unemployment tax, and state unemployment tax, plus withholding the employee's share. Many states also require workers' compensation coverage for domestic employees. Payroll services built for household employers automate all of it.
Should the contract include a trial period?
It is common and sensible: two to four weeks during which either side can end the arrangement with short or no notice. After the trial, the contract's regular notice period applies. Employment remains at-will in nearly every state; the notice clause sets the professional expectation rather than eliminating at-will status.
What should happen when the family no longer needs a nanny?
The notice period in the contract, two to four weeks, plus payment of all earned wages and accrued time as state law requires. Severance of one to four weeks is customary for long-tenured nannies whose position disappears because children age into school, and a reference letter costs nothing.