How much does a nanny cost?

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As a young mother myself, I can't count the number of articles published every week about the daycare situation in Quebec. The same thing is reflected and repeated in my entourage. There is a real shortage of available daycare spaces! The stories are often very sad for the parents who find themselves short of solutions. Some find themselves having to quit their jobs, others, out of breath, combine telecommuting and childcare (thanks to flexible employers!). And what about families who have to juggle atypical schedules? One thing is certain, parents have to use their imagination to find alternative solutions when no childcare space is available for their child(ren). 

What if we rethought this? Would we be able to afford in-home childcare? A "nanny". Let's take it a step further: a nanny for our entire company? Certainly, this is a dream situation for several reasons. It is a direct, simple and easy help. In addition, BINGO! we avoid the traffic at the beginning and end of the day to get to the daycare (because yes, lucky are those who manage to find a place close to the house) and we avoid all the germs that gravitate in this type of environment (when it is not gastroenteritis, tonsillitis, it is conjunctivitis or the famous foot-hand-mouth!) Some nanny(s) even offer various related help such as meal preparation, cleaning the house, laundry, etc. Too good to be true! But how much does it really cost? Who can afford it? Now we get to the heart of the matter: let's look at the fiscal and financial vision of this option.

  

The next generation - career or home

This blog was born out of a story that was shared with me. A friend of a friend used a nanny because there were no daycare spaces (subsidized and unsubsidized) available for their child. There was no way either of them would give up their careers to stay at home. Moreover, as two physicians in remote areas with atypical schedules, they were destined for an atypical solution. When I was made aware of this situation, I asked around to find out if this solution was frequently considered by young families in Quebec.

Finally, my questioning aroused the curiosity of my interlocutors and colleagues, namely "how much does a nanny cost?

Disclaimer: At Barricad Fiscalistes, our strength is teamwork. This blog is the result of collaboration and exchanges between colleagues: Belynda, Caroline and Michèle. 

Tax section/figures/comparative scenarios/fees/etc. 

For the purposes of this article, we assume that no subsidized daycare spaces are available at the time of the decision (which is the case for a majority of new parents). In addition, all of our scenarios were calculated using the following financial information for a couple of employed parents we named Alex and Val[1]

  • Family income: 110,000 $
  • Children: 2 boys of daycare age (Jean-René and Yvan);
  • Frequency: 260 days per year (full time);
  • Cleaning service: 100 $ every 2 weeks.

Basic comparative scenarios for the cost of 2 daycare space[2]s vs. the cost of a nanny in 2022

Our parents Val and Alex shopped for daycare in their neighborhood and near their work office, both of which are located in Montreal. The daily cost of the daycare ranged from $45 to $100 per child. Being a bit burnt out by the visits to the different daycare services, they also started their search for a nanny following a recommendation from one of Alex's work colleagues. After reading the job offers on the net, the average salary for a nanny in Montreal is around $20 per hour.

At first glance, Alex was disenchanted that the cost of a nanny is about 1.4 times the cost of childcare, but after discussing with his spouse, he didn't realize the impact that the nanny would have on their daily tasks.

Scenarios compared EXTRA for the cost of 2 child care spaces[7] the cost of a nanny in 2022 

Effectively, what scenario A does not take into account are all the tasks that are inherent to the nanny's service and that lighten your daily routine. Not only are we talking about major time savings, whether it's the travel between work, daycare and home to pick up your little wolves (and the times you're late and a $20 fee is added to your bill), but also the array of tasks that the nanny takes on, such as:

  • Doing laundry and cleaning;
  • Accompanying the family on trips and assisting the parents with childcare;
  • Bathing, dressing and feeding the children;
  • Organizing activities such as games and outings;
  • Grocery shopping, preparing and serving meals.

A nanny takes on tasks that allow you to spend quality time with your children and perhaps even your significant other. It's hard to convert this into an economic value, but we've built some expenses and values into our 2nd scenario:

Some may point out that this is not a real cost and that it is less expensive to do the housework yourself. This is not wrong if you consider that your time is not valuable. The purpose of this exercise is to quantify the impact of a nanny on your daily life.

 

Your accountant, your best friend

Child care expenses

Your accountant can help you complete your income tax returns in order to claim the refundable tax credit for child care expenses in Quebec and the federal reduction for child care expenses.

Your credit can be claimed when you file your income tax return by April 30[16] following your taxation year or during the year. In fact, the Quebec tax credit can be paid in advance and the federal deduction can be claimed through a reduction in source deductions. This is very useful information for managing your budget.

Some restrictions apply when the caregiver is a family member in order to obtain the tax credit. Therefore, Alex and Valerie will have to pay particular attention to their potential employee:

  • Excluded spouse: Alex will not be able to hire his spouse Val to babysit his children. At least, he will not be eligible for the tax credit;
  • Certain minors excluded (babysitter under 18 years of age and related by blood, marriage, common-law or adoption): Alex will be able to hire his mother Sophie, but not his brother Loïc who is under 18.

Self-employed vs. employee

Given the nature of the nanny's work, it is obvious that she is qualified as an employee and not as a self-employed person. A self-employed person has the free choice of means to execute a contract and there is no subordination relationship between him/her and the client. A person is considered an employee if he or she undertakes, in a written or verbal contract, to perform work under the direction and control of an employer for a limited period of time and in return for remuneration[17]. There are criteria for determining status:

  • The actual subordination in the work;
  • The economic or financial criterion;
  • The ownership of tools;
  • The integration of the work performed;
  • The particular result of the work;
  • The attitude of the parties to their business relationship.

Our obligations as an employer[18]

Like other employers, Alex and Val will have to find a qualified employee according to their criteria and deal with life's hazards such as employee sick days, resignation, etc. 

On the administrative side, Alex or Val, as the employer of their nanny, will have to deduct Quebec and federal income taxes as well as Quebec Pension Plan (QPP), Quebec Parental Insurance Plan (QPIP) and Employment Insurance (EI) premiums on the amounts paid to them.[19]

They will be required to remit periodically to CRA and RQ the Quebec and federal income taxes and QPP, QPIP and EI premiums deducted, as well as their employer contributions to QPP, QPIP, EI and the Health Services Fund (HSF). They will also have to pay an annual labour standards assessment.

There are services/software available to assist or take over the management, payroll and payroll deductions. One financial institution charges approximately $15 per month for this service.

 

Mary Poppins incorporated

After thinking about it, Alex and Valerie have decided to hire a nanny, but they don't know where to start as they are looking for the perfect fit.

After all, they will be bringing a stranger into their home. There is also the language and cultural barrier that can get in the way. If the rare pearl selected is from outside Canada, they will have to comply adequately with the immigration rules (including administrative paperwork) - not to be overlooked. 

Are you interested in this type of assistance? You should know that there are search and matching platforms in Quebec between parents with homecare needs and qualified candidates according to different options, depending on your need to hire a foreign or Canadian nanny.

If you wish to discuss this further, our team is available to answer your questions.

 

 

List of references consulted in the course of writing this blog:

[1] If you have a child with a severe and prolonged impairment in mental or physical functions, other more beneficial credits are provided and this analysis does not reflect your situation

[2] http://www.budget.finances.gouv.qc.ca/budget/outils/garde-net-fr.asp#:~:text=Gr%C3%A2ce%20%C3%A0%20la%20bonification%20du,%24%20%C3%A0%207%2C17%20%24.

[3] The cost of an unsubsidized child care space ranges from $45 to $100 per day per child. We used the median cost.

[4] Daycare fee for an 8 hour day at a rate of $20.00 per hour : https://www.jobbank.gc.ca/marketreport/wages-occupation/17171/QC;jsessionid=DC2731D8AED350625CB9079B558A2879.jobsearch74).

[5] 15.5% of the employee's gross salary charged to the employer for the year 2022 : https://www.emploiquebec.gouv.qc.ca/guide_mesures_services/02_Generalites/02_2_Charges_sociales_imputees_yeur/2_2_charges_sociales_employeur.pdf

[6] https://www.revenuquebec.ca/fr/citoyens/credits-dimpot/credit-dimpot-pour-frais-de-garde-denfants/conditions-dadmissibilite/

[7] http://www.budget.finances.gouv.qc.ca/Budget/outils/garde-net-fr.asp

[8]Daycare fee for an 8 hour day at a rate of $20.00 per hour : https://www.jobbank.gc.ca/marketreport/wages-occupation/17171/QC;jsessionid=DC2731D8AED350625CB9079B558A2879.jobsearch74).

[9] Depending on the service agreement with your daycare, late fees may vary. In general, it is $20 for every 15 minutes of delay. We have assumed that there are 12 late arrivals per year (20*12=$240/260 days = $0.92).

[10] We used an average market price for frozen meals ($9.59) with 50% of the price allocated to preparation. The cost per day corresponds to the preparation of 4 meals per week for 50 weeks, divided on a 260 day basis. 

[11] 15.5% of the employee's gross salary charged to the employer for the year 2022: https://www.emploiquebec.gouv.qc.ca/guide_mesures_services/02_Generalites/02_2_Charges_sociales_imputees_yeur/2_2_charges_sociales_employeur.pdf

[12] Cleaning fee of $100 every 2 weeks, divided by 260 days.

[13] Valerie earns an annual salary of $55,000 for an hourly rate of $25.94. The commute from her work to the daycare and from the daycare to her home is 30 minutes each.

[14] Let's say she goes grocery shopping once a week for an hour and she lives 30 minutes away from her grocery store ($25.94*53 weeks / 260 days)

[15] https://www.revenuquebec.ca/fr/citoyens/credits-dimpot/credit-dimpot-pour-frais-de-garde-denfants/conditions-dadmissibilite/

[16]  The filing date for a self-employed person is June 15.

[17]  IN-301- Self-employed or employee? p.2 : https://www.revenuquebec.ca/documents/fr/publications/in/in-301%282017-10%29.pdf

[18] https://www.revenuquebec.ca/fr/entreprises/retenues-et-cotisations/trousse-employeur/
https://www.revenuquebec.ca/fr/entreprises/retenues-et-cotisations/

[19] Federal Employer Obligations :https://www.canada.ca/content/dam/cra-arc/formspubs/pub/t4001/t4001-21f.pdf

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