How to Hire a Nanny in Canada : Legal Requirements

This page describes the paper work and other steps that a Canadian family must take in order to hire a nanny or other caregiver. The information is provided by a CGA.

To today's busy Canadian parents, having a nanny to care for the children may sound almost as appealing as winning the lottery. Imagine having a caring, competent nanny to tend to your kids while you do the myriad of tasks that await you every day.

However, the prospects of researching, sorting through and making sense of the business, financial and legal aspects of hiring a nanny may be daunting. It's one more thing to add to an already overly busy life.

This page tells you, step by step, exactly what you need to do in terms of finances, taxes and paperwork. In short, it shows you how to hire a nanny in Canada!

The information is provided by Linh Tsiu, CGA.

Linh Tsiu, the source of information for this lens, is a Certified General Accountant with more than fourteen years experience. She's also a wife and mom, a resident of Metro Vancouver and the employer of a nanny.

Linh operates her own accounting business specializing in family tax benefits. In addition to doing tax returns for individuals and providing accounting services to small and medium business, Linh offers a Nanny Payroll Service to employers of nannies and other caregivers. Her clients come from all across Canada.

Linh discovered that many families with nannies simply didn't want the headache of looking after the nanny's payroll and ensuring that all legal and tax related reporting was handled on time. For these people, the job of bookkeeper and accountant was one more obligation to add to their current roles of employee or business owner, parent, chauffeur, cook, housekeeper, gardener, host, nurse and teacher.

These families preferred to use a nanny payroll service. Consequently, Linh launched her business and web site Caregiver Tax Services

If you have questions about taxation, the business aspects of hiring a nanny, or would like to discuss the nanny payroll service, please contact Linh via her web site.

You Are an Employer

When you hire your caregiver, you are an employer and your nanny is your employee. Essentially, you are running a business and you are legally required to perform the same reporting and bookkeeping tasks as any other employer.

This relationship is true regardless of whether you hire a live in or live out nanny, and whether your caregiver is full time or part time.

The exception would be if you use the services of an On Call Nanny. In Canada, the person filling this role is a private contractor and not an employee.

Non-compliance can Mean Penalties

1. You must register for a business number with Canada Revenue Agency (CRA) as you are considered an employer. Your nanny is your employee as per Canada Revenue Agency's (CRA )definition of Employee Vs Contractor. Please refer to the link list below for additional information.
2. You must remit payroll withholding taxes to CRA. This includes the employee's income tax, CPP (Canada Pension Plan), EI (Employment Insurance) and the employer's portion of CPP and EI.
3. You must provide an accurate T4 to your nanny at the end of each fiscal year and file your T4 summary to the CRA by deadline. Should you file late, you will be penalized a late fee starting at $100 and then $10 per day after that, up to $1000.
4. .You must adhere to the provincial labour standards in your province of residence. For example, British Columbia employers must follow all provincial labour standards to avoid liability under the Employment Standards Act (ESA). The ESA sets out minimum requirements for payment of annual vacation pay and statutory holidays. Failure to comply may warrant you an administrative penalty of $500 per ESA violation.
5. Employers must register for Workers’ Compensation coverage for your caregiver.

The Paperwork Required

On every payday, you must provide your nanny with a written wage statement for the pay period stating all of the following:

(a) the employer's name and address;

(b) the hours worked by the employee;

(c) the employee's wage rate, whether paid hourly, on a salary basis or on a flat rate, piece rate, commission or other incentive basis;

(d) the employee's overtime wage rate;

(e) the hours worked by the employee at the overtime wage rate;

(f) any money, allowance or other payment the employee is entitled to;

(g) the amount of each deduction from the employee's wages and the purpose of each deduction;

(h) if the employee is paid other than by the hour or by salary, how the wages were calculated for the work the employee is paid for;

(i) the employee's gross and net wages;

(j) how much money the employee has taken from the employee's time bank and how much remains.

An Electronic Alternative

You may provide a wage statement to the nanny or caregiver electronically if you provide the nanny with:

(a) confidential access to the electronic wage statement, and

(b) a means of making a paper copy of that wage statement.

This access must be in the workplace, meaning your home.

Mistakes can be Costly

In addition to the financial penalties mentioned earlier, there is another concern to think about.

If you accidentally or mistakenly fail to comply with these requirements, you could be looking at a lawsuit when the nanny's employment with you ends.

Should this person file a lawsuit against you for non-compliance, you will find that the Canadian legal system works to protect the employee's rights. As the employer, you are expected to know the standards. Claiming that you did not know the standards is seldom accepted as a legitimate reason.