Understanding the difference between gross and net pay is crucial for a nanny to grasp their true earnings.
Gross pay refers to the total amount of money earned before any deductions , such as taxes are taken out. Net pay refers to what you take home after deductions. Think of it as "gross"being large and "net" catching the pay they will take away.
It is essential to work with gross pay figures because it provides a clear view of earnings, helping you budget and compare job offers with more accuracy.
1.Job Stability for nannies:
Employers can clearly anticipate costs as gross pay accounts for taxes and National insurance.
2. Tax advantages:Nannies can benefit from their tax -free allowance, which typically increases annually.
3. Salary comparison: nannies can easily compare their earnings with peers in childcare and other industries.
4. Simplified financial transactions:
Gross pay simplifies processes like applying for a mortgage application, or loan. Lenders typically require proof of income in gross terms.
From an employers perspective:
1.Better budgeting: Gross pay includes taxes, National insurance and pension contributions upfront.
2. Gross pay ensures that nannies are contributing to their share towards a pension scheme.
3. Clear communication: Dealing with HMRC is simplified as they typically communicate in gross terms avoiding an confusion.
4. Financial protection: Nannies are shielded from being responsible for any unpaid taxes from previous roles, such as court orders or student loans.