Things You Need to Know When Hiring a Live-Out Caregiver in Canada

So you do not want to have a live-in caregiver through the Canadian live-in caregiver program, and decide instead to go the live-out route.  Well below are some things you will need to know when hiring a live-out caregiver in Canada.

1. If you are thinking about circumventing the rules and paying your nanny cash, remember this is a lose-lose situation.  First of all, if the government catches you not only will they assess you and make you pay the amounts which should have been paid to the CRA, such as paying tax, contributing to the Canada Pension Plan, Employment Insurance, and buying workplace insurance, but they will make you pay the employee portion as well.  In addition, you lose the $7,000 deduction on your taxes, and your nanny loses her right to collect Employment Insurance if she gets laid off.

What usually happens in that case is the nanny gets laid off, tries to collect EI, is informed by HRSDC that she is not entitled because she has not been paying into the plan at which point she provides records of payments and then the government is looking for you.  Yes, it is more difficult to do but it also rarely ends well.

2.  Make sure you have a HRSDC approved labour contract clearly spelling out the details of the job, much as you would sign with your employer.  It’s all the same.  They’re generally categorized as domestic workers and they have rights to feedback, clearly defined breaks, details around pay, vacation, overtime, expectations, roles and responsibilities.  Long gone thankfully are the days where potential employers feel that Canada is better than Hong Kong so it’s okay to stretch working hours, responsibilities or ignore breaks.  Getting an agreed upon contract creates good relations between you and outlines exactly everything which can keep you from getting in trouble down the road.

3.  What do I need to know about paying my nanny?  Well, as the employer, nannies are not self-employed, you have to treat them in a manner in which you would want to be treated and that means with respect.  You negotiate the contract and if there are issues with performance, you have to address them in a respectful manner, much in the same way your employee has venues to complain about your treatment, including suing you for wrongful dismissal.

This step-by-step guide to payroll deductions should help getting you on the way and around the fear of the CRA;

Step 1 - Call 1.866.959.5525, the Canada Revenue Agency business help line, follow the prompts for payroll / source deductions accounts and ask the customer services representative for a business (or BN) number.

Step 2 – You have the BN set up in your name, so now you need the information on your one employee, your nanny.  Gather from her on the contract her full name, SIN and live-out address.  You’ll need this later…

Step 3 – Next you will need to figure out how much you will need to remit to the CRA each month.  You can do this by entering the amount you have paid your nanny into the CRA payroll calculator; http://www.cra-arc.gc.ca/tx/bsnss/tpcs/pyrll/tbls-eng.html.  The calculator breaks down how much you will need to remit for taxes, EI and CPP.  This link also provides other information on being an employer, rights and responsibilities.  Read this if you have time or need something to help you get to sleep.

Step 4 – Monthly remittance of the held back funds (deductions of source pay).  By the 15th of month you will be filling out the remittance voucher sent to you from the CRA – unless you sign up to remit online (check My Account).  You remit on the 15th for the previous month, so on June 15th you are remitting for May 1st to 31st.  On the form you need the gross pay, net pay, EI, CPP, month remitting for, number of employees and tax withheld.  For me, the quickest is to take that to the bank on the 15th (16th if the 15th is a Sunday, 17th if the 15th is a Saturday, and 18th if the Monday is a holiday and the 15th is the Saturday.  The bank stamps the form, takes the funds from my account and takes the remittance voucher.  Done.

Step 5 - Keep the copy of the remittance voucher with the bank stamp in a file as you’ll need it when filing your personal income taxes (T1) each year and providing your nanny a T4 by February 28th of the following year.

4. Most often asked questions surround legal obligations, such as; when ending a contract with your nanny, if she gets sick, falls pregnant or gives notice.  First off, be sure that the contract with your nanny establishes the length of notice needed if one of you wants to end your working relationship. Any penalties for not meeting that notice period should be spelled out in your contract too.  As for the other things, just put your self in her shoes and change the employer from you to a large firm.  Would your employer allow you to take short-term disability time off or long-term disability time off?  Absolutely!  By law they are required to and the same goes for your caregiver.  If she falls pregnant you cannot fire her for the same reasons.  If you need help, seek an employment lawyer.

But with all that being said, if the separation is mutually agreed upon, remember you will need to provide your nanny with a Record of Employment (ROE) within 8 days of her last day of work.  Don’t wait!  This is a controlled form to prevent EI fraud, so reach out to Service Canada right away and they will send you a kit with the details on how to do this.

5.  Where can I get a contract?  I recommend Googling “HRSDC approved nanny contract.”  It will lead you to complete the key sections of  the contract which cause the most headaches down the road, specifically; Overtime, training, duties she cannot legally perform for me, tracking of expenses – petty cash, and holiday pay.

 

I hope this provides some insight and helps clear up some lingering issues around what to do with live-out caregivers in Canada.  All in all, just remember to treat your employee with the same respect you would want to be treated as an employee.  Karma’s a bitch!

11 comments

  1. Thanks for this. We have a live-out caregiver and it was very stressful getting all the ducks in a row. I think I know what I’m doing now (I made it through my 1st T4s as an “employer”). Even though there is a lot more hassle, we love having the convenience and personalized care.

  2. Congrats. Getting that first T4 out of the way is a huge accomplishment. We hired our first nanny when I was still working at the CRA – in the payroll area and it took me a long time to figure out how much to remit and if the amount was accurate. I even had a payroll auditor verify the figures and help me prepare the T4′s until the option to do it all online came about. They sure don’t make it easy!

    Happy to be getting back to the classroom soon?

  3. Thanks Urban DAddy, we also wanted to hire a Live in Caregiver but found the recent changes to the program pretty unfair not to speak the process too expensive and risky . We just hired a p/t live out caregiver, a lot less complicated. It almost seems like the Government is trying to stop families from hiring Live in Caregivers. What is your take ?

  4. We are trying to setup a live out nanny due to the cost of having three kids in daycare, which will crush us. There is so much info to wade through to even get started with the process. My first question is, I we required to pay vacaction pay, and Stat pay, or can i just have that incoprerated into the hourly wage?

  5. So it’s tax season and I am really confused. Based on the contract with my LIC, I was to deduct $300 per month for R&B. This amount was deducted from her NET pay after all statutory deductions. I wasn’t sure if this was a taxable benefit or not so what I did was include the amount as taxable benefit on her income and deducted EI & CPP on it.

    Now I have to prepare the T4 and I am so confused that I need to know the following;

    1. Do I include her total gross pay (10.25 * 2080 hours) in box 14, or do I include total gross pay plus R&B “charged” as taxable income?

    2. What would her EI and CPP insurable earnings be? Is this the gross pay only or the gross pay plus the room & board

    3. on box 29, code 30, should I record the amount “charged” for room and board or the difference between the FMV and the amount charged?

    4. How do I determine what the FMV should have been, even though our contract said she would only pay $300 per month.

    I need immediate help.

  6. Hi there Anon,

    It’s too bad you did not email me. I did not see this question until just now. Remember you can always amend a filing with the CRA.

    The answer to your first question is yes. You include both amounts on the T4. Secondly, the Room and Board is a set rate pre-determined by the contract signed with the LIC. There is a max rate and that rate should be added in, deductions based on it, then removed again. Like you suggested. This figure should match the way you calculated remittances to the CRA.

    The last 2 questions are lumped together because the set rate could be your FMV rate and the actual amount charged included as well.

    Look on the bright side… The CRA doesn’t get fussy over nanny payroll accounts and so long as the remittances match the expected remittance, you’re good to go.

    Hope this helps.

  7. Wow thanks so much for providing this info! We are expecting twins in November so are getting going now on figuring out what we need to do to hire a nanny and this is invaluable. Thanks again!

  8. Thank you for taking the time to comment, Brian, and congratulations!

    From a financial standpoint, a live-in makes more sense, if you have the space – but you might already know that by now. :)

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