Hiring a Nanny Legally: What Every Family Needs to Know

Hiring a nanny or manny should feel like a gift of time, peace, and serenity. Not a maze of paperwork, payroll, and potential penalties.

Fun fact: under federal law, you become a household employer the moment you pay a caregiver directly to work in your home under your direction and control. If you determine their schedule, responsibilities, or how care is provided, they are legally your employee, not an independent contractor. This means they must be paid through a W2, not a 1099. Not to mention you also have to comply with state-specific requirements (such as ESST, PFML, Workers Comp, and unemployment insurance program).

*Make sure to review your state’s employment laws, as each state has its own requirements in addition to federal regulations. We're going to walk you through Minnesota's requirements.

Sound confusing? Trust me, I get it... This information isn't common knowledge, I feel like you have to go actively seek it out but even then it can be hard to find. It's no wonder so many parents, not only in Minnesota but nationwide, feel overwhelmed. Missing even one requirement under Minnesota nanny laws, can expose a family to audits, lawsuits, and felony level tax fraud charges.

If you live in Minnesota we can help with this (if not please reach out, we know several payroll companies we can refer you to who handle all of this, nationwide). Here at Nurturing Nannies, we believe families deserve professional, trusted childcare without the burden or risks of being the legal employer. Just as importantly, we believe caregivers deserve the same respect, protections, and benefits as employees in any other field.

Get ready to nerd out with me and learn what this is all about!

Your Household Employer Responsibilities Explained

Your Household Employer Responsibilities Explained

When you hire a nanny or manny, you take on all the same legal and tax obligations as any other employer. According to the IRS Publication 926: Household Employer’s Tax Guide (2025), families become household employers the moment they pay someone to provide childcare in their home under their direction and control. This means that if you decide your nanny’s schedule, duties, or methods of care, they are legally your employee, not an independent contractor. Understanding and managing these household employer responsibilities is an essential part of hiring a nanny legally.

Once you pay your nanny $2,800 or more in a calendar year, you must comply with federal employment tax laws. This includes withholding and paying Social Security and Medicare taxes (FICA), paying federal unemployment tax (FUTA), and providing your nanny with a W-2 form (by the end of January each year). Families must also complete a Form I-9 to verify the nanny’s legal right to work in the United States and maintain accurate records of wages, hours, and deductions.

At the state level, Minnesota families are also required to pay state unemployment insurance, withhold state income tax, and carry workers compensation insurance once the nanny earns more than $1,000 in a quarter. Beginning in January 2026, families will also contribute to the state’s Paid Family and Medical Leave (PFML) program. These programs ensure caregivers receive benefits such as paid leave, unemployment protection, and wage replacement during major life events.

According to the Fair Labor Standards Act (FLSA), household employees are classified as nonexempt workers. This means they must be paid at least minimum wage and receive overtime pay at one and a half times their hourly rate for any hours worked beyond forty in a week.

When all is said and done most household employers pay an extra thirty to forty percent on top of the hourly wage to cover taxes, insurance, payroll processing, and required benefits such as paid sick leave (or Earned Sick and Safe Time in MN). Working with a professional agency can add to the overall cost as well. Most agencies charge an additional twelve to twenty percent service fee, which often brings the total closer to forty percent above the nanny’s hourly rate. While this may sound high, those additional costs typically cover essential services such as payroll management, compliance, liability coverage, replacement guarantees, and ongoing support, all of which protect families from significant legal and financial risks. Just as importantly, working with a professional agency saves families countless hours and stress by managing every detail of the employment process from start to finish.

Minnesota Nanny Employment Standards: What Families Must Provide by Law

Earned Sick and Safe Time (ESST)  As of January 2024, families must provide one hour of paid sick and safe time for every thirty hours worked. Caregivers can accrue up to 48 hours per year, with unused time rolling over into the following year, up to a maximum of 80 hours. At Nurturing Nannies we require our families to offer the option to "pay out" at the end of each year term. This helps Nannies, who have a strong immune system and like the extra income, to not call in because they have to "use it or loose it". It's a great way to show your nanny or manny that you appreciate them and want to create a long lasting relationship where everyone wins.

Overtime Pay 

Caregivers are non-exempt employees. Meaning that any hours worked beyond 40 in a week must be paid at one and a half times the hourly rate. Guaranteed hours do not excuse a family from paying overtime.

Workers’ Compensation Insurance 

Minnesota requires all household employers to carry workers’ compensation insurance once you've paid your nanny or manny $1000.00+ in a year. Without it, families can be personally responsible for medical bills and lost wages if a caregiver is injured on the job. THIS IS SOMETHING YOU DON'T WANT TO SKIP!

Record Keeping and Pay Stubs 

Families must provide written pay stubs each payday, keep detailed records of hours worked, wages, deductions, and benefits, and issue a written notice of terms at the time of hire. Auditors often ask for these first.

How the New Minnesota Break Law Affects Nannies

Under the 2026 updates, caregivers (including nannies) are legally entitled to:

• One paid 15-minute rest break for every four consecutive hours worked.

• One unpaid 30-minute meal break for any shift lasting eight or more consecutive hours.
  

However, because nannies work in private homes and are responsible for supervising children, they cannot simply leave their workplace or “step away” as other employees might. The law’s intent is to ensure employees have reasonable opportunities to rest, eat, and use the restroom, not necessarily to leave the worksite.

For in-home childcare, that means:

• Families must make a good-faith effort to allow reasonable breaks. This could include the nanny eating while the children eat, resting during naps or quiet time, or having short periods to check their phone or decompress while children are occupied.

• Breaks must be paid unless the nanny is completely relieved of duty for 30 uninterrupted minutes (which rarely applies in childcare settings). So in most cases, nanny breaks are still paid time.

• Written acknowledgment helps protect everyone. Families and nannies should include a short clause in the work agreement confirming how breaks will be handled — for example, “The nanny may take paid rest and meal breaks as practical during the child’s nap or quiet periods.”
  

The law recognizes that in-home caregivers have unique working conditions. What matters most is that families provide nannies with realistic opportunities to rest and eat and that those breaks are paid whenever active supervision continues.

PTO & Holidays 

Under both federal and Minnesota law, families are not legally required to provide paid vacation or holiday time for nannies or mannies. However, once offered in writing, these benefits become legally binding under wage and hour laws. While not required, paid time off and holidays are considered industry standard for professional caregivers and play an essential role in attracting and retaining high quality nannies.

Industry Standards

Even though PTO and holiday pay are not legally required, they are widely expected by professional nannies.

• Full time nannies typically receive two to three weeks of paid vacation and six to ten paid holidays per year.

• Part time nannies often receive pro rated versions. At Nurturing Nannies we believe that if they have the experience they should have the same amount off as a full time nanny.

• Career nannies with ten or more years of experience may expect three to four weeks of PTO and additional personal days.

  
  

I think it's also important to state that offering paid time off is more than a benefit, it is a sign of respect and recognition for the vital role nannies play in supporting families. Every other professional industry provides employees with opportunities to rest, recharge, and maintain their well being. Childcare should be no different. Nannies are caring for your most prized possessions, your children, and they deserve the time and space to replenish their energy so they can continue to give their best.

Failing to offer PTO or holiday pay can make positions far less attractive to qualified caregivers and increase the risk of burnout or turnover. Investing in your nanny’s well being ultimately protects your family’s stability and helps nurture a long term, trusting relationship.

Retirement Savings Program 

Beginning in January 2026, Minnesota will launch its state-run Secure Choice retirement program. This requirement will initially apply only to employers with five or more employees who do not already offer a qualified retirement plan. Smaller employers, including most families who hire a single nanny, are not currently required to participate, though they may opt in voluntarily.

Paid Family and Medical Leave (PFML) 

Starting in January 2026, Minnesota will launch its Paid Family and Medical Leave program, giving employees up to 20 weeks of partially paid leave for maternity, paternity, medical recovery, caregiving, or safety needs. The program is funded through a small payroll contribution shared by both the family (as the employer) and the nanny (as the employee), with each contributing about 0.44 percent of wages. Families are not responsible for paying the nanny’s wages while they are on PFML, as benefits are paid directly by the state. However, families must ensure payroll contributions are withheld and remitted correctly and should plan ahead for temporary or backup care during their nanny’s leave.

At Nurturing Nannies, we are the legal employer of all our caregivers, which means we take full responsibility for payroll, tax withholdings, and compliance with all state and federal programs, including PFML. Families never have to manage deductions, filings, or reporting. We handle every detail on their behalf, ensuring complete legal compliance and true peace of mind.

Minimum Wage 

Caregivers must be paid at least the Minnesota minimum wage. In 2025, this will be $11.13 per hour for large employers and $9.08 per hour for small employers, with most households falling into the small employer category. In 2026, these rates will rise to $11.41 and $9.31 per hour. Only Minneapolis and St. Paul currently require higher city minimum wages. In St. Paul, families classified as micro employers, those with five or fewer employees, which includes nearly all households, must pay at least $13.25 per hour in 2025 and $14.25 per hour in 2026. In Minneapolis, all families must pay a minimum of $15.97 per hour in 2025, increasing to $16.37 per hour in 2026. Families in all other Minnesota cities must meet the state minimum wage. Live-in caregivers are the exception, but families must still comply with applicable state and city minimums. It is important to note that most families pay much higher, since professional nannies typically expect $20.00 to $30.00 per hour, more if they are taking on additional responsibilities (here in Minnesota).

Immigration and I-9 Compliance 

Families are required to complete Form I-9 to verify a caregiver’s legal right to work in the United States. Failing to do so may result in federal penalties.

W-2 vs 1099 Nanny: What Families Need to Know to Hire a Nanny Legally

Employee misclassification is one of the most common and costly mistakes families make when hiring a nanny. Under federal law, nannies are W2 employees, not independent contractors. This means you cannot pay them using a 1099 form or treat them as self-employed.

If you do any of the following: determine your nanny’s schedule, set their duties, or direct how they care for your children, they are legally your employee. Misclassifying them as a contractor is not only incorrect, it is illegal. Families who pay under the table or issue a 1099 risk years of back taxes, IRS penalties, and possible legal action for wage theft or tax evasion.

At Nurturing Nannies, we eliminate this risk entirely. Because our agency employs all nannies and sitters directly, families never need to worry about payroll, taxes, or compliance. Everything is handled properly and legally from day one.

Why This Matters

Families sometimes assume paying under the table is easier or even better for the nanny since they get to bring home more money. I get it. The younger version of me thought the same thing for so long until I realized what that really meant. Being paid under the table, without documented income, prevents caregivers from qualifying for a car loan, a mortgage, or even a basic personal loan. They may be denied an apartment lease because they have no verifiable income. Without contributions to Social Security or unemployment insurance, they lose all financial security and access to long-term benefits.

If you look across every other industry, this problem does not exist. No one asks their accountant, teacher, doctor, lawyer, or nurse if it would be acceptable to be paid off the books. Those professionals can qualify for car loans, buy homes, and plan their futures with confidence because their income is recognized and protected.

We need to change that for caregivers. Nannies are not just helping families function day to day. They are nurturing children, protecting them, and shaping who they become. These are the people caring for your most prized possessions, your children.

Professional nannies take their roles seriously, often dedicating their lives to the families they serve. They consistently go above and beyond, putting others’ needs before their own to ensure your household runs smoothly. Many quietly rearrange their personal plans, stay late when needed, and show up every day with patience and care because they take pride in what they do.

They deserve the same recognition, protections, and financial stability as employees in any other profession. Paying legally and supporting professional employment standards does more than meet a requirement. It strengthens the entire childcare industry and helps create a culture where both families and caregivers can truly thrive.

What Happens If Families Do Not Comply with These Nanny Laws?

When caregiver wages go unreported, parents are still required to sign their personal tax returns at the end of the year. Omitting household employment wages is not a harmless oversight; it is considered tax fraud. The IRS clearly states that intentionally failing to report caregiver wages can result in severe penalties and, in some cases, felony charges.

Even without an IRS audit, families are at risk. In Minnesota, workers’ compensation insurance is mandatory. Without it, a simple accident such as a caregiver slipping on an icy driveway in Minnetonka or injuring themselves while lifting a child in Edina could leave a family personally responsible for medical bills and lost wages. Wage disputes can also escalate quickly. Minnesota’s wage theft laws entitle employees to double damages plus attorney’s fees if they are underpaid or denied overtime. Misclassifying a caregiver as an independent contractor instead of a W-2 employee is another common mistake that triggers years of back taxes. Even onboarding requirements such as issuing a written notice of pay, hours, and benefits are often overlooked but still required by law.

How Nurturing Nannies Simplifies Minnesota Nanny Laws and Protects Families

Nurturing Nannies was built on the belief that no parent should have to sacrifice peace of mind for quality childcare. Hiring a nanny is more than a résumé review. It is interviews, background checks, payroll, taxes, insurance, and the constant worry of whether every law has been followed. We take that entire burden off parents’ shoulders and manage it with precision. At the same time, we advocate fiercely for our nannies, ensuring they receive the protections, stability, and professional respect they deserve. Ethical employment is not just a box we check. It is the standard we uphold. Families come to us not only for trusted care, but for the confidence that every detail has been handled with the discretion and care of a concierge level service.

For families, this means no audits, no payroll headaches, and no risk of accidentally committing tax fraud. For nannies, it means reliable paychecks, access to benefits, documented income that builds their future, and the professional respect that comes with being fully or partially employed.

Families can choose the level of support that fits their needs. We can conduct a full search and placement to match you with the perfect caregiver, or if you have already found your ideal nanny, we can step in as the employer and remove the administrative burden or help send you to a payroll company we trust so you can remain the employer. Either way, both family and caregiver thrive.

👉 Ready to experience reliable, trustworthy childcare without the weight of being an employer? Contact Nurturing Nannies today at 763-283-8752 (text first please) or email Rachel at rachel@nurturingnannies.us to start your stress free childcare journey today! *Please note: For the fastest response, please text or email.

Disclaimer: The information in this article is provided for general educational purposes and reflects our understanding of current Minnesota and federal employment laws as of 2025. It should not be taken as legal or tax advice. Laws and regulations may change before January 2026. For specific guidance regarding your situation, please consult a qualified attorney, accountant, or licensed payroll professional.