Blog Post

The Math

The Math regarding having an in home caregiver is not super simple, the wages encompass a mix of care-giving and in most cases housework.  obviously a family does not get housework done using daycare. Lets look at an example.

Toronto 11.54/hr at 40hrs a week times 52 weeks a year divide by 12 months.

This is the only formula to use, there are different numbers of days in each month you cannot just use 40 hrs times 4 weeks.

24003.2/12= 2000.27 per month in Ontario.

Total cash income 2,000.27

Total cash income 2,000.27

Taxable income for the pay period 2,000.27

Pensionable earnings for the pay period 2,000.27

Insurable earnings for the pay period 2,000.27

Federal tax deduction 122.30

Provincial tax deduction 72.31

Total tax deductions 194.61

CPP deductions 84.58

EI deductions 32.60

Total deductions 311.79 This is the amount you hold back from the nannies paycheck and submit to revenue Canada.

Net amount 1,688.48  This is one month of pay for a nanny in Ontario

Employee CPP contributions 84.58

Employer CPP contributions 84.58

Subtotal of Canada Pension Plan (CPP) 169.16

Employment Insurance (EI)Employee EI contributions  32.60

Employer EI contributions 45.64 Employers remit 1.4 times what the worker pays for EI

Subtotal of Employment Insurance (EI) 78.24

Tax deductions 194.61

For this calculation, remit this amount 442.01

Now I will add 130.22 to the 2000.27 to = 2130.49 in Ontario that is the real monthly cost right now.

in most cases both parents hold jobs that require a nanny, though if one parent is in training or school it still works. However the tax saving goes to the lowest wage earner in the home.

for a child under 7 the tax savings is 7000.00 per child, for a child 7-16 the tax savings is 4000.00 per child.

here is an example of how this works

a family with 2 children under 7.

lowest wage earner making 55,000.00 per year 24003.00 income for the nanny. In this case the lowest wage earner in the home would pay tax on 34,000.00 instead of paying tax on 55,000.00 resulting in a refund of about 5000.00.

bringing the actual cost per month down to about 1714.00 per month. Looking at the convenience and possibilities for extra income and promotion, and also considering you must get care for the children via daycare or day homes (which is not cheap either) having an in home caregiver is still the best deal for care for the children and family.