Calculating the Cost of Childcare for Divorced Parents
Posted on: April 5, 2010 by: adminCalculating the cost of childcare in divorce proceedings can be a complicated endeavor. And if all the costs are not included in the analysis, your client could lose out on a substantial amount of money.
While simply adding up the monthly costs of daycare can be relatively straightforward, the costs of hiring a nanny are numerous and by no means obvious. Indeed, if you simply penciled in the amount of the nanny’s annual compensation, you would significantly underestimate the cost of hiring and employing the nanny.
The first thing you must do is consider the expense of hiring a qualified domestic employment agency (or nanny agency) to start a search. Agencies typically charge an initial registration fee of $100 to $250 dollars, and then charge anywhere from 14-18% of the nanny’s annual compensation (including the value of room and board and benefits such as insurance) as a placement fee. With a nanny making approximately $35,000 per year or more, the agency’s placement fee alone likely will exceed $5,000.
Along with that, many families run background checks on who they employ, and it’s not uncommon these days to have a drug test and physical, as well.These background checks, physical exams, and drug testing can cost several hundred dollars, but the total cost can be more if the testing is very extensive.Once the family hires the babysitter, her pay (including but not limited to salary, meals, insurance, or other benefits) is the largest component of the total cost of childcare. Remember as well that nannies often receive holiday or annual bonuses, and this compensation should be included in the childcare cost as well.
In addition to these compensation costs, because the family is almost always the nanny’s employer (nannies are virtually never independent contractors), the cost of childcare also should include the cost of the employer’s share of taxes on the nanny’s compensation.
These taxes include 6.2% of the nanny’s wages for Social Security (on wages up to $102,000 for 2008) and 1.45% of the nanny’s wages for Medicare (taxable on all wages), as well as a variety of smaller federal and state taxes. In total, these taxes can amount to approximately an additional 9% of the nanny’s compensation.
Due to the complexity and effort required to report and pay these payroll taxes, many families hire lawyers, accountants or payroll services to handle these tasks for them. The cost of these services also should be included in the overall childcare cost.
Finally, there are insurance costs that should be considered as well. Many states require household employers to provide worker’s compensation insurance for nannies and other household employees.Similarly, if the nanny will be using the family car or even her own, it makes sense for the family to have the proper auto insurance in place.Again, worker’s compensation and automobile insurance costs should be included in the analysis of childcare cost.
A qualified expert witness can assist family law attorneys in calculating these childcare costs.An expert with this specialty can target your analysis to a particular region, in terms of what typical fees are for nannies and nanny agencies.The expert can also affirm the costs of insurance, taxes, and of course, payroll, from his or her personal experience with the domestic employment industry.
The best expert resource for this testimony is an individual with a thorough knowledge of entire domestic employment industry including employees, agencies, taxes, payroll and insurance. This one expert can testify to the entire range of subjects and ultimately provide the client with a comprehensive and effective childcare cost report.
Using an expert in this field can significantly increase childcare cost recovery for your client, by making sure that all childcare costs are accounted for in the analysis.
This Childcare Expert Witness is the Founder of a leading law firm representing household employers and domestic employment agencies. He is one of the many experts featured by Consolidated Consultants: The Expert Witness Referral Company. He has served as an expert witness in cases involving household employees, including calculating the cost of childcare in divorce proceedings.He also participates on the Board of Directors for the International Nanny Association.
