Understanding the Different Payroll Models for Nannies

When families begin exploring nanny payroll services, the first question is often about cost. While it is natural to compare prices, it is more important to understand the processes behind each payroll model and how these differences affect the way you meet your obligations as a domestic employer. Not all models operate in the same way, and the level of compliance, clarity and support you receive can vary greatly.

This guide explains the two nanny payroll models used in Australia and outlines why quality processes matter just as much as price when choosing a service.

There Are Two Distinct Nanny Payroll Models in Australia.

1: The first approach is known as the Employer of Record model. In this structure, the payroll provider becomes the employer listed on the nanny’s payslip and manages all nannies under a single ATO profile. This groups all nanny arrangements together, with all PAYG and Super lodged under the Employer of Record’s ABN. This model is simpler for a provider to administer because, instead of processing hundreds of End of Quarter/Financial Year lodgements, they only have to process one.

2: The second approach is the Direct Employment model, which NannyPay uses. With this model, each family is correctly registered with the ATO as the official employer. This ensures that your ATO records, WorkCover policy, superannuation payments and payslips all align under the same name of the actual employer. Each family and nanny arrangement remains separate, protecting you from risks that may arise in other households. This model requires more administration because every employer arrangement is lodged individually, but it provides greater clarity, cleaner compliance and stronger protection for both families and nannies.

Why Structure Matters More Than Parents Realise

Families come to NannyPay to outsource the time-consuming logistics that come with domestic employment. It’s rare for families to consider how employer registration, WorkCover alignment or employer obligations work. These details only become visible when something goes wrong, such as an audit, an incorrect lodgement or a workplace incident. When the employer name is consistent across all payroll components, compliance processes are smoother, and the likelihood of confusion is significantly lower.

Cheapest Is Not Always Best When It Comes to Compliance

A cheaper nanny payroll service can only be low-cost if the underlying structure is simple to run or technology is replacing the crucial human touch points required for the bespoke elements that come when a private household becomes a workplace. Technology is at the heart of our operations here at NannyPay, but it will never replace the crucial role our team plays in running a fully compliant, accurate, and reliable payroll. Different nanny payroll models in Australia have different administrative requirements and levels of responsibility for families.

Instead of focusing solely on price, it’s essential that you consider the long-term impact of the payroll structure and how it supports you in meeting your responsibilities as an employer. True value comes from accuracy, peace of mind, and knowing the process is done in line with Australian standards.

The Level of Support You Receive

Support can vary widely between nanny payroll services. Some providers offer app-based systems that allow families to enter and monitor their payroll information. NannyPay provides a fully managed service, handling the entire process on your behalf and delivering clear reports for you to review. Our support team consists of admin-savvy professional nannies with decades of experience in the Australian industry, supported by an Australian-based accounting team that engages with organisations such as the ATO and Xero. Families often say that having a specialist team who understands the nanny sector adds confidence and removes stress. 

Why NannyPay Chose Direct Employment as our Nanny Payroll Model

NannyPay explored all available nanny payroll models and sought legal guidance before deciding on the model we use today. Although other structures can be simpler and cheaper for providers to operate, we chose the direct employment model because it delivers stronger compliance and clearer separation between each nanny-family arrangement. This approach ensures that your employer ATO registration matches your WorkCover policy and your employee’s payslips. It reduces the risk of any confusion about who the employer is, and supports families if a claim or enquiry is ever made. Our priority has always been to protect both families and nannies by maintaining accuracy and transparency across every stage of payroll.

Considerations to help you make an informed decision

If you are shopping around, the nanny payroll models are just one of the factors to help you decide which nanny nanny payroll service provide to use. Consider the following questions for your Nanny payroll provider.

1: Is the nanny payroll team based in Australia, or offshore? If offshore, what guarantees are there that the provider has a strong understanding of the Australian Taxation system?

Our answer: Our NannyPay experts are all based in Australia, hold Australian qualifications, and are recognised industry experts in their fields.  Our accounting firm, Bramble and Briar, is a Xero Platinum Partner, a Certified Xero Advisor, a member of CA ANZ, and registered with the Tax Practitioner Board. That’s an impressive list!

2: When taking out a work cover policy, does the policyholder’s name match the employer’s name listed on ATO lodgements and payslips? If they don’t match, and you are asked to take out a policy in your name, be sure to mention this to the Work Cover provider to confirm whether the policy is valid even though the name on the policy doesn’t match the employer listed with the ATO (each state will be different).

Our answer: Your Worker’s Compensation Policy, ATO registration, PAYG lodgements, Super Payments and nanny’s payslip will all be listed under your name to keep things consistent and compliant. NannyPay is not an employer so we are not required to hold a policy and have no active employees.

3: Are you required to enter information such as timesheets and leave, or will your worker be responsible for that?

Our answer: Your employee will manage their timesheets, leave requests and tax declaration form. Our team reviews each pay run, and if timesheets are incorrect or missing, we’ll follow up with your worker directly to remind them and provide any support they need, 7 days a week. We then ask you to check the payroll report we send you before we debit the total from your chosen account, so you can let us know if there are any changes to be made.

4: What happens in the event that there is a grievance? For example, if a nanny makes a claim for back pay, or a family is investigated by Fair Work, or a nanny/family enters a legal dispute – do you or the Nanny Payroll provider hold any responsibility?

Our answer: Each employment arrangement paid under NannyPay is a separate employment entity. This means that any grievances are managed independently, so your arrangement doesn’t hold any risks/liabilities associated with other nanny-family arrangements. NannyPay is not an active employer, meaning our company bears no responsibility in the event of a lawsuit, Fair Work investigation, or WorkCover claim.

5: Check online reviews – if there are none, seek out validation for the service.

Our answer: All of NannyPay’s customer reviews on Google and TrustPilot are 5 stars!