The Household Employer Payroll Checklist: What to Do Before Your Nanny’s First Paycheck

The household payroll checklist every new household employer needs before day one.

Once you hire a nanny, family assistant, or household manager, you officially become an employer. And with that comes a set of real obligations: payroll taxes, compliance requirements, and legal responsibilities that all begin with the first paycheck, not somewhere down the road.

Most families don’t realize what needs to happen until the first pay period rolls around. The good news is that getting it right from the get-go isn’t complicated. This checklist walks you through exactly what needs to be in place before you run your first payroll, and what to stay on top of once the employment relationship is underway. We’re here to ensure the person supporting your family is paid correctly and your household stays compliant from day one.

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Essential Things to Do Before Setting Up Payroll

A few things need to be in place before you run payroll for the first time. This all should be handled not after payroll and not eventually (read: now is not a good time to take a ‘wait and see’ approach). Getting these right from the start protects you, your employee, and the employment relationship you’re building. A payroll provider like Hello Nanny!’s payroll service, which specializes in supporting families hiring household employees, can walk you through each of these steps and handle most of them on your behalf.

1. Confirm Your Worker’s Classification

Step one is to determine whether the person you’ve hired is a household employee or an independent contractor. For most nannies, family assistants, and household managers, the answer is clear: if you control what work is done and how it’s done, they are your employee and they should be on a W-2, not a 1099.

Misclassification is one of the most common and costly mistakes household employers make, and the IRS takes it seriously, which means you should, too. Getting this right at the outset sets the foundation for everything that follows.

For your nanny or household staff, W-2 employment is more than just a classification—it’s what makes the rest of their professional life work and it’s indicative of how seriously you take their skills and profession. Paying “over the table” as a W-2 employee is how they build a verifiable employment history, qualify for unemployment benefits, access Social Security credits, and as of 2025, take advantage of new federal deductions like the overtime premium deduction introduced in the One Big Beautiful Bill Act. Beyond opening families up for risks, under-the-table arrangements quietly cost caregivers benefits they’ve earned and will never be able to claim.

2. Set up your employer accounts and insurance

Once you identify your employee’s classification (side note: Hello Nanny! requires its families to classify their nannies and household support as a W-2 employee), it’s time to establish your household as a legitimate employer on paper. Just like any other workplace, you need a papertrail and legal documents to hire and process payroll. 

Before your first payroll runs, you’ll need a few things in place:

• An Employer Identification Number (EIN). This is your household’s tax ID, issued by the IRS. You’ll need it to onboard your employee, withhold taxes, and file at the end of the year. It’s free to obtain and takes minutes to set up at irs.gov.
• State and local payroll accounts. Depending on where you live, this can include state unemployment insurance (SUI), state income tax withholding, paid family leave, and local tax accounts. Requirements vary significantly by state and you must set up or register with your state on or before your first payment is disbursed. Many families rely on payroll providers like Hello Nanny!’s payroll service who will guide you through exactly what applies to your location.
• Workers’ compensation or disability insurance. Many states require household employers to carry this coverage. It’s not optional where required, and the cost of skipping it far exceeds the cost of the policy itself.

A note on state requirements: Household employer obligations vary more by state than most families expect. California, New York, and New Jersey, for example, have some of the most layered requirements in the country, while other states follow federal rules closely. Confirm your state-specific registrations, insurance requirements, and filing deadlines before your first payroll run, and revisit them annually. Requirements change, and staying current and staying educated about the latest state and federal rules is part of being a compliant employer. Your state’s department of labor or department of revenue is a good starting point or let your payroll agency handle the research for you.

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3. Collect Documents from Your Employee

Now that you are set up as a legitimate business. The next step is to collect the appropriate documents from your household employee. These documents are what make the employment relationship official, legal, and protected for both of you. Here is what you will need: 

• Basic employee information. Collect your employee’s legal name, Social Security number, and current address. This information feeds directly into payroll, tax withholding, and year-end W-2 preparation. Payroll providers can provide a secure way to collect and store this without your family ever handling a candidate’s sensitive personal information directly.
• Form I-9. This federal form verifies your employee’s identity and authorization to work in the United States. As the employer, completing this is your responsibility, not your payroll provider’s. You’ll need to review acceptable identity documents in person and retain the completed form. Do not skip this step.
• Form W-4 and any required state withholding forms. Your employee completes these to tell you how much federal and state income tax to withhold from each paycheck. Our payroll service provides the applicable forms and walks your employee through completion.
• Your state’s new-hire report. Most states require employers to report new hires within a set window after their first day. Our payroll service can handle this automatically once your employee is onboarded and receives their first paycheck, so nothing falls through the cracks. 

A note on timing: all of this should be collected and completed before or on day one, not after the first paycheck has already gone out. Starting the paperwork late creates administrative headaches and in some cases, legal exposure.

4. Set Up Payroll

Now that you’ve crossed your T’s and dotted your I’s, it’s time to make the employment relationship real on paper. Before your first payroll runs, nail down the following. Remember, that all of this information should be documented in your signed work agreement: 

• Pay structure. Confirm your employee’s start date, pay type, pay rate, and pay frequency. For most nannies and household employees, hourly is the correct pay type, though some are salaried positions. Weekly or biweekly pay frequencies are the most common in household employment and tend to work best for both parties. 
• Payment method. Decide how your employee will be paid: by direct deposit or check. Direct deposit is strongly recommended because it creates a clear, timestamped record of every payment made, which matters if a wage dispute ever arises. 
• Minimum wage and overtime compliance. Before your first payroll runs, confirm the minimum wage and overtime rules in your state, and apply them to every single pay period without exception. Your state’s minimum wage may be higher than the federal floor, and overtime rules for household employees can differ from standard employment depending on where you live. When in doubt, the more protective standard applies. 

A note on overtime: if your nanny regularly works more than 40 hours in a seven-day workweek, overtime isn’t optional—it’s a legal requirement. As of 2025, it also comes with a new federal tax benefit for your employee. Paying overtime correctly is not only about keeping you compliant, but it’s how your nanny accesses protections they’ve earned.

What to Do After Payroll Is Set Up & Running

Setting up payroll is a one-time lift, while maintaining it is an ongoing responsibility. Here’s what to stay on top of once payroll is firing correctly and the employment relationship is underway.

What to Do Every Pay Period 

• Track hours accurately. If your employee is paid hourly—which is how most household employees are paid—accurate timekeeping is non-negotiable. Tracking accurate hours is the foundation of every payroll run, overtime calculation, and record you may need to produce if a question arises later. Whether you use a simple time-tracking app or a shared handwritten log, the method truly doesn’t matter as long as you adhere to it.
• Review and approve each payroll run. Even if your payroll provider is handling the mechanics, the approval is still yours. Take a few minutes each pay period to confirm the hours, rate, and withholding look right before anything goes out. 
• Keep accurate payroll records. Federal law requires household employers to retain payroll records for at least three years. This includes hours worked, wages paid, and taxes withheld. Our payroll service maintains these records on your behalf for a minimum of 7 years. If you aren’t using a payroll provider, it’s worth knowing this requirement exists.
• Plan for your tax obligations. As a household employer, you’re responsible for your share of payroll taxes every pay period and not just at the end of the year or on a quarterly basis. Taxes that typically apply include Social Security and Medicare (both your share and your employee’s), federal unemployment tax (FUTA), and state unemployment insurance (SUI). Depending on your employee’s withholding elections and where you live, state, local, and federal income tax withholding may also apply. Your payroll provider calculates, withholds, and remits these on your behalf, so nothing accumulates into a surprise at tax time.

What to Do Every Year

• Provide Form W-2 to your employee by January 31. This is a legal deadline, not a suggested one. Your employee needs their W-2 to file their own taxes on time, and as of 2025, to claim any applicable deductions like the new federal overtime premium deduction. HelloPay prepares and distributes W-2s automatically.
• File Schedule H with your federal Form 1040. This is how household employment taxes get reported on your personal tax return. Our payroll service prepares Schedule H for you, while your tax preparer handles the filing as part of your annual return. In other words: Schedule H is the one form that your payroll provider cannot file on your behalf—it is submitted with your own tax personal tax filings. 
• Reconcile estimated tax payments. If your payroll provider submitted estimated tax payments (Form 1040-ES) on your behalf throughout the year, those need to be reconciled when you file. Your tax preparer will handle this—just make sure they have a record of what was submitted and when.

A Household Employer’s Payroll Checklist Done Right

Most families (as they should be) are so elated once they’ve hired a household employee. They’re looking ahead to the household and childcare support they’ll finally get, thinking of scheduling, tasks to offload and onboarding. 

What doesn’t always make the list in the tail end of the hiring period is payroll. It’s not because families don’t care, but because nobody told them how imperative it is to set up before the first paycheck goes out.

As a payroll provider specializing in household employment, we take that off your plate. Built specifically for families employing a nanny, family assistant, or household manager, Hello Nanny!’s payroll service handles setup, tax withholding, filings, and year-end W-2 preparation, all so you can stay focused on the part that actually matters: welcoming the right person into your home.

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This is legal information, not legal advice. For questions about your specific situation, consult an attorney or tax professional.