A real nanny payroll cost comparison does one thing most hiring guides won't: it tells you what household employers actually pay in 2026 — not what the brochure says. The hourly rate is the easy part. Employer taxes, annual filings, and compliance management can quietly add $1,000 or more per year. Pick the wrong approach and you're overpaying for services you don't need, or underpaying until the IRS notices.
- Full-service nanny payroll agencies cost $75–$150/month — 3–5× more than software.
- Payroll software handles taxes, pay stubs, and W-2s for $20–$45/month.
- DIY costs nothing upfront but adds $150–$300 in CPA fees at tax time.
- Employer payroll taxes add roughly 10–12% on top of gross wages — no matter which option you choose.
- Most households with 1–2 nannies can self-manage with the right payroll software.
What Does Nanny Payroll Actually Cost? (The 3 Options)
Three tiers. Very different trade-offs. Here's exactly how they stack up.
| Option | Monthly Cost | What You Get | Effort Level |
|---|---|---|---|
| Full-service agency (e.g., HomePay, GTM) |
$75–$150 | Taxes filed, W-2 sent, everything handled | Minimal |
| Payroll software (e.g., PayHRoll) |
$20–$45 | Automated calculations, pay stubs, guided filings | Low |
| DIY (IRS forms + CPA) | $0 + CPA fees | You calculate everything; CPA files Schedule H | High |
Hidden Costs Household Employers Miss
The monthly processing fee is the smallest line item. Three costs blindside new household employers far more often — and none of them show up in the agency brochure.
1. Employer FICA taxes. You owe 7.65% of gross wages for Social Security and Medicare — separate from what you withhold from your nanny's check. On $30,000 in wages, that's $2,295 straight out of your pocket annually.
2. FUTA. Federal unemployment tax runs 6% on the first $7,000 paid per employee. State credits often drop the effective rate to 0.6%, but skipped filings trigger penalties fast. Small numbers, real consequences.
3. Schedule H plus CPA fees. Not using software that automates Schedule H? Add $150–$300 to your annual tax prep bill. Several states also require workers' comp for household employees — New York, Washington, and California among them. That's another line item most first-time employers never see coming.
Budget an extra 10–12% on top of gross wages to cover employer tax obligations — before you even factor in payroll processing fees.
Which Option Makes Sense for Your Situation?
Consider a marketing consultant in Austin who paid her nanny under the table for three months, then panicked when she realized she owed back taxes, penalties, and interest. The fix wasn't a full-service agency she didn't need. It wasn't DIY spreadsheets either. It was payroll software — set up in an afternoon, running clean ever since.
Payroll software is sufficient. Automated tax calculations, digital pay stubs, and W-2 generation — no agency-level bill required.
Consider full-service. Complexity compounds with multiple employees and shifting schedules — the premium may be worth it.
DIY works if you know IRS paperwork cold. Most people don't — and end up paying a CPA anyway, wiping out any savings.
If you're already comfortable running a small business, nanny payroll software gives you proper compliance at a fraction of agency prices.
For most household employers with one or two nannies, payroll software hits the sweet spot — real compliance, automated taxes, and pay stubs at $20–$45/month. Full-service agencies aren't a rip-off; they're solving a complexity problem most single-nanny households don't have. DIY sounds free until your CPA adds three hours of Schedule H prep to your bill.
Frequently Asked Questions
How much does it cost to do payroll for a nanny?
Software runs $20–$45/month; full-service agencies charge $75–$150/month; DIY adds $150–$300 in CPA fees at year-end. Regardless of route, employer payroll taxes add roughly 10–12% to gross wages.
Is a full-service nanny payroll service worth it?
For one nanny on a consistent schedule, it's hard to justify at $75–$150/month — payroll software handles the same compliance tasks for far less. Full-service earns its keep when you're managing multiple household employees.
Do I need payroll software if I only have one nanny?
Yes. One nanny still makes you a household employer subject to FICA, federal withholding, and W-2 filing. Payroll software automates all of that for far less than the IRS penalties for getting it wrong.
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