Is Banking Hours for Your Nanny Legal?

Dec 22, 2022 | Employing a Nanny, Payroll, Taxes & Labor Laws

We have previously discussed the idea of guaranteed hours for a nanny. Another aspect of that is banking hours, when a family uses a nanny’s guaranteed hours to make up for unworked hours. As our payroll partner GTM Payroll Services discusses, this practice is illegal and should not be used by household employers. Here’s a detailed look at banking hours for a nanny.

There are two terms that are somewhat unique to the household employment industry: guaranteed hours and banking hours. While they’re interrelated, the first is an industry standard and the latter is illegal.

To understand banking hours, let’s first explain guaranteed hours.

What are guaranteed hours?

Guaranteed hours are the set number of hours your nanny will be paid each week at their hourly rate. It can be 35, 40, 45, or whatever number of hours you need for childcare during a week. If your nanny works the number of agreed-upon hours – or fewer – they get paid the same. Any hours worked over their guaranteed hours would be paid on top of their typical pay considering an overtime rate for any hours worked over 40 in a workweek.

Guaranteed hours for a nanny may be more convenient for you when paying them each week and preferred by your caregiver. In fact, many nannies – especially more experienced ones – may ask upfront for guaranteed hours.

You can think of guaranteed hours for a nanny as you would if you were sending your child to a daycare facility. If your child does not go to daycare for a day – or even a week if you are on vacation – you still pay the same fee. The daycare facility was available to care for your child – just like a nanny – you just chose not to use them.

In exchange for guaranteed hours, a nanny is guaranteeing their availability to your family during those hours.

Read What are Guaranteed Hours for a Nanny? for additional information.

What is banking hours?

Banking hours is when a family requires their nanny to make up unworked hours paid under guaranteed hours.

Let’s use this example.

Your nanny has guaranteed hours of Monday-Friday, 9 a.m.-5 p.m. at $20/hour. That means each week your nanny is paid $800/week as long as they work 40 hours or fewer.

Let’s say grandma and grandpa want to take their grandkids out for an afternoon. You do not need your nanny during that five-hour time period, but, under guaranteed hours they would still get paid their 40 hours because they were available to work and you chose not to use their services.

With banking hours (again, illegal, which we’ll get to in a moment), you could ask your nanny to “make up” those five unworked hours the following week or at some other time in the future. The banked hours would be unpaid.

In this example, your nanny could conceivably work their normal 40-hour workweek and then come back on Saturday for date night and work five unpaid hours.

Why is banking hours illegal?

While you won’t find the term “banking hours” in federal labor laws, the Fair Labor Standards Act does state that “covered employees must be paid for all hours worked in a workweek.”

Also, “the workweek ordinarily includes all time during which an employee is necessarily required to be on the employer’s premises, on duty or at a prescribed work place.”

Nannies and other household workers are considered “covered employees” under the FLSA.

Back to our example above. If a family would like their nanny to work extra for a date night or some other reason, those hours must be paid (at an overtime rate if the hours exceed 40 in the workweek) even if the caregiver had “unworked” hours from a previous pay period.

Can I “bank hours” for later in the pay period?

Let’s say your nanny has guaranteed hours and you let them go early on Tuesday afternoon because you came home from work early. Can you ask your nanny to stay late on a different day that same workweek to “make up” the hours missed? Legally, that may be ok, but it could depend on your nanny contract. If your work agreement states that guaranteed hours are 9 am – 5 pm Monday-Friday, then you likely can’t require your nanny to stay late or come in early on a different day. They may do so as a courtesy, but they may not be obligated to agree to your request.

What if I pay my nanny every two weeks?

If you pay your nanny guaranteed hours every two weeks, you wouldn’t be able to move unworked hours from one week to the next. That’s because of the FLSA rule that nannies must be paid for all hours worked in a workweek. The timing of their pay isn’t a factor.

What happens when my family goes on vacation?

If your nanny has guaranteed hours and you go on vacation, your caregiver still gets paid as if they worked a full week. They were willing and able to work, and you chose not to use their services. Some families and nannies will add language to their nanny contract to the effect that the caregiver must use five days of their PTO when the family is on vacation. The rest of the nanny’s PTO can be used at their discretion.

Another option – if agreed to by both parties – is to have your nanny perform other duties while your family is away. They could house sit, pet sit, pick up the mail, clean and tidy up the house, or run errands. Remember your nanny is a professional child caregiver and may not agree to do household chores but it may be worth exploring with your employee.

You could also take your nanny on vacation with you.

Other considerations when banking hours

You shouldn’t bank hours because it’s illegal and will open you up to a wage claim by your employee.

Banking hours also can damage the relationship with your nanny. If they’re working more hours during a week because of baking hours, it’s likely on the weekend, early in the morning, or at night. That cuts into their downtime and disrupts their schedule especially if banking hours is extensive or happens frequently. This can cause resentment, frustration, and burnout on your nanny’s part. If you find an exceptional nanny, treat them like a professional to maintain a positive working relationship.

GTM can help

GTM Payroll Services handles guaranteed hours for hundreds of families and can help you remain compliant with federal and state tax, wage, and labor regulations. Call (800) 929-9213 for a free, no-obligation consultation with a household employment expert to discuss hiring a nanny and paying them the right way. Or schedule time with us at your convenience.

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