How to Legally Hire a Nanny in Denver: Taxes, Contracts, and Payroll Made Simple
If you're hiring a nanny in Denver, it’s about more than finding someone great with your kids—it’s about getting it right on paper, too. Colorado has clear laws around nanny employment, and staying compliant is crucial for protecting your family, your caregiver, and your peace of mind.
Whether you’re hiring a full-time nanny, family assistant, or ROTA nanny, this guide will walk you through everything you need to know—from legal classification and payroll to tax obligations and employee benefits.
Step 1: Understand How Colorado Classifies Nannies
In Colorado (and under federal law), a nanny is considered a household employee, not an independent contractor. This is a legal distinction that requires you to withhold and pay employment taxes, and it means your nanny is entitled to protections and benefits under labor law.
Misclassifying your nanny to avoid taxes can lead to penalties, back taxes, and legal complications. It’s not worth the risk. You’re not just a parent anymore—you’re technically an employer. Think of it like launching your own micro-business... one that’s built around love and goldfish crackers.
Step 2: Comply with Wage and Labor Laws
Minimum Wage (Denver 2025):
$18.29/hour (as of January 1, 2025)
Most nannies in Denver earn $25–$35/hour, depending on experience, duties, and live-in/live-out status.
Overtime Pay:
Required after 40 hours/week (at 1.5x hourly rate).
Applies to live-out nannies only.
Live-in nannies are exempt from federal and Colorado state overtime pay requirements under the Fair Labor Standards Act (FLSA), but must still be paid at least minimum wage for all hours worked.
Paid Sick Leave:
Under Colorado law, household employees earn 1 hour of paid sick leave for every 30 hours worked, up to 48 hours/year.
Meal and Rest Breaks:
Not mandatory unless the nanny is working more than 5 consecutive hours—then a 30-minute unpaid break should be given.
PTO & Paid Holidays:
Not legally required, but standard practice is:
2 weeks of paid vacation
3–5 paid sick days
5–7 paid holidays (think: New Year’s Day, Thanksgiving, Christmas, etc.)
Workers' Compensation:
Not required unless you have multiple household employees, but check your homeowner’s insurance. Some plans offer affordable domestic worker coverage.
Step 3: Set Up Legal Payroll in Colorado
Payroll and tax compliance is where many families start to feel overwhelmed—but you’ve got this. And yes, there are tools that make it much easier (more on that below).
What You Need to Do:
Get a Federal Employer Identification Number (EIN) from the IRS. It’s free and you can apply online.
Register with the Colorado Department of Revenue to withhold and pay state income tax.
Register with the Colorado Department of Labor and Employment to pay State Unemployment Insurance (SUI).
Complete Form I-9 to verify your nanny is eligible to work in the U.S.
Taxes You’re Responsible For:
Social Security & Medicare (FICA):
Withhold 7.65% from the nanny’s paycheck
Match 7.65% as the employer
Federal Unemployment Tax (FUTA):
You pay 6% on the first $7,000 of wages
May be reduced with a credit depending on how you pay SUI
Colorado State Unemployment Insurance (SUI):
Paid by you, the employer; rates vary slightly by year
Federal Income Tax:
Withholding is optional, but highly recommended. If your nanny requests it, you’ll need a completed W-4.
Colorado State Income Tax:
Withholding is required; you’ll need to use the DR 0004 form and appropriate state tax tables.
Quarterly & Annual Filings:
Quarterly: You must file employment tax forms (typically 941 for federal and DR 1094 for Colorado), and remit taxes collected.
End of Year:
Issue Form W-2 to your nanny by January 31
File W-3 with the Social Security Administration
File Schedule H with your personal tax return (Form 1040)
Tip: Hire a nanny payroll service. They handle all filings, pay stubs, tax deposits, and end-of-year forms. You can still manage a household and keep your sanity intact.
Step 4: Write a Strong Nanny Contract
Even if you're hiring a family friend, a solid nanny agreement protects everyone involved. Think of it as your parenting-meets-HR document. At a minimum it should include:
Work schedule and daily/weekly hours
Hourly wage, overtime rate, and pay schedule
PTO, sick time, and holiday policies
Expectations: child-related duties, light cleaning, screen time, etc.
Use of vehicle and reimbursement for mileage (standard IRS rate)
Emergency protocol and communication expectations
Notice period and termination process
Step 5: Offer Great Benefits (And Keep Your Nanny Happy!)
Top nannies in Denver often receive:
2+ weeks paid vacation
5+ paid holidays
3–5 sick days (on top of required accrued leave)
Health insurance stipend ($150–$350/month)
Guaranteed hours (nanny gets paid even if you go out of town)
Professional development (CPR recertification, trainings)
Year-end bonuses or raises for loyal, long-term care
Think of it this way: the better you treat your nanny, the better care your child receives.
Step 6: How to Find the Right Nanny in Denver
At The Natural Nanny Collective, we help families in Denver find experienced, professional nannies who align with your parenting style—whether that's holistic, screen-free, gentle discipline, or Montessori-inspired.
We specialize in full-time placements, household managers, travel-ready ROTA nannies, and caregivers trained in philosophies like RIE®, Waldorf, and Reggio Emilia. From interviews to background checks to contract support, we handle the details so you can focus on your family.
Final Thoughts
Hiring a nanny isn’t just a transaction—it’s a relationship built on trust, respect, and clear communication. When you take the time to set things up correctly—from tax compliance to writing a thoughtful contract—you’re setting your nanny (and your family) up for long-term success.
And hey, you don’t have to do it alone. The Natural Nanny Collective is here to support you every step of the way. Start your Family Application today!
** This article is for informational purposes only and does not constitute legal or tax advice. Please consult a qualified professional or employment law expert before making any hiring or payroll decisions.
