I've done it both ways too. It seemed that all 3 nannies I worked with were only interested in take home pay. Actually, you save a little bit in taxes if you pay nanny's portion given desired net pay as the base that tax calculated from is lower In that case.When I pay the employee portion I always say, your salary is $x but it is comparable to $y somewhere else where they don't pay that tax.

We had that very same situation arise, and a couple of our friends suggested that I call a payroll company (GTM). They advised that about 30% of the families they speak with will pay for the employee's portion. They sent me this calculator so that I could sit down with my nanny and review the various options. https://secure.gtmassociates.com/calculator.aspx
I found it really helpful.

We pay the employer share of Medicare and Social Security and deduct the employee share (same with income tax withholding) and send it in. It may be that some employers pay the employee share, as a way of offering more generous compensation, but our nanny (and others we talked to) seemed more interested in a higher hourly rate. You may be running into confusion about paying the employee share vs. handling the paperwork on paying the employee share with the employee's money. We use a tax service (Homework Solutions) largely to deal with all the tax withholding stuff for us.

I have done it both ways. You can either deduct the nanny amount from her check or pay it yourself. If you pay the nanny's portion this must be added to her income on the W-2.

One thing that you may want to make clear is that you are not paying income tax. Our nannies have been confused about this.

Hi all, we are new to this area and we are looking to hire a nanny. Quite possible something is lost in translation since all of the candidates we have interviewed so far seem to be saying that as the employer, we should pay all of their social security taxes. Is this correct? I asked one of the payroll companies if in their experience employers usually paid all social security taxes for their nannies and they said that that is highly unusual, but that doesn't seem to be the current market expectation based on what we are hearing. Of course, we will cover the employer portion of social security taxes, but seems strange to me that we would be expected to cover the employee's portion too? Could anyone with some experience with this please advise? Thanks so much.