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There's no law that says you absolutely have to create a nanny contract; but don't be surprised if the person you're interested in hiring asks to see one. Having that contract eliminates any misunderstandings. For example, let's say you hire a nanny and tell her that you'll be paying her $10 per hour and that she'll be required to work 30 hours per week. A couple of weeks go by and she starts complaining that you promised her 40 hours of work per week. With a signed contract, you can refer to it anytime you want as a reminder of what was said and what was signed.
Everyone hiring a nanny (whether it's the first time hiring a nanny, or the tenth), should have a signed nanny employment contract right from day one. Sometimes there's a sense of security and/or complacency when it's a close family friend who's being hired as the nanny. Just because you're best friends with the nanny's mother doesn't mean you shouldn't take the time to create and have signed a nanny contract. It's not just for your own interests; it protects the nanny as well. It's important to have that contract as a reference point for periodic job assessments, or renegotiation.
For some people, the word “contract” makes people queasy. Sounds too legal for them. Not to worry! Anyone in the process of hiring a nanny should have a nanny contract. That might mean searching for sample nanny contracts on the Internet, or seeking help from someone who's done it before. It doesn't have to be fancy; it just has to be done.