Cash, e-Transfer, or Direct Deposit: What's the Best Way to Pay Your Domestic Employee?

You have hired a great caregiver, agreed on an hourly wage, and the first payday is fast approaching. Now comes the most important logistical question for any household employer: how do you actually get the money into their hands?

When you hire a nanny, senior caregiver, or domestic employee in Canada, the tension usually sits between what feels easy in the moment and what keeps you legally protected in the long run.

Here is a breakdown of the three main ways to handle nanny pay or caregiver pay in Canada, and the hidden risks of taking the “easy” route.

The “under the table” myth: can you pay a nanny cash?

The short answer is yes, paying in physical cash is legal in Canada, if you still deduct and remit taxes, and provide a proper, detailed pay stub with every envelope of bills.

The reality, however, is that “paying cash” is almost always synonymous with “paying under the table.” This means paying a flat, unrecorded amount without deducting Canada Pension Plan (CPP), Employment Insurance (EI), or income tax.

This is strictly illegal. Paying under the table leaves the employer vulnerable to severe CRA penalties, back-tax bills, and potential wage disputes. It also harms your employee by preventing access to crucial benefits like EI, maternity leave, or future pension growth.

Even if you are doing the math correctly and remitting taxes, paying in physical cash creates a major paper-trail problem. If there is ever a dispute over wages or hours worked, physical cash leaves no verifiable audit trail for the CRA or provincial labour boards.

The convenience trap: Interac e-Transfer

For many families, Interac e-Transfer feels like the modern digital equivalent of cash. It is fast, familiar, and easy to send.

However, relying on e-Transfers for regular nanny pay comes with significant drawbacks for you as an employer:

1. It separates the payment from the pay stub. An e-Transfer receipt is not a legal pay stub. Provincial labour laws require a detailed statement showing gross pay, net pay, hours worked, and exactly what was deducted for taxes, CPP, and EI. With e-Transfers, you are stuck manually generating these records every payday.
2. It adds mental load. e-Transfers require you to remember to log into your banking app, input the correct amount, and send money on every single payday. It is easy to miss when you are busy, traveling, or sick.
3. It creates a messy audit trail. Paying your employee with the same payment rail you use for personal transfers makes records harder to defend during an audit.

The professional standard: direct deposit for domestic employees

Setting up direct deposit for domestic employees is the gold standard for domestic payroll. It is how most people get paid by their employers, and it is usually what professional caregivers expect.

The benefits of direct deposit go far beyond just moving money securely:

• Set-it-and-forget-it automation: Scheduled direct deposit ensures your caregiver is paid accurately and on time, every time.
• Built-in compliance linkage: Direct deposit is typically tied to payroll software (like RoostPay), so compliant pay stubs are generated at the same time money moves.
• Clean, verifiable records: You get a clear electronic trail of what was paid and when, separate from personal banking activity.
• Better employee experience: Most nannies and caregivers prefer predictable, professional payroll.

The trade-off: automation vs manual math

The only catch to direct deposit is that, unlike e-Transfers, you generally need a payroll service or app to run it properly. That service usually has a monthly cost.

But your payment method determines your weekly workload.

If you choose e-Transfer, you are choosing manual spreadsheet math: overtime calculations, changing CRA tax rates, homemade pay stubs, and manual money movement.

If you choose direct deposit through a dedicated payroll app, you are choosing automation. The software cost is usually outweighed by time saved, reduced errors, and confidence that remittances and records stay compliant.

Put your caregiver pay on autopilot

You hired help to get your time back. Treat your household employee like a true professional, and take “amateur accountant” off your task list.

Do not want to manage e-Transfers and manual pay stubs? RoostPay automates caregiver and nanny payroll with integrated direct deposit, automatic CRA tax remittances, and digital pay stubs.

Explore our flat-rate, predictable Pricing plan or Join the waitlist to simplify your household payroll.