A CLOSE friend tells you that this girl is great. She is kind, not too expensive and gets on well with children. Not only that, she will work for cash and can move in next week. She is from abroad but has been working in England for another family for a while.

What could possibly go wrong? Quite a lot, actually. She could be the cause of a criminal record if you do not check her immigration status or pay her correctly. She could become a long-term unwelcome guest in your house. She could even sue you for an employment law claim you normally associate with office workers at large organisations.

The Immigration, Asylum and Nationality Bill, introduced in June, reminds us that proper checks and procedures are essential when it comes to employing a nanny. The Bill, which should become law next year, proposes weighty penalties for those employing illegal workers, including onerous fines. It also introduces up to two years in jail for those who knowingly employ illegal workers. It is therefore important to make the correct document checks — and don’t delay. Under existing law you risk a £5,000 fine for each illegally employed nanny.

The checks you need to make to comply with current immigration laws may be as simple as checking and photocopying the nanny’s passport. Do this even if she appears to be as British as Mary Poppins. If she is a European Economic Area (EEA) or Swiss national, she can legally work for you, no visa required. Nationals of some of the Eastern European EEA states will need to register under the Worker Registration Scheme within a month of starting work — the Home Office (0845 0106677) can give you more information.

Otherwise, check whether she has a visa that permits her to work in the UK, and whether there is a time limit on the visa. If not, common visas for nannies include the Au Pair Placement visa, the Working Holidaymaker visa, the Overseas Domestic Workers arrangements and UK Ancestry visas. Qualifying conditions apply to each, and in some circumstances there will simply be no way the person can work lawfully in the UK. Just because a nanny has worked in Britain before, does not necessarily mean, she can lawfully work for you now. A nanny should not start work until she has the correct visa — and this can take some time.

Immigration issues aside, families employing nannies also risk falling foul of the law on pay, working time and landlord and tenant.

Minimum wage legislation applies to nannies not living as part of the household — even if he or she has a free flat, eats your food, accompanies the family on luxurious holidays and has sole use of a car and pony. Free separate accommodation counts as less than £5 a day towards the minimum wage (£4.85 an hour, increasing to £5.05 on October 1). Other benefits in kind do not count at all.

Income tax and national insurance contributions also need to be paid. Defrauding HM Revenue & Customs by intentionally avoiding tax payments is a criminal offence. Nannies also qualify for redundancy payments, statutory sick pay and maternity pay and benefit from some of the provisions of the Working Time Regulations, including a minimum of four weeks’ paid holiday a year and rest breaks.

If the relationship sours, your live-in nanny could become a more permanent lodger as you take your eviction process through the courts. Where a live-in nanny’s accommodation is required for “the better performance of duties” this is likely to be a “service licence”, which comes to an end when the employment does. Set this out clearly in a written service occupancy agreement before she moves in.

Finally, if she is not leaving voluntarily, take care not to dismiss her unfairly, and to follow the statutory dismissal procedures (“Applying a new discipline to employment procedures” on www.speechlys.com/employment_knowhow).

Daniel Wise is a barrister and Anne-Marie Balfour is a solicitor at the City law firm Speechly Bircham

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