Childcare: the benefits

The vast majority of organisations employ working parents, and it is worth considering the benefits of an employer-supported childcare voucher scheme for your staff and your business.

Setting up a childcare voucher system is straightforward and can bring substantial savings for both working parents and employers.

Childcare voucher schemes operate by way of salary sacrifice, whereby an employee agrees to reduce their salary in exchange for childcare vouchers. These vouchers can then be used as full or part payment towards the cost of registered or approved childcare, such as a nursery school or childminder.

Benefits

The benefits for employees joining a scheme are the tax and national insurance saving of up to £1,399 per year. Some providers may also offer additional benefits to scheme members, such as discounts on shopping or access to parental advice. In addition to the savings employees can make, employers can benefit too. Employers can save up to £402 per annum for each employee participating in the scheme, since the organisation does not pay national insurance on childcare vouchers. Depending on the number of employees participating in the scheme, this can result in a significant saving.

Offering a childcare voucher scheme is also a way of offering enhanced benefits to your employees and can help to attract and retain talented members of staff.

How do you set up a scheme?

Setting up a scheme is relatively simple.

First, you need to identify a childcare voucher scheme provider to work with. There are a number of providers available and it is worth investing some time to research which scheme fits best with your business. The scheme provider will administer the scheme on behalf of your organisation. Once the scheme has been set up, you should then work with your provider to promote the benefits throughout the organisation. The cost of setting up and running a scheme is minimal in comparison to the savings that can be made.

Changes coming in

From autumn 2015, the UK Government is set to make changes to childcare funding with the introduction of the Government Tax-Free Childcare scheme.

While some parents will benefit from this, others may be better off with an employer-supported childcare voucher scheme. Parents who wish to start saving on childcare after autumn 2015 will not be eligible to join an employer scheme; however, existing schemes will continue to operate for those who joined before the cut-off date. Organisations interested in setting up a childcare voucher scheme should act now to take advantage of the benefits this type of scheme has to offer.