Tom Walker explains the benefits of offering childcare vouchers to working parents.
As your business grows and you continue to employ staff, it’s likely that you’ll need to do more to retain your best people. After all, your employees are one of the greatest assets in your business because they help drive growth and productivity. Given how reliant you are on them, it’s probably a good idea to look for ways to reward them by offering incentives and benefits.
The good news is there are plenty of perks you can offer to employees which can also be beneficial to you as a business owner. A good one to consider is the employer childcare voucher scheme.
Working parents with children aged up to 15 (16 if the child has a disability), can receive childcare vouchers of up to £243 a month from their employer, which are free from tax and national insurance payments. This tends to be provided through salary sacrifice, meaning those enrolled exchange some of their income for these vouchers.
It can save employees hundreds of pounds a year by swapping taxable salary for tax-free vouchers. They reduce the costs of childcare significantly, especially during the school holidays. The vouchers can be used for an array of care including:
After school clubs
Education centers to help with extra tuition
What this means for your business?
By offering employees the opportunity to enroll on the childcare voucher scheme, you’re providing them with help with the costs of being a parent, which can boost morale and engagement with your organisation:
1. Make savings
Many businesses are unaware that by providing the scheme, you can save money on Employers' National Insurance Contributions of up to £402 per employee per annum. That's because you don't pay national insurance on the amount of salary paid in childcare vouchers.
2. Attract and retain working parents
With the increase in the number of working parents in the UK, getting the work-life balance right is becoming more important to employees. This voucher scheme can help boost productivity because with sufficient planning it can reduce absenteeism. A family friendly working environment is a useful staff recruitment and retention strategy.
For some parents the cost of childcare can be overwhelming, leaving them with little option but to stay at home to look after their children. However, with this help parents can return to work following parental leave, as the costs of childcare are made that bit more affordable.
3. You’re seen as an employer of choice
Offering the scheme actively demonstrates a commitment to a work and family life balance, which can be a great image boost for any organisation. It can also enhance recruitment by listing this as one of the perks on offer with the job.
Tax Free Childcare Scheme 2017
This is another childcare option that was made available to working parents from the 21st April 2017. The Tax-Free Childcare scheme is applicable to those with children under the age of 4, or under the age of 17 if the child is disabled. By the start of 2018 the scheme will also be available for children under the age of 12.
Who is eligible?
Parents who are working and earning at least £120 per week, but less than £100,000 each per year qualify. The scheme doesn't actually rely on employers offering it and is available to those who are self-employed. Thus any eligible working family can use it.
How does the scheme work?
For every 80p parents pay in to the registered childcare account, the Government will pay in 20p - up to £2,000 per year per child, or up to £4,000 for disabled children to cover the cost of childcare. This is equivalent to the tax most people pay – 20% – which makes the scheme ‘tax-free’.
It’s important to note that there is a limit to the tax-free top up; parents can only receive up to £500 every 3 months from the Government.
Who can pay into the account?
Contributions aren’t exclusively payable by parents, others such as grandparents and family members are also able to pay money into the childcare account.
The process has been designed to be straightforward – parents need to re-confirm their circumstances every 3 months online and they will be provided with details to log-in to view the account details of their children.
If circumstances change and they no longer want to pay into the account, they'll be able to withdraw the money they've saved, but the Government will also withdraw its corresponding contributions.
The content of this post is up to date and relevant as at 10/11/2017.
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