Help staff benefit from cheaper childcare
April 17, 2008
I’ve been thinking about staff benefits recently, and a really good scheme that I set up and ran in my previous position was a childcare voucher scheme. The great thing about this scheme is that it can actually save the company money and effectively pay for itself as well as being a fantastic money saving benefit for those employees with a young family but a tight budget.
The way the scheme works is that employees buy childcare vouchers through their salary. This scheme is one of the few remaining tax free benefits available, and works through ‘salary sacrifice’, i.e. the voucher payment is taken out of their gross salary, before any other deductions have been made. Therefore the remaining salary that is taxable is lower and attracts lower tax and NI deductions; so the employee pays the same for their childcare but sees the saving in a higher salary payment. The saving for the employer works in the same way: they save money by paying lower NI contributions on the remaining salary after the voucher payment has been taken. Many providers charge a percentage based administration fee for each employee in the scheme rather than a flat fee – so running the scheme is cost neutral as the NI savings pay for the administration charge. There is a maximum amount that can be purchased through the scheme (currently £243 per month), but this is applicable per person, therefore if an employee’s partner is also in a voucher scheme, both parents can use the system and make double the savings.
The vouchers are redeemable in any Ofsted registered childcare facility or with a registered childminder. If the establishment doesn’t already accept vouchers it is very easy for them to be set up to receive the payments: most voucher providers can now do everything through the internet so it’s really straightforward.
There are a few considerations when considering the scheme: minimum wage calculations are based on salary after the cost of the vouchers is deducted, so employees who are near this salary rate before purchasing vouchers may be restricted to how much they can purchase in a month. Also, the voucher scheme can affect the maternity pay companies are able to claim back from the government, as the claim system is based on actual salary paid, so this would need to be considered in the context of the organisation. The best thing to do is ask a few providers to come and deliver presentations, to give you an idea of what they are offering and so that you can ask as many questions as you need. When I set up the scheme in my previous company, I used Leapfrog, who also have nurseries all over the country that people in the scheme can use at a discount, but there’s loads of other providers as well: just Google childcare vouchers and away you go.
Where I work at the moment there are very few employees who have childcare needs, but I think in many organisations, it’s a no-brainer for staff benefits when the scheme is so straightforward, saves people money and doesn’t cost the company anything.
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