Childcare Vouchers – on the ascendant
Designed to help working parents, childcare voucher schemes have seen a sharp rise in their profile in the benefits arena since vouchers became tax free in April 2005.
Childcare vouchers are an alternate means of paying for childcare. Vouchers are provided by employers to staff and are a simple tangible way in which employers can assist employees with their childcare costs.
Employers of choice have become aware of the importance of adopting family friendly policies to attract and retain staff in what is now a highly competitive job market. Staff loss through soaring childcare costs has become a major issue for industry. Losing a key member of staff can, however, impact more heavily on a smaller organisation.
Recognising the difficulties being faced by employers, the government decided to offer an incentive to encourage employers to help their staff with childcare costs to keep people in the workplace.
Childcare Vouchers: The Incentive
Childcare vouchers, up to £55 per week per employee, are Employer National Insurance exempt – giving annual NI savings of up to £373 per employee to your company.
Most childcare vouchers are provided through something called salary sacrifice – whereby an employee opts to take part of their existing salary in the form of vouchers in return for a financial gain. In the case of childcare vouchers the first £55 per week is exempt from both tax and National Insurance Contributions so employees taking salary in this form pay less tax and National insurance than before.
With schemes being run through payroll, employees see a net increase in their take home pay each pay period. Savings can be as high as £1,195 per employee, per annum; depending on the individual level of tax and National Insurance an employee pays. Furthermore, if both parents work for companies that run childcare voucher schemes they can each claim the exemption meaning savings to a family could be doubled to £2,390.
Because vouchers can be used to pay for most forms of childcare, and can be used for children up to the age of 16 – not just pre-school children – they offer a highly flexible and simple solution to employers to help all members of their staff with their childcare costs. Voucher schemes can be run in-house but in practice most employers prefer to rely on childcare voucher companies such as Sodexho Pass to deliver schemes on their behalf. A good voucher supplier will provide marketing materials to raise awareness of the scheme amongst staff to drive take up and maximise the savings to both employers and employees.
Voucher companies can also undertake the responsibility of handling all the required record keeping thus ensuring that schemes comply with HM Revenue & Customs guidelines.
No employer wants additional administration so when it comes to choosing a scheme provider, simplicity, ease of use, scheme back up and reliability should be the key criteria in the decision making process. To find out how Sodexho Pass can help your company implement a childcare voucher scheme, click here.