Childcare vouchers have been
established as a government based scheme to encourage employers to
help their employees with the cost of childcare.
Childcare vouchers are
exempt from
National Insurance Contributions (NICS) for employers and from tax
and NICS for employees.
The limit for childcare
vouchers for
2007/8 is £55 a week or £243 a month and each employed
parent can apply for the exemption for children up to the age of 15
(16 if disabled).
Savings for 2007/8 tax year
of up to
£1195.56 can be made for each parent.
There are significant
benefits to both
employer and employee in the Childcare voucher scheme. The financial
incentives are a part of these benefits within a scheme of enabling
working lives to be improved for families.
For most people with
families knowing
that their children are well cared for allows them to feel more
settled in their employment and be more effective in their work. For
employers, this will bring added value to the work place, increase
committed team players enabling improved staff retention.
Employers
can:
- Provide information or signpost
employees to Children's Information Services or to HM Revenue and
Customs for advice on the availability of childcare locally and
entitlements of Working Tax Credits.
- Operate a
childcare voucher scheme for
employers, either directly themselves or through a Childcare Voucher
provider.
- Establish a work place nursery, for
larger employers, or to have direct contact with local childcare
providers.
Actual
Benefits:
The savings depend on both
the support
the employer provides and the individual's salary.
- Childcare vouchers can be given in
addition to the salary in which case they pay no tax or NICS on that
amount.
- Childcare vouchers can be given
through a salary sacrifice scheme which will produce a saving on tax
and NICS.
Conditions:
The employer must provide
the support
to a parent and each employed parent is able to claim the exemption.
The scheme is available for eligible children, i.e. up to the age of
15(16 if disabled) and the number of children does not change the
amount of exemption. All staff employed are able to access the
scheme. The childcare used must be registered or approved.
Operating
Childcare Vouchers:
A childcare provider can
easily accept
vouchers as part payment for childcare fees, so long as they are
registered or approved. Depending upon the issuing agency they can be
received electronically or as paper vouchers.
The most common way that a
Childcare
Voucher scheme is introduced is through a salary sacrifice scheme.
The scheme costs nothing to introduce and employers and employees can
save money. There are implications both in the amount to be agreed
and in other related benefits, such as pensions, when taking an
effective reduction in salary, which employees need to be aware of.
Some employers will also be
interested
in operating a childcare vouchers as an addition to the salary as an
increased benefit.
Childcare
and Business:
The government has
recognised the
importance of childcare both to the UK economy and to people's live,
through the ten year strategy. It enables more people to be able to
return to work and is also part of the agenda for removing children
from poverty and giving them the best start in life.
The childcare voucher
scheme is part of
a wider agenda for business organisations in becoming a family
friendly employer and combined with good maternity, paternity and
parental leave will make a case for being an employer of choice.
For further information and
guidance visit:-
