All About Childcare Benefits
It has become increasingly important for employers to offer a family friendly employment policy. Childcare is at the forefront of many employees' minds, and businesses have found that they must adapt to ensure that their workforce can handle the dual responsibilities of employment and parenthood. As such, childcare is an important aspect of most companies' employee benefits package.
Childcare as an employee benefit can come in a number of different guises, and the nature of the specific benefits offered will frequently depend on the size of the company. Many large organisations, for example, offer on-site nursery facilities for the children of employees. The financial aspects of this type of benefit offering can be complex; it is up to the business in question to decide whether they are going to offer the nursery facilities for free, or whether they will expect employees to sacrifice a portion of their salary in order to secure its use. However, if your business has the capacity to offer these facilities it is something that you should seriously consider; individuals who feel that their employer cares about the wellbeing of their family are likely to be happier in their work and therefore more productive, while the presence of the nursery can foster a sense of community in the workplace.
A more common form of childcare benefit is the childcare voucher. These offer employees a means by which they can pay for childcare while at work, while retaining the right to choose where their child goes during the day. Childcare vouchers are generally offered on a salary sacrifice basis, meaning that an employee wishing to take advantage of the benefit will be required to give up a portion of their salary. However, there are significant tax savings available to both employer and employee. In the employee's case their income tax and National Insurance liabilities will be significantly reduced, up to a maximum annual figure of £1,195. Similarly, the employer will see a saving of 7.8% on their own National Insurance Contributions. There are limits on the amount that can be drawn in childcare vouchers; employees may take up to £55 per week, or £243 per month, in salary sacrifice childcare vouchers. However, it must be ensured that their salary remains at a level at which they are being paid at least the minimum wage once salary sacrifice has been taken into account.
In order for employer and employee to take full advantage of the tax benefits of childcare vouchers, the benefit must be offered to every member of staff, although none are under any obligation to take it. Similarly, in order to make a tax saving the vouchers must be used as payment for an accredited childcare professional, registered with the government. The employee is free to top up the vouchers if they do not cover the full amount.
Childcare should be an important consideration for any employer, and is clearly an important consideration for any employee who is also a parent. Childcare vouchers, along with other childcare employee benefits, can be a tax efficient method by which childcare needs can be fulfilled.