The Impact Of Tax-free Childcare On Employers

The latest initiative from the Government to support parents is the Tax-free Childcare scheme and it was rolled out just a few weeks ago with the idea of showing greater support for working parents; but how does it work and what is the impact on employers? Here, aspire cambridge explains what this means..

The latest launch means that children up to the age of 4 will be eligible for Tax-free childcare but in some cases the childcare vouchers that are currently offered could give working parents a better deal so companies will need to look into this to ensure their employees don’t miss out.

The current state of affairs means that since 2005 employers have provided parents with childcare vouchers as part of a salary-sacrifice scheme. These childcare vouchers are helping around 780,000 working parents save up to £933 of tax and national insurance on their childcare costs per annum. However, come April 2018 and new entrants will no longer have the childcare voucher scheme available to them, but those parents already in the scheme will be able to stay in the scheme for as long as they need.

One difference between the old scheme and the new scheme is that the employer was responsible for managing the old scheme, but this new scheme will be managed by the parent; that said, the employers will need to look very carefully at both of the schemes to see the eligibility requirements that parents must have for each scheme to decide which scheme is best for which employee and their circumstances.

As an employer, the first thing you need to do is show support for working parents and working families as some employees may be financially worse off than they were with the old scheme. A vital step in achieving a company culture that values and respects individuals and family life is to clearly show the support of the company to employees that are working parents.

Try to consider employee benefits that allow parents to keep more money in their pockets, improve on policies for new parents returning to work and look into flexible working options that could be a possibility for some working parents to work around the needs of their childcare arrangements; all of these will help employees see that your business understands and supports the realities of family life.

Sodexo completed research on over 10,000 parents and found that 55% of single parents and 66% of working couple parents would be financially better off with the original childcare vouchers and not the new government scheme.

If you have a strong understanding of both schemes you will be able to help all employees and understand how changes will impact on different employees, but if you do have any concerns then please do not hesitate to contact one of our specialist HR consultants on 01223 855441.

We will be happy to help you with any queries you have or deal with your employees directly to recommend the best scheme for their individual needs.