As an employer, there are a number of ways in which you can support working parents, for example by subsidising childcare costs, or providing workplace nurseries or flexible working times.
Although legally you are not required to offer any enhanced benefits, childcare voucher schemes are a way of helping employees with the costs of childcare they need whilst they are at work.
Childcare voucher schemes usually work through salary sacrifice where you, as the employer, either pays your employee’s chosen childcare provider directly, or provide the employee with vouchers for them to use. The employee can choose their own childcare provider, but they must be registered with the non-ministerial department of Ofsted on their Ofsted Childcare Register (OCR).
Employers who provide childcare voucher schemes will usually benefit by saving on National Insurance contributions, and employees will also make tax and National Insurance savings.
Most employers will contract with a childcare voucher company to administer the scheme for them, although you can do it yourself.
What is the new Government scheme?
In April last year the Government rolled out its new Tax-free Childcare scheme. Companies who already offer support for childcare fees will need to decide whether to use this new Government scheme or remain with their existing childcare voucher scheme.
The Tax-free Childcare scheme enables eligible parents to receive a Government contribution of 20% of their childcare costs, up to a maximum of £2,000 per child (or £4,000 per disabled child). It is available to parents whose youngest child is under 12 (or under 17 if the child is disabled).
This scheme is managed by parents themselves, not by the employer.
Whilst some employees will benefit from the Government’s scheme, others may be worse off, so employers need to be on top of the changes and decide whether to switch from an existing childcare voucher scheme to the Government’s scheme. Employees will also need to decide whether to switch.
Can I still continue with my childcare voucher scheme?
Employers can still run childcare voucher schemes that were started prior to the Tax-free Childcare scheme. The last day new entrants will be able to join an established childcare voucher scheme is 5 April 2018. Employees will be able to continue using the scheme, providing they remain with that employer and the employer continues to offer it. If, as an employer, you wish to stop providing Childcare vouchers then you will need to enter into a consultation period with your staff before any amendments can be made to their Contracts of Employment.
If your employee tells you that they have started using the new Tax-Free Childcare scheme, they cease to receive childcare vouchers. If this means stopping or changing a salary sacrifice arrangement, you must also update your employee’s Contract of Employment and your payroll software.
A full breakdown of options and implications can be found at https://www.gov.uk/expenses-and-benefits-childcare/what-to-report-and-pay.
If I start offering support to employees, do I have to report it?
What you have to pay and report depends on whether:
- you provide a workplace childcare facility yourself
- your employees pay for childcare themselves and you pay them back
- you contract directly with a childcare provider, such as a commercial nursery or a childminder
- you give your employees childcare vouchers
- your employees applied to join your employer-supported childcare scheme on or after 6th April 2011.
Depending on these factors, you may or may not have to report anything to HMRC at all, or pay tax or National Insurance.
If you set up a nursery for employee’s children, you do not have to pay or report anything. The nursery premises do not have to be within the workplace, it can be on other premises that you manage and finance, so long as they are not a private residence.
To be exempt, the nursery must meet the following conditions:
- have the appropriate registrations and approvals (Ofsted)
- be available to all your employees
- provide childcare for your employees’ children, or children they have parental responsibility for
- provide childcare up to the maximum age its registration and approval allows for.
Whilst we do not advise on payroll, if you are struggling to work out what support you should be offering to your employees, contact us on 01582 883299 or email email@example.com.