If you read nothing else, read this…
• Employees can use childcare vouchers for any registered nursery or childminder, as well as after-school and summer clubs, for children up to the age of 16.
• Vouchers can be refunded, but they cannot be transferred between employers.
• Both working parents are entitled to childcare vouchers.
Childcare vouchers are a popular perk, so employers need to know the key facts about the scheme, says Jennifer Paterson
Childcare vouchers are one of the most common benefits employers offer to their workforce and, with childcare costs spiralling, they are likely to become one of the most valued.
A comprehensive communications strategy describing exactly how the vouchers can be used is imperative, so Employee Benefits has tracked down the answers to some of employees’ most frequently asked questions about childcare vouchers for employers to consider in their strategies.
1. What are the tax advantages?
Childcare vouchers are free from income tax and national insurance (NI) for up to £243 a month for basic-rate taxpayers, £124 a month for higher-rate taxpayers and £97 a month for additional-rate taxpayers.
Julian Foster, managing director at Computershare Voucher Services and a board member of the Childcare Voucher Providers Association (CVPA), says: “Basic-rate taxpayers can save about £943 a year by taking childcare vouchers.”
There are also tax savings for employers. Dally Purewal, product and quality manager at Co-operative Employee Benefits, says: “Employers make savings on NI contributions on all the vouchers being purchased. For basic-rate taxpayers, there would be savings of £400 a year per employee. For 100 employees, that is £40,000 in savings.”
Tax savings can be made by offering a childcare voucher scheme to employees through a salary sacrifice arrangement.
2. Where can vouchers be spent?
Childcare vouchers can be used for any nursery, nanny or childminder that is registered by Ofsted, the official body for inspecting schools in England, and its equivalent in Northern Ireland, Scotland and Wales.
John Woodward, group chief executive at Busy Bees Employee Benefits, says: “Most parents have a good understanding of Ofsted registration and the rankings.”
Iain McMath, managing director at Sodexo Motivation Solutions, says: “We have more than 35,000 registered childminders on our system. If parents are in doubt, they can contact their provider to ensure the childminder is registered.”
Vouchers can also be accumulated, says McMath. “Childcare vouchers can be used for school holidays, so even if staff are not using all of them each week, they can be saved up.” People tend to think childcare vouchers cover only babies and very young children, but they can also be used for older children, up until 1 September following a child’s 15th birthday or a 16th birthday if the child is disabled.
3. What is the qualifying age range for vouchers?
“People know they can use it for nannies and nurseries, but what they might not know is that it can be used for breakfast, after-school and summer holiday clubs or activity camps,” says Computershare’s Foster. “It can also be used for emergency or back-up childcare.”
Laura Czapiewski, product manager, childcare vouchers at Edenred, says: “Any care that takes place at a school outside school hours qualifies for payment with vouchers.”
However, about 90% of vouchers are used for under-fives. Busy Bees’ Woodward says: “It has been a natural development. Employees who have been using vouchers for their under-fives understand it, so when their children become older, that knowledge is transferred. Those who are missing out are parents of 10- and 12-year-olds who didn’t use vouchers when their children were in nursery.”
4. Do vouchers expire and are they refundable?
Typically, there is no expiry date on childcare vouchers. Employers tend to decide whether to refund the balance of any unused vouchers. Foster says: “Generally, since employees are receiving vouchers instead of being paid, a refund of the voucher would have to go back through their employer and through payroll. Most employers allow that, but not all. Some schemes are structured so that once you have chosen to sacrifice salary, it is done.”
HM Revenue and Customs says vouchers should be refunded only in exceptional circumstances. Czapiewski says it is best practice not to make refunds a standard part of the scheme, but adds: “It is ultimately the employer’s decision.”
However, an employer must refund any balance in the voucher account of an employee leaving the organisation, because it cannot be transferred between employers.
5. Can both parents take up childcare vouchers?
Many employees think vouchers are available to only one working parent, but mothers and fathers can both take advantage of childcare benefits as long as they are working.
Sodexo’s McMath says: “There is still a big assumption that it is only available to the mother. It is not in relation to the child, but to the employee.”
About 400,000 employees take up childcare vouchers each year, so employers need to be able to answer employees’ queries on the scheme as and when they arise.
Case study: Sellafield powers up communication on childcare vouchers
Nuclear reprocessing site Sellafield has offered its 9,500 UK employees childcare vouchers for many years, but it continues to refresh its communications to ensure the value of the benefit is fully understood.
Common employee questions include: Where can the vouchers be used? What kind of childcare is covered? How much saving can staff make based on their salary? Are both parents entitled to vouchers?
Joanne Meloy, compensation and benefits adviser at Sellafield, says: “We have a real peak of female employees who take the vouchers, so we are working on targeting the dads.
“We have a lot of same-family parents working with us, because we are the biggest employer in west Cumbria.
“Communication is around pointing out to them that both parents can use the benefit.”
Sellafield’s childcare voucher communications are featured on the benefits section of its HR intranet site, along with links to its provider, Computershare Voucher Services.
The benefit is also communicated to employees through childcare voucher roadshows, flyers and booklets, and on posters on Sellafield’s onsite noticeboards. The perk is also publicised in the firm’s maternity guidelines and family benefits booklet.
Case study: Vinci builds childcare voucher take-up
Construction firm Vinci UK launched a communications campaign early this year to refresh its 4,000 employees’ knowledge of its childcare voucher scheme.
The campaign, created with Vinci’s provider, Computershare Voucher Services, included benefits roadshows, online slides, posters and material in its maternity- and paternity-leave packages.
Campaign content highlighted the variety of childcare services for which vouchers can be used.
Gemma Concannon, benefits manager at Vinci UK, says: “People seem to have a misconception that the vouchers are just for nurseries. They can be used for a wide range of childcare, such as after-school clubs, and we wanted to get that message out.”
Within the first few weeks of the communications campaign, the employer’s voucher take-up increased by 7%.
Concannon adds: “The vouchers are a way for people to increase their take-home pay. It is a really sensible thing to do.”