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Breaking News March 14th 2018 Childcare scheme gets six-month reprieve

14 Mar 2018

Education Secretary Damian Hinds made the concession during a Commons debate yesterday March 13th.

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The hidden cost of the Childcare Voucher Scheme that nobody notices


The Childcare Voucher Scheme guarantees that both you and your staff can save a substantial amount of money that would otherwise be taken by HMRC. Also, by adding this scheme to the package of benefits you offer your employees, you will improve your recruitment and retention of staff and ensure that those who take part will be happier, more productive members of your team.

How the Scheme Works

The Childcare Voucher Scheme enables parents who work for you and who pay for their childcare to purchase vouchers to cover the cost of this care by regular deductions through your payroll. The advantage for them in this arrangement is that it is classed by HMRC as a ‘salary sacrifice' scheme and, therefore, your employees do not pay any tax or NI on the amount deducted. The advantage for you is that you do not pay Employers' NI on any of the salary that your employees convert into childcare vouchers. With just a few employees in the scheme this can give you a saving of hundreds of pounds each year, and once a substantial number of employees join your savings can amount to thousands.

From an employer's point of view, administering the scheme is fairly straightforward. You will work in partnership with one of several specialist childcare voucher providers. They will be there to advise your employees about the scheme and, once they are signed up, will supply them with childcare vouchers on a regular basis. The provider will also liaise with your payroll to ensure the correct deductions are made.

Not All Childcare Vouchers Providers are the Same

You will be required to pay your voucher provider a monthly fee based on a percentage of the total amount of money your employees are paying into the scheme. Almost without exception, the fee will be lower than the amount you save on Employers' NI. Most providers will have a sliding scale whereby this percentage reduces in accordance with the numbers signed up to the scheme: typically something like a basic percentage figure for up to 100 employees, a slightly lower one for up to 200 and so on.

So how do you choose the right childcare voucher provider for your business? Cost is obviously the prime consideration, but the lowest quote is not always the best, nor is it necessarily the most economic one for your company in the longer term. There are a number of other factors you need to consider before accepting a quote.

Choosing the Right Provider

To choose the right childcare voucher scheme provider for your company you need to remind yourself of the advantages you were hoping to achieve by signing your business up to the scheme. Almost without exception, companies will be hoping to achieve cost savings, by reducing your Employers' NI bill, and a better motivated workforce, by offering this very attractive benefit to your staff. It follows that the greater the number of employees you can sign up to the voucher scheme, the greater will be the benefit to you on both of these counts.

Therefore, do not just look at the basic administration fee quoted by a potential provider, but ask:

• What marketing materials and promotional initiatives do they offer to support you in informing your
staff about the scheme? Ask not just about the initial campaign, but about regular follow ups.
• Do they provide an ongoing advisory and support line for your staff? How responsive is it? Poor
aftercare means that staff will become frustrated and your numbers on the scheme will erode.
• How smooth is the process of getting vouchers to your staff and how widely accepted is their
particular brand amongst childcare providers?

Only when you have answers to all these questions can you thoroughly evaluate a quote.

Author: Eoin Olivers photo

Author: Eoin Oliver

Eoin Oliver is a web designer and blogger with six years of experience writing content and designing graphics for clients large and small. For the past three years Eoin has been focused on researching and writing about the childcare voucher scheme. When not hard at work, Eoin can be found in the company of his 4-legged companion Layla.

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