Childcare Voucher Scheme

How employers can help you offset childcare costs

This scheme can seem complicated but is certainly worth pursuing with your employer if they have a responsible attitude to childcare and see the benefits of retaining staff with young children.

How does it work?

Your employer, in conjunction with a specified administrative company (e.g. Busy Bees) has introduced a more flexible way to meet the costs of childcare, under which part of your wages / salary can be given up or "sacrificed" in exchange for Childcare Vouchers. Within specified limits, these vouchers are non-taxable and exempt from National Insurance Contributions and therefore represent a saving for employees. Childcare Vouchers are issued from your employer (in conjunction with the specified partner) and are then exchanged, in whole or part, for the childcare services you use (i.e your nursery).

How much better off will I be in this scheme?

The amount of income tax and national insurance contributions you will save under the arrangement depends on your current salary.

From 6th April 2005, each parent or legal guardian can receive Childcare Vouchers, which are non-taxable and exempt from NIC up to £50 per week (£217 per month).

Example of Savings	£50 per month costs	£100 per month costs	£150 per month costs	£200 per month costs	£217 per month costs
Example of Savings	Below: Annual savings based on the monthly childcare costs shown above
£34k Annual Salary	£246	£492	£734	£984	£1067
£10 to £33k Ann Sal	£198	£396	£594	£792	£859

Note: A number of state benefits are dependent on maintaining a minimum level of NI contributions. If you receive less than £4896 per month (£408 per month), in the 05/06 tax year, it may affect your benefits. Everybody will need advice on this scheme according to your wages and personal circumstances.

A scenario of how this may work for you:

If either partner is employed and you think that this will save you money, visit the nursery and get some leaflets and information explaining the deal.
Make an appointment with your employer; manager or HR department. Show them the information and discuss if they would be able to work with you in introducing the scheme. With them work out what you might save, depending on your present salary. Agree that you both want to go ahead with the scheme.
To go ahead with the scheme, you must complete an Order Form and sign the agreement to vary your Terms and Conditions of Employment. You will give this to your employer, who will then do the necessary paperwork to provide you with Childcare Vouchers as part of your salary. Your employer will work with one of the administrative companies.
Your childcare provider (e.g. Raunds Rainbow Nursery School) will register with the company that is providing the vouchers for you own company (there are several of these, acting as overall administrators of the funds). The childcare provider has to be registered with OFSTED.
You will provide your childcare provider with the voucher to pay for all or offset some of the cost of your childcare costs, depending on how much the care comes to.
Your childcare provider will knock the amount of the vouchers off what is owed to them. In many cases, covering all the costs. Your provider will reclaim the voucher cost from the special company administering the voucher system.

There are a number of other questions that you will have about this. The above is only a general overview of how it works and how much you might save. However, it might save you a considerable amount of money and could be well worth pursuing. Please contact us as well as your employer for more information.