It wasn’t meant to be like this. Back in April 2005 when the tax and NICs exemption for employer-supported childcare was introduced it seemed like a win-win-win for employees, employers and the government. Employees could get help with the increasing costs of childcare, employers could deliver the scheme through salary sacrifice and cut their NICs bill, and the government could get women back into the workplace using good quality childcare, and so achieve its targets for ending child poverty. But four years on it’s a very different picture. Changes to the maternity regulations last October, as a result of a judicial review of the Sex Discrimination Act, have made employers question both the cost, and fairness of childcare schemes.
Women whose babies were due in early October 2008 were the first affected by the change in legislation that now requires all non-cash benefits (which includes childcare vouchers) to be provided for up to 52 weeks of maternity or adoption leave. Those employees are now coming to the end of their leave period, having enjoyed the provision of their benefit package throughout. It is those businesses that operate a salary sacrifice for childcare and do not have occupational maternity pay that are now counting the cost. Once contractual payments dry up, and for some this will be after a mere six weeks of leave, salary sacrifice schemes cannot operate against statutory maternity or adoption pay, and yet the employer still has to provide (and fund) the provision of vouchers. With salary costs an issue for many employers at present there is evidence that some are taking the drastic step of closing voucher schemes, citing not only cost pressures but also the unfairness of those on leave receiving free vouchers as compared to those who are at work.
Cost is not the only factor to consider. With yet another change in the regulations in respect of what constitutes registered childcare in England (effective on 18th July) employers have to be mindful that the tax/NICs exemption hinges on both the child and the childcare qualifying. The July changes bring to an end the scheme for nannies to be ‘approved’ as childcarers and so qualify under the scheme. They must now register with Ofsted, as must foster carers who work as childminders.
All in all a complex and costly benefit that may no longer tick the cost/benefit analysis box
