People Management: Childcare vouchers can be a win-win

Peter White

Both employers and their staff can save money under this new scheme.

New exemptions on childcare vouchers could save money for both charities and their employees.

From 6 April, employees will be able to get bigger discounts on childcare if their employer participates in a childcare voucher scheme. The first £50 of childcare vouchers each week, or £217 every month, will be free of tax and National Insurance.

Under the scheme, employees sacrifice part of their salary, which is deducted from the payroll to purchase the vouchers. The vouchers can be used for registered nannies, childminders, nurseries, play schemes and school clubs, but not when a child is cared for at home by a relative.

A basic rate taxpayer could save up to £850 a year, and higher rate taxpayers might save more than £1,000.

Employers will not have to pay NI on the vouchers, amounting to savings of £300 a year per employee.

A spokeswoman from charity Working Families says: "This means voluntary sector employees using a wide range of childcare can benefit by £1,000 a year at no extra cost to the charity."

According to a survey made last year by the Daycare Trust, which offers charities advice on childcare, the average cost of childcare to parents for a child under two is around £7,000 a year, and £10,000 in London.

Given the low level of voluntary sector pay, this is especially bad news for charities.

A spokesman for the trust says: "Childcare is not cheap, and it's not means tested - so the less you earn, the greater the percentage of your salary you spend on it."

Leonard Cheshire introduced childcare vouchers last September at the request of its staff association. Clare Smith, HR director at the charity, says: "We have had positive feedback, and the exemptions will make it an even more attractive option. We have a predominantly female staff, and many are parents. We try to offer a competitive package, and family-friendly benefits are the most popular."

Charities thinking of introducing the vouchers must be careful that employees on low wages do not sacrifice so much of their salary that it takes them below the minimum wage level. And if you earn below the National Insurance threshold of £91 a week, you will not benefit from the scheme.

Staff will also have to ensure the childcare they choose is eligible for the tax relief.

To find out more about childcare vouchers go to


- The childcare voucher scheme begins on 6 April this year

- Employees sacrifice part of their salaries, deducted by payroll to buy the vouchers

- The first £50 of vouchers each week, or £217 a month, will be free of National Insurance and tax

- Employers do not have to pay NI on the vouchers - Ensure the childcare you use is eligible - a relative caring at home is not.

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