New childcare scheme to encourage parents back into work

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The government has published a consultation on a new tax-free childcare scheme, due to take effect in autumn 2015.

Parents with children born in or after September 2010 will benefit from the scheme which will see the government pay up to £1200 per year towards childcare costs for working parents. Julian Foster, spokesperson for the Childcare Voucher Provider Association said: “For any employer with an existing childcare voucher scheme, it won’t be taken away when the new scheme is introduced.

“Anybody in the existing scheme can continue on the same terms, but the way the new scheme will work is that employees will be able to have a direct contract with the voucher provider, so there isn’t a direct role for employers.”

The reform has arrived after government talks over employers’ contribution to the childcare costs for families with both parents working. Within the current childcare voucher scheme employers are able to opt in; about 5 per cent choose to do so, benefiting only half a million households.

Encouraging parents to work

At present employers can subsidise childcare costs within their own company benefits package, or use the childcare voucher scheme; the government currently provides 15 hours free child care for all 3 and 4 years olds over a period of 38 weeks.

The childcare vouchers allow employees to sacrifice part of their salary that is paid directly to their childcare provider, and thus reduces the amount of National Insurance and Income Tax due from their gross annual income.

This amounts to around £1800 a year for a family with two working parents, and applies to children up to the age of 15.

The government has stated that 2.5 million will be able to apply for the reformed, employer-backed scheme. The hope is that this will encourage parents who want to work to be able to without the cost of childcare outweighing their annual income.

However, parents who receive tax credits or universal credits will not qualify for the new scheme. Nor will families with only one working parent with one who remains at home and have a household income of £60,000, as this will make them ineligible for tax and universal credits.

Single parents earning £60,000 and who do not receive tax credits or universal credits are eligible.

How employers will benefit

According to the office of national statistics, in 2012 9 in 10 couple families with three or more dependent children had either one or both parents working. It is in the employer’s interest to provide facilities and services to make coming back to work after having children easier for parents.

By supplying a healthy work-life balance for parents, employers will be able to retain high calibre employees who might seek work elsewhere if they are unable to feel assured that their child’s wellbeing is taken care of.

What employers can do to help:

  • Childcare voucher schemes
  • Subsidised or complete childcare within company benefits package
  • Flexi-time work option eg. Term time work and job sharing
  • Extended maternity and paternity leave option

Establishing your benefits policy

Hiring an experienced compensation and benefits specialist can create the right working environment for your valued employees. Using industry benchmarking and analysis they are able to assess the employee benefits package that competitors provide, and retain employees with attractive child and health care policies.

Portfolio CBR are experienced in the compensation, benefits and rewards sector and will help you find the right candidate for the position at your company. If you would like to speak to one of our recruitment team to register a vacancy or for any further recruitment services, please call us on 020 7650 3190.