Childcare - support for employers

Employers are realising that introducing flexible working and support for childcare to help their employees achieve a work-life balance is good for business. This article looks at the advice and support available for employers regarding childcare in particular.


KEY POINTS

  • There is evidence of business benefits for employers that support the childcare needs of their staff, resulting in better employee relations, improved commitment and motivation and reduced labour turnover.

  • There are financial incentives available for employers, whereby the costs are often outweighed by reduced tax and national insurance contributions. Options open to employers include workplace nurseries, help with childcare costs, salary-sacrifice schemes and childcare vouchers.

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    Helping staff find, and pay for, quality childcare is an essential factor in becoming a truly family-friendly workplace. With fees for one child at nursery running at an average of more than £150 per week1, any help they can receive will clearly be a relief to employees.

    Business benefits

    Those employers that support the childcare needs of their staff could enjoy business benefits including better recruitment and retention of staff, reduced absenteeism and a more motivated and loyal workforce. In a Department for Trade and Industry (DTI) survey of employers providing support for working parents2, 94% of employers believed that people work best when they can strike a balance between work and other aspects of their lives. Almost two-fifths (39%) strongly agreed with this statement. The majority of employers reported that work-life balance practices had a positive impact on employee relations (71%), employee commitment and motivation (69%) and labour turnover (54%).

    Financial incentives

    A range of tax and national insurance incentives is available from the government to help employers offer support with childcare costs. "Helping staff with childcare is a smart choice for today's employers," declares Emma Knights, the joint chief executive of the Daycare Trust, a leading charity working to promote high-quality affordable childcare for all3. "The costs incurred will often be outweighed or balanced by reductions in an employer's national insurance contributions and extensive tax-breaks." According to the Daycare Trust, employers can save more than £300 per year per employee in national insurance contributions by helping them with eligible childcare costs4.

    Workplace nurseries

    Running a workplace nursery (and/or playscheme during school holidays) is one employer-supported childcare option. Employers can also develop a contract with an existing local nursery. Until recently, this has really only been an option for the largest employers. However, in October 2006, the Department for Education and Skills (DfES) announced £16.8 million in funding to help small and medium-sized businesses create workplace nurseries. The funding is being delivered through regional development agencies and led by the London Development Agency5.

    Financial support

    Employers can provide other forms of support that are suitable even for organisations too small to have an HR department or personnel officer. They can help with the cost of childcare by making a contract with a childcare provider and paying them on behalf of their employee. This option involves a direct transaction between the organisation and the childcare provider.

    Alternatively, employers can give their employees childcare vouchers direct. This leaves the choice of childcare provider up to the parent (as long as the provider is registered or approved), and employers can provide their own vouchers without having to go through a voucher company6.

    Covering the cost

    Childcare vouchers and direct contracting of childcare providers can be paid for either:

  • as part of a flexible benefits package - where the staff member takes them instead of another benefit, such as a company car. In this case, the employer pays for the voucher, but the cost is lessened by tax relief.

  • as a salary sacrifice - when the employee takes vouchers in place of part of their salary, but gains because the voucher is free of tax and national insurance contributions.

  • as "Salary Plus" - an addition to the employee's salary. This entails the greatest up-front costs to the employer but, in terms of recruiting and retaining skilled staff, may well be a worthwhile investment.

    • Providing information

    Providing existing and new employees with basic childcare information is a straightforward option and is achievable by even the smallest company. Employers could provide contact details of the local Children's Information Services (CIS), which provide listings of local registered childcare, or could simply incorporate a link on the intranet to ChildcareLink7.

    1. Childcare costs survey 2007, available from the Childcare Trust at: www.daycaretrust.org.uk/article.php?sid=292.

    2. The second work-life balance study: results from the employers' survey (PDF format, 77K) (on the DTI website).

    3. For free, independent information on setting up a childcare voucher scheme and on helping employees with childcare, visit: www.daycaretrust.org.uk or contact the Daycare Trust information line on: 020 7840 3350 or email info@daycaretrust.org.uk.

    4. See Childcare Trust factsheet, Employer supported childcare, at: www.daycaretrust.org.uk/mod.php?mod=userpage&menu=2801&page_id=123.

    5. See www.lda.gov.uk/server/show/ConWebDoc.1655 for more details.

    6. More information is available at: www.hmrc.gov.uk/childcare.

    7. www.childcarelink.gov.uk.

    This article was written by Carol Foster, research officer, Equal Opportunities Review, carol.foster@rbi.co.uk.