Working Parents Encouraged to Take Advantage of Childcare Vouchers

Hundreds of employees who pay for childcare while they go out to work are missing out on big savings by not taking full advantage of the tax and National Insurance breaks offered by the Inland Revenue’s childcare vouchers, according to Payroll Manager Harshila Patel at Dean Statham Chartered Accountants, Stafford.

Benefits exist for the employer and employee, for whom long term childcare arrangements are fast becoming a prerequisite, particularly women who are returning to work after having a baby.

Employers can save up to 12.8% in the pound on payroll costs by initiating a voucher scheme as part of an employee’s salary or benefits, thereby reducing the sum of National Insurance contributions payable by their company. The first £55 a week of the cost of providing vouchers for approved childcare to each employee is exempt from income tax and N.I.

Instead of paying for childcare out of their net earnings, employees can save up to 40% tax and up to 11% N.I. if they take a portion of their wages in childcare vouchers. If both parents were signed up to a voucher scheme they could save as much as £2,392 per annum.

Harshila puts the low take-up down to many small to medium sized firms not having a dedicated payroll or human resources manager due to financial or time constraints, preferring instead to absorb day-to-day responsibilities such as bookkeeping and payment of wages into other administrative roles, and subsequently not developing a complete understanding of all their employee’s rights and allowances.

She says, ‘If your company employs staff you are obliged to get a handle on your statutory requirements and know where you and your employees stand on issues such as maternity and paternity pay and childcare. Employers are failing their staff by delivering only the basics of personnel management and hundreds of working parents are missing out because they are unaware of their entitlements and the savings they could be making.’

Harshila has over 20 years payroll experience and more recently acquired HR experience within the public and private sector. She assists dozens of Staffordshire firms in a number of ways, from implementing weekly and monthly payroll systems to advising on interview etiquette, legal rights and redundancy. She adds, ‘Ask your employer if they currently operate a childcare voucher scheme. If not, any good accountant will be able to advise on how to set one up and one employee is enough to get the ball rolling.’