Friday, 11 March 2016

Childcare Vouchers & Maternity Leave Clarification

One of the main barriers to providing a Childcare Voucher scheme has now been removed. Here, Busy Bees Benefits tells us why it’s not too late to set up a scheme.

Up until now, employers that provided the Childcare Voucher scheme were advised by HMRC to cover their employees’ Childcare Vouchers in periods where only Statutory Maternity Pay (SMP) was paid to the employee. However, a ruling from an Employment Appeal Tribunal on 9th March has stated that this was not a correct interpretation and employers are not required to continue providing Childcare Vouchers in a period where there is no salary to be sacrificed.

In other words, employers will not have to cover childcare vouchers when a member of their staff is being paid SMP only.

Many organisations including small and medium sized businesses may have been deterred from providing a scheme due to the previous advice. Now that the situation has been clarified, employers who previously looked into offering a scheme can take advantage of the NI savings without having to worry about the potential burden of extra costs.

Employers that are now reconsidering the scheme should move fast as the Government will be launching Tax-free Childcare in 2017. This system will be operated by the government without employer involvement so there are no business savings opportunities.

On the other hand, Childcare Vouchers are a well-established employee benefit which can save an organisation up to £402 per employee on the scheme each year; as vouchers can provided without payment of Employers National Insurance contributions.

Once Tax-free Childcare is launched, no new joiners can participate in a Childcare Voucher scheme. Childcare Vouchers will remain in existence for as long as they are required, although only for those already using them. There is urgency for employers to set up a Childcare Vouchers scheme now to maximise their National Insurance savings whilst simultaneously providing their employees with the choice to use whichever scheme provides them with maximum savings.

Setting up and administering a Childcare Voucher scheme is quick and easy. Not only will your employees save money on their childcare costs, their motivation, production and retention will increase. Therefore, offering a scheme can enhance your employer profile.

If you would like to discuss setting up a scheme, please contact Busy Bees Benefits or visit for more information. 

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