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child care vouchersIs child

The opportunity to pay employees £55 a week in child care vouchers seems to be a potential significant benefit for employees on above average salaries paricularly higher rate taxpayers (I am aware that there are problems for lower paid employees relating to tax credits and minimum wage).

My firm operates several payrolls for SME's and I am considering writing to these firms outlining the potential benefits of such a scheme particularly the use of DIY vouchers.

My question is that despite a 40% taxpayer being able to save in the region of a £1,000 a year in tax using vouchers requests for information from clients appear to have been virtually non-existent. Can anybody inform me whether child care voucher schemes are operating successfully and whether this is a popular benefit?
Alistair Thurlow


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24th Sep 2008 22:57

Whilst it is no doubt easy for some employers to pay the childcarers direct, the great advantage of paying a childcare voucher company is that once the money is paid over the employer involvement ends.

Our company doesn't want to be involved when Mr Smith wants to pay his childminder £40, his pre-school £68 and the out of school club another amount. And then he wants to pay them all different amounts next month!

The flexibility, and benefit of paying the admin fee, comes from the provider, in this case Accor, running the online scheme which enables the employee to pay registered childcarers as they wish, whenever they wish, with varying amounts as they wish. It also enables him to build up a balance in his childcare voucher account if he wishes, for example to pay for school holidays.

Yes the employer could save more money by paying directly but paying the admin fee saves hassle and work (and therefore employee and bank cost) for the employer. It is often a question of balance.

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24th Sep 2008 21:44

Don't bother with vouchers
For the very few employees who take up the offer of employer-paid childcare, just pay the carer direct against an invoice.

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24th Sep 2008 20:21

Don't waste money on bought-in vouchers
Doug Scott is on the button. It really is pretty easy for an employer to set up and administer its voucher scheme itself. But if it wants to be absolutely sure it gets the documents correctly drawn up, it would do well to buy the templates available on the market at fixed cost a fraction of what is charged by voucher providers.

Colette Farrand-Laine has a scheme costing her company less than 12.8% - by implication 7% - but should ask herself why the employer needs a voucher provider to re-distribute the money for carers. If the employer is paying its employees, why shouldn’t it pay their nominated carers as well?

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01st Oct 2006 21:51

Yes they do operate in practice!
Yes, they are great schemes and several I know of run very well.
The main things that people worry about in my experience are admin cost from the employers point of view, and from the employees point of view the salary sacrifice and can they get the salary back at some time and how does it work practically.
I've not come accross the DIY schemes in practice, but as regards the Busy Bees / Accor etc schemes the admin fee charged is virtually always lower than the employers NI so the employer is not worse off.
For the employee, different providers have different recomendations about how often you can change the amount of salary you sacrifice but most state at least a maximum of once a year or a lifestyle reason is fine to change or stop receiving vouchers and retain the approved salary sacrifice scheme status. As for convienience, some schemes work on a paper voucher system which are handed directly to the nursery but many now run like an online bank account which most people prefer. The childcare funds go in and you pay them out as and when you want to any approved childcare provider.

I would bet the reason your clients (the employer I assume) can't be bothered to reply is that it's often not worth their while, as they see it, to save 12.8% then pay an admin fee of 7%+VAT unless they have one or more staff members hassling them for it.

We have been operating an Accor direct (internet based) scheme successfully since 2004 when only NI was saved. I have had no problems operating it either as an employer, an employee or a childcare provider (for my sins do the playgroups books as well!).

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02nd Oct 2006 09:53

Not popular
We have 130+ employees and in two years only two staff have ever taken it up despite reminding staff frequently of the scheme.

The only scheme we've had that had a significant uptake was the Home Computer Initiative.

We also have Cycle-to-Work and Pension salary sacrifice schemes that haven't attracted much interest eaither.

Basically the average punter is financially ignorant/lazy and it is all they can manage to check they get paid every month.

The cheapest option with these salary sacrifice schemes for employer's is to administer it themselves and this is pretty easy to set up. ie. issue your own childcare vouchers and redeem to the childcarer/nursery.

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