Employees’ childcare costs – why employers should help

Employees’ childcare costs – why employers should help

According to the Family and Childcare Trust, British parents now pay a staggering £6,000 every year on average for a part-time nursery place.

Why should employers be worried about this?
Given the high costs of childcare, it is little wonder that they are a major barrier to work for many parents. Which in turn can impact you, the employer.

In fact, a joint survey by the British Chamber of Commerce (BCC) and Middlesex University found that 33% of businesses regard the availability of childcare as a key issue in recruiting and retaining staff. Reported issues due to the cost of childcare included:

  • 28% of firms said they saw a reduction of working hours;
  • 12% a reduction in productivity;
  • 9% saw employees leave the business;
  • 8% saw staff change job roles within the company.

 

But won’t the increase to free childcare help with this?
Yes but onl to a certain degree.

The Government is doubling free childcare to 30 hours across England from September 2017. Many working parents of 3 to 4 year olds will be eligible. However, the first thing to understand is that this is 30 hours free for the equivalent of the school term times only, i.e. only 38 weeks per year not 52 weeks of the year.

Parents may be able to spread the free childcare over further weeks, but this is entirely at the discretion of their childcare provider and will mean they are getting fewer than 30 hours free childcare each week if they do.

Furthermore, and most importantly, not everyone will necessarily be eligible. All parents will still receive the 15 hours free childcare that is currently available. But to be eligible for 30 hours, they will need to meet certain eligibility rules. These are:

  • The child will be age 3 or 4 when the scheme starts in their area
  • Both parents must be working – or the sole parent is working in a lone parent family
  • Each parent earns, on average, a weekly minimum equivalent to 16 hours at National Minimum Wage or National Living Wage. The exact amount depends on the parent’s age but for a parent aged 25+ they would need to earn a weekly average of at least £115.20.
  • Each parent must have an annual income of less than £100,000
  • They must live in England

 

Parents can already pre-register for the 30-hour scheme on the GOV.UK website. They will be emailed with information about when the scheme will be available and how to apply.

It is also still unclear whether all nurseries will be able to offer the flexible 30 hours free childcare. There has been a lot of concern in the childcare industry that the grant supplied by the Government is not enough to cover the costs of the current scheme.

Free education and childcare is also available for children in Scotland, Wales and Northern Ireland.

What more can employers do to help?
Given the above, it is really important that you the employer do all you can to help support your parent-employees with this issue. Many companies offer benefits such as Childcare Vouchers through salary sacrifice. Such schemes are essentially free of direct cost to the employer, as the National Insurance saving usually covers the cost of providing the vouchers. And the cost-savings to the family can really stack up. For example, a basic-rate taxpayer paying £243 a month into a Childcare Voucher Scheme could save £933 a year!

As a minimum we would recommend helping your employees understand the support that is offered (e.g. Childcare Vouchers and Tax Free Childcare) and signpost them to the support tools available.

For more information please contact us.

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