In autumn 2015 the option for employers to offer a childcare voucher scheme to their employees will cease and instead any employees will have to use the Government’s Tax-Free Childcare scheme. While this evolution may bring immediate implications for companies that could be difficult, it is those HR teams that act now to embrace the change and view it as an opportunity to do something positive and proactive that will stand out from the crowd.
One of the most significant ways in which companies may be affected is a loss of National Insurance Contributions (NIC) savings. Currently, employers who run a scheme benefit from significant savings of up to 13.8% on NIC, which for larger organisations can run into hundreds of thousands of pounds. As the new Tax-Free Childcare scheme is being administered by National Savings & Investment, employer involvement is not required and so employers will potentially be left with a big hole in their budget. For example, a company where 1,000 employees are taking £180 per month in childcare vouchers will be facing over £298,000 company NIC savings being at risk, money which is often re-invested in the provision of other employee benefits to create a highly attractive package that aids recruitment and retention.
Given the starkness of these potential financial losses, and the fact that the new scheme won’t necessarily be more beneficial to all employees, is imperative that HR teams take action to prevent their employer and their employees from losing out.
A comprehensive review of the company’s benefits mix and what it offers to employees and brings to employers is essential. The world of benefits is rapidly evolving and there are lots of other very valuable and popular salary sacrifice schemes now available, all of which can generate substantial savings to the company as well as expanding the savings opportunities for employees. These range from pension schemes and cycle to work arrangements to annual leave purchase, car parking or mobile phone schemes, all of which should be explored in detail.
The upcoming publicity around childcare gives employers the opportunity to engage with their workforce and communicate a very positive message about not only childcare but also benefits in general. As there will inevitably be confusion amongst employees about the implication of the changes and the options available to them, HR teams must rise to the challenge of educating employees in a clear and impartial way so they can make an informed decision.
The new Tax-Free Childcare won’t benefit everyone and so ensuring employees understand they can either join an employer-provided scheme prior to the changes, which they can then remain on beyond the launch of the scheme, or alternatively can join the new scheme in the autumn, means they can determine which works best for their particular circumstances. Employers still have time to introduce their own scheme before the new one comes into force and by doing so will provide their employees with maximum choice. Effective promotion of any new or existing scheme will encourage uptake and ensure savings are maximised.
Companies that embrace the changes with a positive attitude will be able to reduce or eliminate the financial implications while enhancing the package they are able to offer, and increasing employee engagement through comprehensive communication on the issues that matter to them.
