Do it yourself

Do it yourself employer childcare voucher schemes are an ideal means for an employer to make the most of the savings for their employees and themselves using the government exemptions on childcare.
 
The exemption allows £243.00 per month of registered childcare to be exempt from both Tax and NIC. Many companies use a voucher company to run a scheme for them, and there are quite a few on the market. It is, however, possible for an employer to run a scheme itself without buying vouchers from a third party. 
 
Voucher companies charge a fee for the administration of the scheme and this is usually offset by the savings in employer National Insurance Contributions. However, if a company chooses a ‘Do it yourself’ scheme it saves on all the employer contributions. Once the scheme is up and running it follows the procedures in place, which have to be compliant with the relevant tax laws, and should run smoothly as part and parcel of its PAYE system.

Reduce costly childcare
Do it yourself voucher schemes, or Direct payment schemes as they are sometimes called, are an effective means of paying for childcare. As with Employer Childcare Vouchers, the schemes usually operate on a Salary Sacrifice basis where the amount of childcare (up to £243.00 per month) is deducted from the salary before tax and National Insurance is calculated. 
 
For many people who are not eligible to claim the childcare element of Working Tax Credit, it is a very good option to help reduce the burden of costly childcare and make working a worthwhile option for families. There is also another option that employers pay for the childcare and offer it on top of a remuneration package (Salary Plus). In effect, this gives the employee full benefit but in reality many employers are reluctant to do this and these employment packages are rare. 

How to D.I.Y.
The employer would take full responsibility for running the scheme and need to be satisfied that all the rules and regulations have been followed. The employer sets up a system to gather information about the parents/guardians and their children and also to be able to pay the registered childcare provider on a monthly basis. The same arrangements for doing a salary sacrifice scheme, as would be required for schemes run through a voucher company, would also need to be put into place, eg. salaries not dropping below the national minimum wage. 
 
Accurate record keeping and updating, if there are changes needed, are essential to enable the scheme to run smoothly. There are companies that assist the employer through the rigours of the legislation. For example, Abacus Voucher Solutions has a set of templates on the internet which can be downloaded and adapted for individual employer use. 
 
Anthony Rentoul, senior partner of Abacus, said: “In running its payroll no employer has any problem deducting the tax (etc) that it then sends off to the Revenue. So if it deducts also the value of a voucher, what can be simpler than to pay that money over, at the same time, directly to the childcarer nominated by the employee? Why pay a voucher provider a fee of anything between four per cent and eight per cent to act as a filter in that very straightforward process?”

The benefits
So what are the advantages of administering the scheme as an employer? 
 
If it is a big company and many of its staff have childcare vouchers, there could be a huge amount of savings on employer NIC. The employer would need to administer the scheme, but it may be more cost effective to employ someone, probably just a part time worker, to manage the scheme rather than involve a voucher company who would take a percentage of the savings. 
 
For smaller companies it may be possible to incorporate the scheme into the PAYE job role. Once the system is in place it should be easy to manage. 
 
The money saved could be used to provide other childcare or family orientated events such as a summer play scheme or family day for workers and their children providing a cost effective means of giving something back to parents who have contributed through their enrolment in the scheme.
 
Employers linking directly with local childcare providers may find that they develop closer links with that provider, which may create a spin off should any other childcare opportunities arise. For example, provision of a crèche for a training course.
 
If it is a very small company it may not be worthwhile to use a childcare voucher company as the amount charged in commission may not be cost effective.
 
Parents can choose their own childcare arrangements, provided the carer is a registered carer – it can be for example: a nursery, home based child carer, out of school club, holiday play scheme, etc or even a mix of two or three providers if different care is needed.
 
To finalise, a ‘Do it yourself’ voucher scheme is an ideal means of assisting parents to manage their childcare commitments with the minimum of stress as the payment is taken care of through the salary sacrifice scheme. For the employer it’s a cost effective way of making savings in this ever increasing squeeze on finances as well as providing very worthwhile savings for their employees and good practice on work life balance.

This information was gathered by the Creating More Balance project, which advised employers on work life balance across South Yorkshire. This project is now running through Doncaster and Rotherham local authorities (Early Years). Margaret Goodlad was the previous co-ordinator of the CMB project and is a Work Life Balance consultant

For more information
Web: www.cmb.org.uk

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