Preparing for the closure of childcare vouchers


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The closure of childcare vouchers to new entrants in April 2018 marks a significant change to financial support for working parents

The childcare voucher scheme enables employees to sacrifice up to £243 per month in exchange for childcare vouchers, which can be used to pay for any form of registered childcare (including breakfast and afterschool clubs, holiday schemes, childminders and day nurseries). The amount sacrificed is exempt from tax and National Insurance Contributions (NICs) resulting in employees saving up to £933 per year, per parent (£1,866 per household). Employers are also exempt from NICs on the amount sacrificed by each employee, reducing their payroll costs.

What is changing?

The deadline for parents to join the childcare voucher scheme is 5 April. To join parents must have made a salary sacrifice before that date – it is not enough to express an interest or request to join. Many employers will finalise their payroll a month in advance, meaning that employers have a limited window in which to register eligible employees to their scheme.

Employers and employees who are already registered will not be affected, unless an employee were to switch employer (in which case they will be treated as having left the scheme). Post-April the government proposes parents use the new tax-free childcare scheme to help with the cost of registered childcare. While tax-free childcare will benefit some parents, those who would be better off on childcare vouchers run the risk of losing out if they do not act now.

HR professionals can future-proof their employees’ eligibility by supporting them to enrol in childcare vouchers by sacrificing as little as £1 from their pay to join the scheme.

Top five tips to prepare for these changes

1. If you do not yet offer a childcare voucher scheme take action now.

Once the childcare voucher scheme closes to new entrants only employers who already offer the scheme will be able to continue doing so. Employers wishing to offer childcare vouchers need to have their scheme in place as soon as possible so employees can join ahead of the April cut-off point.

2. If you already offer childcare vouchers tell your staff about these changes, and communicate details of your childcare voucher scheme to them.

The more staff you have who are benefiting from childcare vouchers, the greater the saving to you through reduced employer’s NICs. When the childcare voucher scheme closes to new entrants you will not be able to accept new employees on to it. Employers should inform staff of the changes now, so that there is time for those wishing to use childcare vouchers to join the scheme and make a salary sacrifice before it closes.

3. Ensure staff who want to use childcare vouchers have salary sacrificed before the end of this tax year.

You may have staff who do not realise they could benefit from childcare vouchers; for example parents paying for afterschool or breakfast clubs for older children.

Parents can join a childcare voucher scheme from when their child is born. Employees cannot salary sacrifice below the equivalent of the National Living/Minimum Wage. An employee on statutory maternity pay could use a keeping in touch day, or a day’s annual leave, to sacrifice a small amount to join the scheme, giving them options on returning to work.

4. Ensure staff who have opted out of childcare vouchers temporarily make at least one salary sacrifice in each 52-week period to remain in the scheme.

Staff who were members of the scheme but opted out temporarily can only remain if they make at least one salary sacrifice payment within each 52-week period.

5. Update employment contracts, staff handbooks or terms and conditions.

Once the scheme closes new staff will be unable to join, even if they previously received childcare vouchers through another employer. Existing staff who are already members can remain in the scheme and benefit for as long as they are eligible. As the government has decided to make this change the employer should not be at risk of perceived discrimination – as long as those who are still eligible to use the scheme can do so.

Aoife Hamilton is policy and information manager at Employers For Childcare

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