Jelf Employee Benefits have this week put out a press release on our recent findings of employer attitudes to Childcare Vouchers. If I’m honest, I think our findings are rather alarming.
For those not up to speed on this one, it’s probably best to start with a quick history lesson as follows…
Tax-efficient Childcare Vouchers came into existence under the Labour Government in the early part of the last decade. This was because the (ever rising) cost of childcare was a very real barrier to some parents returning to the workplace.
From the Government’s perspective it’s better to have individuals working and paying some tax, as opposed to being on benefits and paying none. Therefore any lost revenue would be easily outweighed by the additional numbers able to undertake work as a result of the Childcare Voucher benefit.
So it was a good idea. A slight error in the strategy was that Childcare Vouchers would only be available to parents where an employer was willing to establish the plan. In practice this meant that many employees were unable to access the governments support for childcare costs. Today many, perhaps most, parents with access to Childcare Vouchers work for large employers or those SME’s with dedicated Human Resources departments.
It therefore follows that a very large number of working parents (or indeed those that want to work) are unable to access this support currently.
Which takes us to the recent changes announced by George Osborne in the March 2013 budget statement.
It is proposed that a replacement Childcare Voucher system will come into force in October 2015. There are several differences to the proposed support, but a crucial one is that parents can register direct with a voucher provider (rather than via an employer) to access the benefit. This makes sense, and will widen the numbers able to access this important benefit.
So what’s the problem?
I spoke on this topic at our May London event, and we then asked the audience for their views. We found that some 36% of those employers who offer Childcare Vouchers currently were considering scrapping their offering before the replacement system is running or available.
What makes this figure even more alarming, was that this question was posed after I had outlined the likely differences between the current and future schemes, and also provided delegates with 5 strong reasons why employer’s should retain their current offering until at least the commencement of the replacement voucher scheme.
So it appears that some employer’s are set on removing this benefit early. This could be very bad news for their employees who rely on this benefit to help make ends meet, and in extreme circumstances could even force an employee out of the workplace and onto benefits. Surely this is not what any sensible employer would want to do, and not what the Government intended?
It’s also worth noting that scapping Childcare Vouchers before 2015 may result in some employee’s never again being able to claim such support. There are some key differences between the old and new systems which will prevent certain groupings from continuing to benefit from Government support for childcare unless they are able to maintain their current vouchers and payments until October 2015.
It really is important that employer’s seek to understand the impact on their employees of removing this benefit before a replacement system is available. It’s possible that removing Childcare Vouchers now could damage employee engagement, and that is of course critical to employers in these delicate economic times.
We will have to wait and see if employer’s really will follow through on this threat to take Childcare Vouchers away early (I hope not). In the meantime, some more detail on this subject can be gauged from coverage we have received in publications/ web over the last 24 hours. Some examples are shown via the links below:
Cover Magazine: https://www.covermagazine.co.uk/cover/news/2276023/third-of-employers-mull-ending-childcare-vouchers-early
Employee Benefits: https://www.employeebenefits.co.uk/benefits/childcare-and-carers/employers-consider-scrapping-childcare-voucher-schemes/102313.article
Best regards
Steve
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