Work Pays

Keeping up with the rapidly changing world of employment law often seems to be impossible, especially when considering all the proposed changes to family friendly working. It’s mind-boggling to get your head round all the legislative changes coming into force over the next few years, and one further plan that’s been announced by the Government recently will enable some parents in the UK to claim back up to £1,200 a year for each child, or 20% of childcare costs from 2015. Britain has some of the highest childcare costs in the world, and financially, it does not make sense for both parents of some families to go to work. The plans are to be introduced as a way of “helping every family get on in life”.

There has been considerable criticism from all quarters. Some people are saying that this is offensive to mothers (or fathers) who opt to stay at home to raise their children. I read one pithily worded post from a person who thinks that employers should pay more so that employees can pay for childcare. Let’s get real - it doesn’t matter how much you pay – for most employees it will never be enough. Still others complain the tax payer shouldn’t have to face this level of burden if people elect to have children. They point out that families have to take responsibility for their own finances and manage their own budgets.

Currently, parents can receive vouchers for childcare for up to £55 a week through the current employer supported childcare voucher scheme. This is deducted from their salary before tax is paid. Vouchers are only available to employees whose employer is part of the scheme. The new proposals are expected to be open to all parents who meet the relevant criteria.

To be eligible, both parents will have to work (or in the case of lone-parent families, the one parent) and each parent must be earning less than £150,000 a year. Half of the funding for the new scheme will come from the abolition of the previous system of childcare vouchers and by funding from elsewhere in Whitehall.

Parents will be able to open an online voucher account with a voucher provider and have their payments topped up by the government. For every 80p families pay in, the government will put in 20p up to the annual limit on costs for each child of £1,200. Employers will no longer have to make deductions from their employees’ salaries and so it is hoped that the administrative work that surrounds the current childcare voucher scheme will be completely removed.

For many working parents, securing affordable childcare is the main barrier preventing most parents from returning to work. Although its hard at first, most do want to get back into the working routine, but the longer it’s left, the harder it is to return to work.

Employers can do a number of things to ease the financial burden on new parents, and to encourage them to return to work after their child’s birth. Besides childcare vouchers, there are two main ways employers can help with childcare costs:

• Direct payment for childcare. This is similar to the current voucher scheme, except you pay the childcare provider directly.
• Workplace nurseries. Large employers may set up their own nursery (either on workplace premises or at another location) that are completely exempt from tax and NICs provided that they meet certain conditions.

If an employee wants to return to work after having had a baby it makes logical business sense to help where possible. Obviously not all employers will be able to afford large benefits and schemes, and certainly it’s only ever large businesses that have their own nurseries on site. The government’s proposal to introduce the new childcare plans will involve self-employed workers for the first time, and so it is hoped that most people will be able to benefit.