Delving into the intricacies of tax and national insurance might not sound exciting, but what if there were strategic ways to save money while ensuring your child receives the best care? That’s where childcare salary sacrifice arrangements come in.
While commonly associated with pensions, salary sacrifice arrangements extend beyond retirement planning to offer a practical solution for managing childcare costs.
Let’s explore the details and how a salary sacrifice arrangement for your childcare could help your family reduce your childcare costs by 32-59%.
What are Childcare Salary Sacrifice Arrangements?
At its core, a salary sacrifice arrangement is a means to minimise tax and national insurance obligations.
Parents can ‘sacrifice’ the cost of childcare from their salary before they are paid, meaning you avoid tax and national insurance contributions. Often referred to as a Childcare Salary Sacrifice arrangement, this approach leads to both savings for families and additional financial support for nurseries.
The perks of a childcare salary sacrifice arrangement are significant.
By implementing such an arrangement, families can gain substantial savings on childcare fees, ranging from an impressive 32% to 59% depending on salary, tax brackets and childcare costs. Whilst workplaces also make savings through reduced National Insurance contributions.
So why isn’t every workplace offering this benefit to their employees? There is a crucial condition for workplaces to offer this benefit: they must have a workplace nursery arrangement in place.
What is a Workplace Nursery?
Workplace nurseries are ingenious solutions offered by employers to meet the childcare needs of their staff, being able to offer the workplace nursery benefit can be a key driver in supporting women back to work after having children and enable parents financial support to make choices on returning to work.
By partnering with commercial nurseries, workplaces are able to offer a tax-exempt salary sacrifice scheme.
Beyond their financial benefits, the workplace nursery scheme demonstrates commitment of employers towards their employees’ well-being and work-life balance.
While the concept has been around since 1990, The Herde has made it possible for it to be evolved to adapt to the modern hybrid work landscape and implemented simply through our managed service.
Who Can Benefit from a Childcare Salary Sacrifice Arrangement?
The accessibility of a childcare salary sacrifice arrangement is broad. Any employed individual with a consistent salary and parental responsibilities for a child under the age of 16 can benefit. Employers are mandated to extend this benefit across their entire workforce, promoting equality and support for all.
Moreover, nurseries that collaborate with The Herde also experience gains by participating in the Workplace Nursery scheme. On average, a standard nursery spot can hold an additional value of around £1,000 when offered through The Herde.
Furthermore, the workplace nursery benefit holds additional advantages. As a tax-exempt benefit, employees are not required to declare the salary sacrifice arrangement in their year-end tax return and workplaces themselves reap financial advantages by effectively reducing their own National Insurance contributions.
So why isn’t everyone already doing this?
Despite this being a benefit since 1990 many parents, workplaces and nurseries are unaware of the significant financial benefits of the scheme.
The challenge for many workplaces workplace typically revolve around the remote set up of their workforce and therefore requirements to have multiple workplace nursery agreements with each individual nursery utilised by their workforce, meaning that predominantly the uptake has been on campus style workplaces who have a nursery onsite.
This is where The Herde steps in, consolidating the contractual requirements and providing workplaces with a single contract whilst still being able to offer employees access to hundreds of nurseries across the UK. Overall streamlining the process and enhancing convenience making it simpler than ever for parents to access this benefit.
How Does The Workplace Nursery Benefit work?
By partnering with The Herde workplaces can use one contract to access hundreds of nursery partners across the UK.
Once employees and the workplace agree on the sacrifice amount, a change of terms letter formalises the arrangement. From here, the workplace takes the reins, directly covering parents nursery fees through The Herde.
This seamless process reflects in your monthly pay slip, meaning one less administration task and a significant improvement to take home pay.
Changing the Future for Working Parents
Childcare Salary Sacrifice provides significant financial benefits for all involved, particularly for many struggling to justify returning to work due to sky high childcare costs.
By embracing this innovative approach and partnering with The Herde, you’re paving the way for a future where both your child’s potential and your financial goals flourish.
To find out more about Childcare Salary Sacrifice arrangements, please see our FAQs or get in touch with any questions.
