Childcare Voucher Scheme Options
There are two main types of childcare voucher schemes – Salary Sacrifice and Straight Benefit.
Salary Sacrifice Schemes
Under salary sacrifice childcare voucher schemes employees voluntarily give up part of their salary in exchange for income in the form of childcare vouchers. The value of vouchers, if processed through an employer's payroll department, is exempt from employer and employee National Insurance Contributions, thereby providing potential financial savings for both employers and employees.
Childcare vouchers up to the value of £55 per week are free from tax and National Insurance Contributions for employees. Working parents can each save up to £99.63 per month on registered childcare costs.
Employers could save up to 12.8% of voucher values.
Examples: Individual employee receiving £243 per month in childcare vouchers - Employee could save up to £99.63 per month per month (£1195.56) per annum
- Employer could save up to £31.10 per month (£373.20 per annum)
10 employees each receiving £217 (£243 from April) per month in childcare vouchers - Each employee could save up to £99.63 per month (£1195.56 per annum)
- Employer could save up to £311.04 per month - (£3,732.48 per annum)
Straight Benefit Schemes
Under straight benefit childcare voucher schemes employers bear the cost of vouchers and issue them to staff as a benefit in kind, in addition to their salary.
Under such schemes vouchers are exempt from National Insurance Contributions and may be Corporation Tax deductible also up to £55. Employers set their own internal rules/conditions for an straight benefit childcare voucher scheme, for example setting a financial limit, deciding if vouchers will only be provided for children up to a certain age, deciding if vouchers will be provided on a monthly basis or as an annual bonus etc. Under such schemes employers decide how much time and money they want to invest.
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