Employers to offer childcare vouchers after launch of tax-free scheme

Value of staff benefit recognised by majority of firms post autumn 2015

The majority of employers, 82 per cent, have said they will continue to offer childcare voucher schemes to staff after the government launches its tax-free scheme in autumn 2015, research has shown.

Plans for a new tax-free childcare subsidy were announced in this year’s Budget, and hailed as a benefit worth up to £2,000 per child for as many as 1.9 million working families.

However, concerns about the new system have been previously raised by tax experts suggesting that some working mums and dads could be worse off under the government scheme.

Working parents who pay basic rate tax and who spend less than £5,720 may be better off staying in their existing childcare voucher scheme, experts said when the scheme was first announced.

In addition parents spending between £5,720 and £7,321.60 on care for their offspring while they are at work would be worse off if they switch from childcare voucher scheme to the new scheme in 2015.

Following the Budget announcement, two government consultation responses have so far failed to quell concerns, with research suggesting that the majority of employers  will continue to offer vouchers as a benefit after the introduction of Tax Free Childcare (TFC).

Less than 3 per cent of employers said they would no longer provide childcare vouchers for working parents. Jelf researchers suggested these employers may have been influenced by some of the improvements to the TFC proposals announced in March – most notably the acceleration of provision for the under 12s.

A further 14 per cent of employers were "not sure" whether they would scrap vouchers.

Steve Herbert, head of benefits strategy at Jelf Employee Benefits, commented:  “As more detail has become known regarding the government’s proposals for TFC it has become increasingly apparent that some employees will be better off retaining their membership under an existing employer supported childcare voucher scheme.  So it’s encouraging that so many employers are now actively considering retaining such arrangements to help these employees access this vital government support towards the rising cost of childcare.”

Herbert added: “Although the final outline for TFC is significantly more generous and wider reaching than originally proposed – it still leaves many families worse off or unable to access this vital support.”

He said that it was “unlikely” that any more improvements would be made to the government’s proposals before introduction next year and he urged employers to retain their schemes for the moment.