Employers call for clarity on Tax Free Childcare

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Many employers are confused about the benefits of the Government's new Tax-Free Childcare scheme and unclear about how they will be involved, new research suggests.

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A survey by the Childcare Voucher Providers Association was carried out to find out the extent to which employers value vouchers and what role they see themselves playing in supporting working parents with the cost of childcare when TFC is introduced in 2015. Earlier this month, the Government launched a consultation on its plans for the new scheme.

The research found that 97 per cent of employers offer childcare vouchers because they think it is important to help parents with childcare costs.

A similar number (94 per cent) want to create a family-friendly environment and 65 per cent believe that vouchers are important for employee retention. Previous research by CVPA found that one in five parents said they would have to leave their job if they could no longer use childcare vouchers.

However, while most employers believe it is important to support their employees with the cost of childcare, they are unclear about the benefits of changing from offering childcare vouchers to the TFC scheme, with 70 per cent of employers saying that they are unsure or disagree that the change is a positive step.

The survey also found that just under two-thirds of employers would like to continue to offer childcare vouchers, regardless of whether their National Insurance contribution (NICs) relief was removed.

The CVPA surveyed more than 1,600 businesses that currently offer childcare vouchers to more than 1 million people.

Childcare vouchers are currently used by more than 525,000 parents and offered by more than 50,000 companies employing just under three-quarters of the working population.

The report, Making Childcare Work, concludes, ‘The role of the employer in the current childcare voucher scheme has been a fundamental reason for its success.

‘Ensuring there is a link between the new scheme and employers will help build on its success, and guarantee employers can still play an important role in helping their staff with their childcare costs.’

The CVPA is calling on the Government to recognise and define a clear role for employers in the new scheme, including:

  • allow for parents’ payments to continue to be made through post-tax salary deduction to reduce fraud and error;
  • incentivise employers to promote TFC and manage accounts on their behalf, negotiating ‘group deals’ where appropriate;
  • set out a role for employers in confirming the ‘in employment’ eligibility criteria, reducing the potential for fraud and error in the new scheme.

Julian Foster, CVPA board member, said, ‘This research is a significant contribution to the on-going debate around Tax-Free Childcare. It highlights not only the importance of employers in administering the current childcare voucher scheme, but demonstrates how and why employers want to continue to be involved in helping working parents with the cost of their childcare.

‘The CVPA therefore encourages the Government to outline a defined and meaningful role for employers in the delivery of Tax-Free Childcare.’ 

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