Change ahead

The announcement that the launch of the Government’s Tax-Free Childcare scheme would be delayed until 2017 saw masses of coverage about the effect on working parents. What hasn’t attracted so much attention, however, is what it means for employers.

In outline, those employees that are already taking advantage of an employer-provided childcare voucher scheme can remain on it even when the new system is introduced.

The employer schemes will, however, close to new entrants once the government’s Tax-Free Childcare programme is up and running. As current schemes run on a salary sacrifice basis, the employer will therefore continue to make savings on National Insurance Contributions (NIC) of up to 13.8% on those employees that have opted in.

For larger organisations, this can be a significant amount, running into hundreds of thousands of pounds. For example, a company where 1,000 employees are taking £180 per month in childcare vouchers will be facing the loss of over £298,000 in NIC savings. This money is often re-invested in the provision of other employee benefits to create an attractive package that aids recruitment and retention.

If you’re potentially facing a big hole in your HR budget, what should you do? The first step should be a review of your benefits mix and what it offers to employees and brings to you.

Savings for all

There are many other very valuable and popular salary sacrifice schemes now available, all of which can generate substantial savings to the company as well as expanding the savings opportunities for employees.

These range from pension schemes and cycle-to-work arrangements to annual leave purchase, car parking or mobile phone schemes. It’s worth considering adding these to your benefits package.

The changing circumstances also give you an opportunity to engage with your employees by talking to them impartially about not only the changes, how it will affect them, and their options, but also about benefits in general.

The new regime won’t benefit everyone. So it’s key that employees understand there is still time to join an existing scheme if that would suit their circumstances better.

You also still have time to introduce your own scheme, thereby giving employees maximum choice and enabling you to take advantage of salary and NIC savings. Effective promotion of any new or existing scheme will encourage uptake and ensure savings are maximised.

The changes are coming and you can’t stop them, but you can approach them with a positive attitude and determination to reduce or eliminate the financial implications while enhancing the package you offer.

About the author

James Malia

James is the managing director of P&MM Employee Benefits