The system of Childcare Vouchers was introduced so that there was a mechanism in place to ensure that the money generated through the scheme, was being directed correctly to the childcarers.
In order to take full advantage of the child care voucher scheme, your employer needs to operate it on a salary sacrifice basis. This means that you agree to give up a proportion of your salary and use it for other purposes or replace it with something else. Taking part in a salary sacrifice scheme will mean a change in the terms and conditions of your employment, because you will effectively be receiving less money and this could affect your other entitlements.
Salary sacrifice schemes operate for a number of different benefits, including purchasing computers and mobile phones for personal use, help with parking or public transport costs, contributions to pension schemes and, of course, the new child care voucher scheme.
As far as the child care scheme is concerned, each company will choose to operate it in a slightly different way. You will still be able to sacrifice salary of up to £55 per week, which you will then receive in child care vouchers. This exchange takes place before income tax and National Insurance deductions are made, which means that you save money on your tax and NI bill, and your employer saves money on their NI bill. You need to take into consideration though, that your NI contributions will be reduced, and that this may affect your state pension later on. If you are unsure about how reducing your NI payments will affect you, talk to your HR department, or see an independent financial adviser.
You may be asked to commit to a salary sacrifice scheme for a fixed period. If you are buying something through the scheme, such as a home computer, you will commit to the salary sacrifice until the computer is paid for. As far as the child care voucher scheme is concerned, if your child care needs change within this time, you may need to speak to your HR department in order to alter your arrangement. Alternatively, your employer may choose to allow you to alter the amount you sacrifice on a monthly basis.
Salary sacrifice is the perfect vehicle for the child care voucher scheme, because it allows the employer and the employee to make savings at source. Always be sure that you have looked at all the ramifications of joining the scheme and, if it will work for you, take advantage of the benefits it offers.
Date: 08/12/2005
The introduction of childcare vouchers provides a genuine cash saving for working parents, and Fennies Vouchers would like to ensure that the experience of using childcare vouchers is quick and simple, and does not add an unnecessary administrative burden to the already busy lives of the working family.
