CHILDCARE VOUCHER POLICY
HUMAN RESOURCES DEPARTMENT
11th September 2006
Introduction
The London Borough of Richmond upon Thames believes in supporting employees to
balance work and family commitments successfully and has introduced policies and
flexible working practices as a result. To add to these we have adopted a voluntary
Childcare Voucher Scheme which enables parents to make the best use of the
government tax concessions on childcare costs.
Overview of Policy
The London Borough of Richmond upon Thames works with an external provider,
Imagine Co-operative Childcare, to provide and administer the Childcare Voucher
Scheme. For more information, visit: www.imagine.coop
The Childcare Voucher scheme enables you to agree to ‘sacrifice’ an amount from your
monthly gross salary in exchange for childcare vouchers to use against your childcare
costs. On payday you will receive a reduced salary and your Childcare Voucher
account with Imagine Co-operative Childcare will be credited with the equivalent
amount in childcare vouchers. You will not pay tax and national insurance on the
amount of the salary sacrifice.
You can choose to sacrifice up to a maximum of £243 per month. You can choose to
‘sacrifice’ less than this amount, but no more than this amount.
This is seen as a variation to your contract of employment and you will therefore be
required to sign an Amendment to Contract.
There is no charge to either you or your chosen carer(s) for participating in the scheme.
We, as your employer, save our Employer’s National Insurance Contributions on whatever
you decide to “sacrifice”. These savings allow us to pay Imagine for administering the
scheme, so there is no real cost to us as the employer.
Eligibility to Join the Childcare Voucher Scheme
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You can join the Scheme if you are a permanent employee or an employee on a
fixed term contract. Employees on a casual contract cannot join the scheme as
there is no guarantee of pay each month.
your child must be under 15 years old (or under 16 years old if your child is
registered disabled)
you must be the parent of, or have parental responsibility for the child in respect of
whom the Childcare Vouchers will be used to provide childcare
your salary must not fall below the national minimum wage after the salary sacrifice
has taken place
your childcare provider must be registered or approved
Registered or Approved Childcare
You can only use Registered or Approved childcare if you want to pay them with
childcare vouchers. Any carers who are not registered or approved CANNOT be paid
with childcare vouchers. This is because the Inland Revenue have said that in order to
save Tax and National Insurance, only registered or approved childcarers can be paid
in this way.
Most common forms of childcare are registered. Nurseries, childminders, Out of
School Clubs and Holiday Play-Schemes are usually registered with Ofsted. It has
now become possible for other carers such as nannies to become approved through
SureStart.
Before you join the scheme, please ask your carer if they are registered or approved
and also check that they are happy to be paid with Childcare Vouchers.
You are responsible for choosing the childcare provider and agreeing terms with them.
The London Borough of Richmond upon Thames and Imagine Co-operative Childcare
do not accept liability for the standard of childcare service provided by your childcare
providers.
Joining the Childcare Voucher Scheme
You may join the scheme at any time so long as you ensure that you complete your
set-up details with Imagine Co-operative Childcare, and send a signed copy of your
application form (produced by the Imagine Co-operative Childcare system) to Human
Resources by the 3rd working day of the month in which you wish to start receiving the
childcare vouchers. If your signed copy of the application form is not received on time,
you will be automatically added onto the scheme for the following month. Please be
aware that childcare vouchers cannot be backdated e.g. electing to take two months’
worth in one month.
Please send your signed copy of the application form to Human Resources
Department, 1st Floor, Civic Centre, 44 York Street, Twickenham, Middlesex, TW1 3BZ,
marked for the attention of the Employee Realtions and Engagement Team .
When you join the scheme, you should intend to join the scheme for a period of 12
months however we do not have a minimum stay period; therefore you are able to opt
in for a few months if you wish.
The maximum amount you can choose to take is £243 per month. This equates to
£2,916 per year. You can choose to take less than this amount if you wish. You should
intend to take the same amount each month.
Calculating the amount required in Childcare Vouchers
You need to think carefully about how much you realistically spend on childcare in an
average year.
If you are someone who spends over the maximum available in Childcare Vouchers,
the answer is simple - elect to take the full amount of £243 per month.
Some parents however may only have a need for part time childcare, for example,
when their children are at school and so only need care in the summer and on school
holidays. If this applies to you, please calculate the AVERAGE monthly amount you
think you will need.
To do this, look at the approximate amount you spend on childcare per year, and divide
by 12.
Example:
My summer holiday play-scheme costs £100 per week for 6 weeks.
I pay for another 6 weeks care during Easter, half term and Christmas holidays, which
is another £100 per week.
The approximate total I pay per year is £1200.
£1200 divided by 12 months is £100 per month in Childcare Vouchers.
Remember that you do not need to use your childcare Vouchers every month.
You can save them up until you need them as they are valid for 5 years.
Leaving the Childcare Voucher Scheme
You can choose to leave the scheme or change the amount being received in childcare
vouchers at any time as long as you have a ‘lifestyle change’. A ‘lifestyle change’ is
something that significantly changes your childcare requirements. Some examples
are: Pregnancy
 Change in working hours
 Change in your partner’s working hours
 Redundancy
 Redundancy of a partner
 Leaving the company
 Death of partner/child
 Your childcare needs change
This is not an exhaustive list, but please be aware that these are the types of
circumstances where changes are acceptable.
It is not expected that such changes will occur very often and Payroll will only
administer up to three genuine changes in a rolling year. If, frequent requests are
made and it is considered that the individual is not complying with the spirit of the
scheme, Payroll reserves the right to end the arrangement.
If you leave the scheme you are able to rejoin in the same financial year the approval
of your application will be considered by Human Resources.
Refunds
Imagine Co-operative Childcare cannot refund you directly as any monies in your account
will be subject to income tax and National Insurance Contributions if you are no longer
using it for the payment of eligible childcare. Therefore all refunds will need to come
through payroll at which point all relevant Income Tax and National Insurance
Contributions will be collected.
If you are leaving the Council and have an outstanding balance in your Imagine... account,
you can either retain your account until all of your funds have been used up paying for
childcare or you can request for a refund through payroll. You must apply for this refund
prior to leaving the Council in order that your P45 details are correct.
The London Borough of Richmond upon Thames Employee Benefits
Joining the Childcare Voucher scheme will not make a difference to your employee
benefits. It has been agreed that all benefits such as overtime, redundancy and pay
increases will be calculated on your gross salary (Notional Salary) before the childcare
vouchers are deducted.
Statutory Benefits
Statutory Maternity Pay, Paternity Pay and Adoption Pay
Statutory Maternity Pay (SMP) and Statutory Adoption Pay (SAP) can be reduced by
you participating in a salary sacrifice scheme. This is because SMP/SAP is calculated
using the actual cash pay you receive (i.e. earnings that are subject to National
Insurance Contributions). By participating in a salary sacrifice scheme, you are
effectively reducing your cash pay, therefore should you be made redundant, the
amount of SMP/SAP you will be entitled to could be less than you were entitled to prior
to joining the salary sacrifice scheme.
To avoid any negative impact on your SMP/SAP, you should come out of the salary
sacrifice scheme 23 weeks prior to the expected week of childbirth/adoption. This is
because your maternity/adoption pay is calculated over the 8 week period prior to the
15 week period before the expected week of childbirth/adoption.
Statutory Paternity Pay (SPP) should not be affected by entering into a salary sacrifice.
You are entitled to two weeks paternity pay; one week paid at full pay and one paid at
the SMP rate of £108.85 per week (or 90% of your salary if it is lower) However, it is
unlikely that it will be less than the £108.85 level as you would be close to receiving
minimum wage and would therefore not qualify for the Childcare Vouchers scheme.
SPP also applies for adoptive fathers.
The following websites provide further
information.
http://www.dwp.gov.uk/lifeevent/benefits/statutory_maternity_pay.asp
Statutory Sick Pay
Statutory Sick Pay (SSP) can be reduced by you participating in a salary sacrifice
scheme. This is because SSP is calculated using the actual cash pay you receive (i.e.
earnings that are subject to National Insurance Contributions). By participating in a
salary sacrifice scheme, you are effectively reducing your cash pay, therefore should
you be made redundant, the amount of SSP you will be entitled to could be less than
you were entitled to prior to joining the salary sacrifice scheme. The following website
provides further information.
http://www.dwp.gov.uk/lifeevent/benefits/statutory_sick_pay.asp
Statutory Redundancy Pay
Statutory Redundancy Pay (SRP) can be reduced by you participating in a salary
sacrifice scheme. This is because SRP is calculated using the actual cash pay you
receive (i.e. earnings that are subject to National Insurance Contributions). By
participating in a salary sacrifice scheme, you are effectively reducing your cash pay,
therefore should you be made redundant, the amount of SRP you will be entitled to
could be less than you were entitled to prior to joining the salary sacrifice scheme.
Tax Credits
Tax credits will be affected in most cases should you decide to participate in a salary
sacrifice scheme. However, it is difficult to give you a clear picture as to the precise affects
that may occur, as tax credits are very different for each individual’s circumstances.
The Tax Credit office at Inland Revenue are currently developing a calculator which will
enable you to work out if you would be better off staying with your current tax credits or
joining the salary sacrifice scheme for Imagine... childcare credit. As soon as this is made
available, we will provide the necessary link so that you are able to check for your own
personal circumstances.
Until the calculator is created, what we are safely able to advise is that if your current
childcare costs meet, or exceed, £2,916 per year, and you are currently in receipt of less
than £670 in tax credit assistance annually, then you would receive greater financial
benefits by joining this salary sacrifice scheme.
Should your tax credit assistance exceed £670 per year, we would advise that you contact
the Tax Credit office and request that they perform some comparative calculations, so that
you can see clearly which route will be most beneficial for your own circumstances.
Further information is available on the following link.
Tax Credits Help Line: 0845 300 3900
http://www.inlandrevenue.gov.uk/specialist/salary_sacrifice.htm
https://www.taxcredits.inlandrevenue.gov.uk/Qualify/WhatAreTaxCredits.aspx
State Pension
The State Pension consists of two pension elements. The first is the Basic Element. By
entering into a salary sacrifice scheme for Childcare Vouchers, you must earn at least
minimum wage in cash earnings to participate. This automatically preserves your
entitlement to the Basic Element of the State Pension.
The Second element of the State Pension is an adjusted amount depending on what you
earn above minimum wage, known as the Additional State Pension or the State Second
Pension. By entering into a salary sacrifice for Childcare Vouchers, your contributions
towards the State Second Pension will be decreased for the duration of the time that you
participate in the salary sacrifice due to the fact that your salary is seen to reduce for this
period. Childcare Vouchers are not treated as a pension-able element of salary for the
State Pension. You can get a pensions forecast by clicking on the link below. The effect
on you State Second Pension pay out will be miniscule.
If you are contracted out of the State Pension, then there will be no impact by entering into
a salary sacrifice for Childcare Vouchers. Further details are available on the following
websites.
http://www.thepensionservice.gov.uk/
Other State Benefits
If you are currently in receipt of other state benefits not covered in this information, then
you should carefully consider what the effect on them may be, prior to opting into a salary
sacrifice scheme for childcare vouchers.
Entering into a salary sacrifice scheme for childcare vouchers will reduce your level of
salary by the benefit amount you have opted for. This means that for state benefit
calculation purposes, whatever amount you have sacrificed will not be included as salary
or earnings. The effect may be to reduce your entitlement to the state benefits in question.
This is normally not a significant reduction, but may vary depending on your personal
circumstances, so we do recommend that if you are in any doubt that you should check
before proceeding.
For further information on other state benefits, you may find the link below useful.
http://www.dwp.gov.uk/
This Policy
Hopefully this policy document will have made the rules of the Childcare Vouchers
Scheme very clear, and will help determine whether it is a good benefit for you.
Further Information
For further information and enquiries about the Childcare Voucher Scheme please visit
the Imagine.
website at www.childcarevouchers.coop;
or email vouchers@imagine.coop
or call on freephone 0800 458 7929.