As most parents will tell you, sorting out childcare can be a huge headache. There are so many things to think about if you want your child to go to a nursery, including the cost. That’s why many employers are now introducing workplace nursery salary sacrifice, a way to help employees reduce the financial burden of parenthood.
This salary sacrifice scheme, sometimes known as childcare salary sacrifice, helps employees reduce NI costs, offsetting nursery fees by an average of £6,500 per child. You can also reduce your employer NI costs, too. The wins are clear – but how can you choose the right provider to operate the scheme? With a few options on the market, you’ll need to do your research to pick the best one for your company. Our handy guide will help you decide.
Table of contents
1. Compliance
Compliance is absolutely top of the list when it comes to picking any employee benefits provider, and salary sacrifice for childcare is no different.
Most workplace nursery scheme providers are taking advantage of decades-old legislation to help employers offer the benefit despite not owning an actual nursery themselves. This opens up the benefit to all sorts of companies and employees, not just huge corporations with the budget and resources to have childcare in-house. But there are some significant complications if all conditions for a legitimate scheme aren’t met.
When picking a supplier, you should make sure they are hitting the requirements for a legitimate scheme. For example, employers should be contributing financially to the nursery, and employees should be involved in how that funding is spent. The best suppliers will make sure this is happening, ideally with no cap on how much goes to the nursery, whilst ensuring a positive impact on the childcare providers involved.
2. Eligibility
You should check whether your chosen scheme has a minimum nursery fee for eligibility. If so, this may disadvantage some parents, especially those who may work part time or use other forms of childcare and therefore require fewer nursery hours. Some workplace nursery schemes have no minimum fee.
3. Cost for employees
Helping employees save money on childcare is a huge reason why many companies are introducing childcare salary sacrifice. It’s a benefit that can genuinely make a meaningful difference to employee lives – and their families! So you’ll want to make sure your employees get the most out of the scheme.
Some workplace nursery providers make money by taking a fee from employees. While this can help you maximise your employer savings, it reduces the benefit to the parents who really need it.
4. Cost for employers
Some providers make money by taking a fee from the employer. Yes, this will reduce your NI saving, so you may want to compare the cost across providers who do this. However, remember this will ensure the maximum savings go to your employees. Parents need every bit of help they can get!
5. Liability
Any salary sacrifice arrangement carries risks. One of the main risks to consider is what your liabilities are if the employee’s circumstances change: if for example, they sign a 12 month contract, and then no longer want to be part of the scheme 6 months in. What are you liable to continue paying, and who takes on the risk?
You’ll also want to consider your overall liability in light of existing and possible future HMRC clarifications.
A good provider will offer protections on your liability to make sure they are carrying the risk rather than you.
6. Customer service
When you compare providers, make sure you look into their customer service provision. Firstly, how much support will they give you with setup? Will they help you communicate with employees? Will you get a named contact you can work with as you get started?
It’s also important to check out what support is available as time goes on. For example, if the company offers customer service by webchat, email or phone. Can you get hold of them in an emergency?
7. Sign-up rates
Although the number of parents may differ between employers, it might be good to get a sense of how widely used the benefit is. If all eligible employees sign up, you will get the biggest possible return on investment. A successful service will help employees understand the process, advantages, and any potential disadvantages, and therefore get as many as possible on board.
If you’re ready to dive into setting up a workplace nursery scheme for your organisation, it’s worth spending some time researching the options. There are a few major providers you may consider, using these seven factors as a starting point.
How Maji can help
Maji delivers a workplace nursery salary sacrifice scheme that ticks all the boxes:
- Compliance-first approach to protect your business and ensure employee savings are legitimate and sustainable.
- No minimum nursery fees, making the scheme accessible to all eligible employees.
- No employee charges, helping parents keep more of what they save.
- Protections on your risk exposure to ensure neither you nor your employees face unintended consequences
- Simple onboarding and ongoing support, with clear communication and easy admin tools for your HR team.
- Integration with other salary sacrifice schemes, like pension contributions, to maximise savings for both your business and your people.
- Backed by a financial wellbeing platform and 1-1 coaching, Maji also helps support your whole team to manage their money with confidence and get the most of your full benefit offer
To find out more about how Maji can support your employees, book a demo.
