Childcare Options

Guidance for SMEs

Helping staff with childcare - the advantages for employers

Many SME owners are themselves parents or grandparents, and are sympathetic to the difficulties of finding adequate childcare. Even without this personal experience, it makes good business sense to provide help with childcare where possible, for the following reasons:

• Wider recruitment pool. With fewer school/college leavers - a trend set to continue - employers will need to widen their recruitment pool in order to fill vacancies. More and more women are set to enter the workforce, many of them parents. In order to work, parents have to find suitable childcare.
  Help with childcare will mean that you will have the edge over other employers when it comes to recruiting the best people. Childcare is becoming more of an issue for men, too, as parents share the responsibility for childcare between them.

• Skills shortages. Employers, who can offer that bit more in terms of employee welfare, are going to have the advantage when it comes to recruiting for hard to fill vacancies.

• Higher retention rates and reduced recruitment costs. More women return after maternity leave. Fewer have to give up work due to childcare problems.

• Less absenteeism and sickness leave due to stress and childcare concerns. (In a survey of working parents, 51% said finding childcare was a major cause of stress.)

• Higher productivity. Employees can concentrate on their work and are more creative and productive if not worrying about their children. (Estimates suggest it takes, on average, 16 hours to find childcare, 80% in work time.)

• Greater loyalty. Employees are more likely to 'go the extra mile' if they feel their employer helps them with their concerns. This results in increased motivation, productivity and low staff turnover.

• Enhances image. Good public relations benefits an employer in several ways: it will promote products or services, improve recruitment and help nurture good will within the community in which the business operates.

The above business reasons for helping your staff with childcare will partly determine what sort of help you offer.

Ways of helping with childcare

1. Information

All employers, irrespective of size, can offer staff information about childcare. This can take various forms:

• publications on the different types of childcare and how to find it (e.g. Balancing Work and Home, published by WORKING FAMILIES, price £5.99)

• Information on childcare, available though the Children’s Information Service. For more information, contact Childcare Link.

2. Childcare allowance/voucher

An allowance to help employees pay for childcare. The cost of childcare can be prohibitive and may mean that some employees are unable to return to work after having a baby. By helping them pay for childcare, you will be helping them to return to work after maternity leave thereby retaining their skills and experience.

There are two main ways of helping to pay for childcare; by adding a certain amount to the pay packet each week/month or by making a Childcare Voucher scheme available to employees. Employers can buy into a commercial service offering Childcare Vouchers (run by Accor Corporate Service, Leapfrog, Busy Bees and others), or they can run their own schemes. The size of the allowance/voucher will depend on your budget, but tax advantages to Childcare Vouchers apply only to vouchers below a certain amount, see below. Some employers offer a flat rate to all qualifying employees, others have a sliding scale so that those on lower salaries receive a greater allowance that those with higher incomes.

A few employers impose a time limit on the allowance (payable only for one year) while others limit payment to pre-school childcare only. Some employers continue to pay the allowance for primary school age children (albeit at a lower rate).

There are certain advantages of buying into a Voucher Scheme, depending on the resources that you have. There are a number of schemes you can look at which are cost neutral:

• Salary Conversion

In this scheme the parent chooses to substitute part of their salary in exchange for childcare vouchers. The employer orders vouchers of that value and the employee uses the voucher to pay the childcare provider. If the childcare used by the parent is registered or approved, they will not pay income tax or NI on up to £55 per week paid in vouchers. The employer does not have to pay NI on the sum either, so both you & your employee benefit.

• Flexible Benefits Scheme

In this scheme the parent can exchange other benefits the employer may offer for childcare vouchers.

Employers may also want to look at one-off allowances that could make these more attractive. For example, paying the first month’s childcare fees for a new employee.

3. Buying Reserving Places

Buying or reserving places in nurseries, holiday playschemes or after-school clubs. By buying or reserving a certain number of places for your employees at existing nurseries, clubs or playschemes you make the task of finding childcare much easier.

Nursery provision is reliable and usually open throughout the year (except for public holidays) so your staff won’t have the problem of the child carer being too ill to look after their child. Many employers subsidise these places.

Many employers who have a high percentage of employees with school age children have trouble with cover after 3.30pm when school closes and during holidays. There may be high levels of absenteeism and staff all wanting to take holiday at the same time. Where this is the case employers could help employees pay for their children to attend an after-school club or holiday playscheme.

Where there are no clubs or playschemes available, employers could help employees and/or other local employers simply by providing financial assistance or by providing premises if they have something suitable. Some employers provide financial assistance or equipment to the club or playscheme in return for staff being offered places.

Choosing the right options for your business.

The options you choose will be determined by the business benefits you are seeking and the needs and circumstance of your staff. For example:

• If you have a problem of absenteeism during the summer holidays, look at helping staff find and pay for holiday playschemes. This could be done by supporting the setting up of a holiday playscheme; by buying in places on an existing scheme; or by helping staff to pay for holiday childcare.

• If you want to encourage women to return from maternity leave, look at providing information to maternity leavers on childcare options, buy into a local childcare information service or give employees a childcare allowance.

• If you have trouble recruiting staff, introduce a childcare allowance along with flexible working (see Factsheet 3 in the series on Managing the Flexible Worker) and you will attract loyal, motivated and reliable working parents to your organisation.

• Your advertisements for staff should state that you offer working practices which will enable staff to balance demands of work with other aspects of their life.

• Contact your Early Years Development and Childcare Partnership who can offer practical advice and assistance in setting up a childcare policy. They can also put you in touch with other employers in the area who are keen to do the same.

For further information:

Childcare Link Information Services
Provides details of childcare options within a locality and also how to get in touch with your Early Years Development and Childcare Partnership
Freephone: 0800 096 02 96
Website: www.childcarelink.gov.uk

4Children
Information and advice on setting up and running out-of-school childcare.
Tel: 020 7512 2100
Website: www.4children.org.uk

New Opportunities Fund
Provides grants for setting up out-of-school childcare provision. Have just extended the availability of funding although it closes in June. Organisations in England should approach their Early Years Development and Childcare Partnership first.
Website: www.nof.org.uk

A Factsheet of this nature can only provide general guidance. It should not be used as a substitute for independent legal advice. While every effort has been made to ensure the accuracy of its content, we cannot be held responsible for any errors.

June 2006

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