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Annie Hayes



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Opinion: The benefits backlash


Lynne Currer, product manager, Childcare Vouchers at Accor Services considers the growing resentment towards family-specific benefits and advises employers on how to manage the backlash.

The cost of a typical full-time nursery place in England has increased by more than 27 per cent over the past five years. This outstrips inflation by nearly 20 per cent. The good news for working parents is that the number of employers offering childcare vouchers and family-friendly policies is increasing. The bad news is that this is breeding discontent among a number of employees – without access to these benefits – who feel they are being disadvantaged.

This issue presents two major challenges for employers. The first is justifying the policies aimed specifically at working parents and the second is alleviating the resentment by creating an approach that is supportive towards all employees.

Understanding childcare vouchers:
Much of this resentment is born out of a lack of understanding of how childcare vouchers actually work and exactly what working parents gain from the benefit.

Childcare vouchers can be provided as an additional benefit or reward on top of an employee’s salary, however, the majority of schemes are offered via salary sacrifice. This means that they are offered to employees as a voluntary benefit, with the employee converting part of their salary into vouchers. The employer is not providing any ‘additional’ benefit to employees with children. In fact, it’s a government paid benefit because childcare vouchers are a tax and national insurance exempt benefit.

Similarly, childcare vouchers cannot be exchanged for cash and can only be used to pay for registered or approved childcare. A financial cost which only working parents have to cover.

Single working parents can also benefit from joining a scheme. The benefits are awarded per working parent and are designed to act as an incentive for both parents to stay at work.

Put it in perspective:
An employee is entitled to up to £55 per week or £243 per month in tax and NI exempt childcare vouchers.

According to the Daycare Trust’s 2006 Childcare Costs Survey, nursery places for a child under two typically cost £142 per week, that’s over £7,300 a year. In some parts of the country, particularly London and the South East, it’s not uncommon for annual nursery fees to exceed £10,000, with the highest cost identified in the survey at over £20,000 a year.

Childcare vouchers, therefore, will only be able to provide a contribution to these costs, costs which an employee without children would not have to budget for.

Why support working parents?
Assisting working parents to stay at work and contribute to the UK economy is in everyone’s best interests. The demographic trend in the UK demonstrates a need for increased numbers of people to be in work in order to support our ageing population. Families are also an integral part of the economy creating both the consumers of today and the workers of tomorrow.

Research from Vodafone’s Working Nation series has shown that 69% of employers believe that companies will fail if they don’t employ diverse workforces. Just as people with different backgrounds, ages, genders and experiences will have alternative skills to offer a company, working parents will have developed a range of skills which they will be able to apply to their work and provide an alternative perspective.

Re-invest the cost savings in benefits for all
Childcare vouchers are exempt from NI contributions for employers too. This means that an employer can expect to save around £370 per year for every employee who takes £55 per week in childcare vouchers.

A great way to alleviate resentment towards working parents is to re-invest the cost savings made through the childcare voucher scheme back into benefits for all employees. For example, this could be an initiative that appeals to a wider range of employees such as a social club or gym, an employee assistance programme or a dental plan.

A family-friendly approach should be a priority for any business but only as long as it doesn’t disadvantage those without children. The government’s agenda on flexible working has been clearly directed at working parents, but the best employers are those that recognise that every employee has responsibilities and interests outside of work, not just those with children.

Ultimately, childcare vouchers are an integral part of a company’s benefit strategy, but of course they will only have an immediate benefit for those employees with children. However, by supporting working parents, a company will also be tackling issues such as recruitment, retention and absenteeism which will have an impact on the company as a whole and all its employees.

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Annie Hayes


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