Gaining a return on inventment on childcare perks

Costing the return on childcare provisions is complex, but employers have an added impetus if staff take bogus absences to look after kids, says Nick Golding

Case study: Getty Images

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Childcare benefits frequently top the lists of employers’ most commonly-offered perks. According to the Employee Benefits/Towers Perrin Flexible benefits research 2007, childcare vouchers are offered by the majority (84%) of employers with a flex plan in the UK.

Yet, while so many organisations invest time and money in schemes such as childcare vouchers and workplace nurseries, it can be difficult to calculate the exact return they can expect to receive on their investment.

The popularity of these benefits, however, indicates that financial advantages are measurable either in the form of savings or increased productivity.

For starters, employers and their staff can make tax and national insurance savings on childcare vouchers up to the value of £55 per week where employees opt to take them up. Similarly, if an employer runs a nursery and provides staff with a free or subsidised space, there is a full tax and national insurance exemption on the benefit.

Childcare provision also makes it easier for parents to return to work following the birth of a child, thus helping employers to save on the cost of recruiting a replacement John Woodward, managing director of Busy Bees Group, says: “The more people that you can keep in a job the better, especially when you look at the overall costs of recruitment and training.”

For example, PricewaterhouseCoopers (PwC) experienced an increase in the proportion of employees returning to work following maternity leave once it introduced childcare services, from 40% in 2000 to 86% in 2006. Its package includes childcare vouchers, emergency back-up childcare and flexible working arrangements.

Lynne Keeble, product manager – childcare vouchers at Accor Services, explains: “The financial assistance that childcare vouchers offer actually encourages people to go back to work.”

Getty Images finds that its childcare voucher scheme has helped it save time and money on recruitment.

Melissa Shields, compensation and benefits programme manager at the imagery firm, cites this as its primary measure of the return on investment on the perk. “The number of employees returning to work is definitely [key]. We invest so much time and money on training, we will do anything to encourage them to return,” she says.

Providing staff with access to on-site workplace nurseries or subsidised places at childcare facilities nearby can also help to ease staff back into working life by offering them the peace of mind that their child is being looked after by a registered, reliable service. Some parents, however, may prefer to rely on family and friends taking on the childcare burden.

These informal types of arrangements have a tendency to be cheaper but can let parents down at the last minute, giving a mother or father little option but to call in sick.

High absence levels within any organisation can be crippling. According to the annual CBI/AXA absence and labour turnover survey 2006, absence now costs companies £531 per employee per year, which, in some cases, could be reduced if parents have reliable childcare arrangements in place and do not have to take unauthorised sick days.

The Employee Advisory Resource’s Employee wellbeing survey 2006 revealed that parents in employment have childcare problems, on average, nine times a year, with 89% having to take time off as a result. “If employees don’t have formal arrangements with childcare they tend to be let down every now and then, and take a sick day to look after their child,” explains Keeble.

Providing access to emergency childcare arrangements or an employee assistance programme (EAP) that helps staff to source alternative care at short notice, can therefore make an impact on bogus absence levels and thus boosting productivity.

Research conducted by HM Revenue and Customs (HMRC), called Monitoring of the reform of the income tax and national insurance rules for employer-supported childcare 2006, showed that 30% of employers using childcare schemes identified these as having a positive effect on absence levels.

It also revealed that 47% of employers felt that productivity among staff improved following the introduction of a childcare scheme. One of the knock-on effects of providing employees with peace of mind about their child’s wellbeing while at work is that they will naturally be more productive as they can focus on the job at hand. Many employers also view this as a return on their childcare investment.

Jon Haynes, childcare manager at PES Consulting, says: “You feel better at work [and] you want to come back because your employer is helping you, so employers could make the assumption that productivity rates will increase at this point as well.”

Other positive side-effects include satisfied workers and, more importantly, a loyal workforce, which for many employers is more than enough to justify an investment in childcare services. “Of course loyalty [will increase] as well. If you know that your employer is doing something for you, you will feel committed to the company,” says Keeble.

Although it is difficult to put a value on loyalty, Getty Images’ Shields believes the levels that exist within the company are, in part, generated by its childcare arrangements. “From the childcare help that we offer staff we get loyalty and increased morale as they see that the firm is looking out for them.

“We don’t have statistics on this but just going by observation we can see the determination among employees to balance work and home,” she adds.

Childcare perks can also help to retain employees who have young families over the long term and not just when they return from parental leave.

By ensuring staff can make a smooth transition between home and work, and helping employees to maintain a work-life balance through reliable childcare that suits the individual, staff will be less likely to leave, particularly for employers that don’t offer such perks.

“Retention is definitely a factor for employers offering childcare schemes, and by appearing to be a caring employer you will not only attract but also retain staff,” says Haynes.

Calculating a return on childcare is not always simple and, in many instances, employers may feel that they are splashing out on benefits without gaining any visible advantages. But, when it comes to childcare perks, it is vital that they look at what they could be spending, should these benefits be removed.

Case study: Getty Images

Imagery firm Getty Images incorporates childcare vouchers into its work-life balance offering. Around 30% of its 460-strong workforce have currently taken up the scheme.

Melissa Shields, compensation and benefits programme manager, explains the advantages gained by staff being able to work in the knowledge that their children are being professionally cared for is enough to justify the initial spend.

“It is the whole package that helps, and it is about being relaxed and knowing that everything is being taken care of,” she explains.

Although employees may have family and friends that can care for their children during the working day, Shields believes having a registered child minder simply negates any concerns.

“These are registered childcare minders. It is not to say that neighbours and friends can’t provide care, it is just about ease of mind,” she adds.

How to measure the return on investment on childcare perks

Tax and NI savings

Employers and staff can make tax and national insurance savings on childcare vouchers and some nursery care.

Productivity tax

Providing childcare benefits can help staff to feel more relaxed because they know that their child is being properly cared for while they are at work. This can often result in increased productivity levels.

Return to work levels

Childcare benefits can also make it easier for employees to return to work following parental leave. Reducing staff turnover among new parents can save employers vast sums on the recruitment and training of new employees.


Staff who are offered access to childcare perks are also more likely to stay with an organisation once they establish their new work-life balance. This can also impact on recruitment and training.

Reduced absence levels

Without childcare assistance from their employer, parents may be forced to use informal arrangements such as relying on friends or neighbours to look after their children. However, while these may be cheaper options, they can often be more unreliable than registered services, prompting them to take unnecessary sick days to look after their children.