Childcare perks can encourage parents’ return to work

Employers can use childcare perks to encourage parents’ return to work by easing financial burdens, so boosting retention levels, says Alison Coleman

For any working parent, the task of balancing family life with work obligations can be an expensive and sometimes stressful business. For some employees, it may all become too much prompting them not to return to work following the birth of a child.

While there is little employers can do if an employee is determined to leave the workforce to become a stay-at-home parent, there are a number of perks they can utilise to make the process of returning to work easier for staff who wish to do so. These can include subsidising childcare, thus easing the financial burden in order to boost employee retention levels and promote the organisation as an employer of choice for prospective recruits.

Emma Knights, joint-chief executive of childcare charity The Daycare Trust, says: “According to our annual survey of childcare costs, the fees for one child at nursery are more than £150 per week, so any help that employers can give will be a relief to staff. With extensive tax-breaks available from the government, it is clear helping staff with childcare is a smart choice for employers.”

Employers can offset some of the costs of childcare provision through a reduction in national insurance contributions (NICs), that are available on some eligible perks. Yet, a cost-benefit analysis carried out by The Daycare Trust showed that while employers can save up to 12.8% – over £300 per year – per employee in NICs by helping them with eligible childcare costs, only 2.5% of employers in the UK currently do so.

Philip Hutchinson, a principal at Mercer Human Resource Consulting, says: “This suggests that people are either unaware that these benefits exist, or they don’t understand how they work. Either way, it comes down to [needing] better communication of benefits to staff by their employer.”

Another option open to employers is the workplace nursery, which can be expensive to set up and run, but given the right workforce demographics and location, can be a valuable staff retention tool with the potential to pay dividends in the long term.

Subsidised on-site childcare facilities can be cost effective for an organisation, as any subsidy, whether at the employer’s cost or recovered from employees through a salary sacrifice arrangement, is free from income tax and NI, and can be treated as normal expenditure for corporation tax calculations.

Marcus Barrow, corporate sales manager at Kids Unlimited, says: “We run nurseries that are fully occupied by employees’ children and others that offer places to local residents who are not employed by the organisation. Choosing the right location is key, but they remain a very popular option.”

For employees, knowing their child will be on site with them during the working day can also ease their return to work, particularly if they initially have reservations about placing their child into daycare. If staff are on the same site as their child, however, they can often visit them if necessary during the working day to put their mind at ease about their happiness and the care they are receiving. Some nurseries even email staff pictures of their children during the day so they can see what they are up to and put their mind at ease. This can pay dividends for employers in terms of helping staff to remain focused on their work, rather than worrying about their child, so enhancing productivity.

Some employers, however, may find that an on-site nursery is too big an undertaking to set up and operate in compliance with HM Revenue & Customs [HMRC] guidance, which can be both onerous and expensive. On-site nurseries may also not be the best option for some employees, for example, if they have a lengthy commute into work, which they do not wish to do with their child, or if they spend part of the week working from home and would need to source alternative local care on those days, which could be an upheaval for their child.

Workplace nursery partnerships, where a company reserves a fixed number of subsidised places at a local nursery, offer a compromise by avoiding the huge initial outlay from the employer, and allowing staff to benefit from more convenient nursery care for their children.

Childcare vouchers
But Barrow warns that partnership can be more complicated in terms of the available tax breaks. “In order for an employer to take advantage of the tax breaks, the [HMRC] ruling is that they have to make a significant investment in the care facility, which includes a management as well as a financial contribution, which is not always easy to demonstrate in an off-site nursery.”

The provision of childcare vouchers, meanwhile, continues to be an area of steady growth. Vouchers, which can be run by a commercial service provider, or as a bespoke scheme by employers, are typically offered through a salary sacrifice arrangement, which has tax and NI advantages for staff and NIC breaks of up to 12.8% for employers.

Their real value, to parents as well as employers, lies in their flexibility, says Lynne Keeble, product manager at childcare provider Accor Services. “Even companies that have on-site nursery facilities offer vouchers as well, because they don’t want to restrict parental choice,” she explains.

As well as being used to pay for care for nursery-aged and pre-school children, childcare vouchers are also accepted by out-of-hours school clubs, play schemes, and holiday care providers. This can be invaluable to working parents as their children grow and assist staff during the school holidays as well.

David Lebond, executive director of performance improvement business P&MM, says: “The biggest advantage for parents using these vouchers is that they are redeemable at any registered or approved childcare provider, so parents can choose the nursery, or day-care centre that is most convenient to them.

Keeble adds: “Childcare vouchers have a positive impact on staff retention, productivity and absenteeism. They have helped to drive up standards of childcare, as providers must be properly regulated, and they are a valuable and cost-effective benefit that can be offered by organisations of all sizes.”

Some providers now offer paperless voucher schemes. Care-4, for example, is a fully-managed automated childcare scheme, which is aimed at larger employers or those that want dedicated account management. Andy Lister, head of benefits services at Grass Roots, which operates Care-4, says: “We have a proportionately smaller number of actual clients among the main providers, but a significant market share in terms of participant employees, which allows us to focus on providing high standards of service. Because the system is fully automated there are no paper vouchers, which are [often] disliked by the carer community.”

Emergency problems with childcare, where a childminder or a child becomes ill, however, can create the most disruption and can be a major cause of absenteeism.

Providers such as Emergency Childcare organise immediate emergency care through nurseries, nationally-registered childminders and nannies, which can be subsidised by employers. Knowing such services are available can help staff when they return to the workplace by allaying fears that they will have to take unauthorised absences in such situations or have difficulties in sourcing alternative care arrangements.

Venetia Wickham, operations manager, says: “We are seeing more employers using it to enhance their existing benefits packages, for example, by including a number of free childcare days each year, or offering a discount [on] pre-booking of care by their staff.”

But such perks may not be the only factor that can help to retain staff after the birth of a child. “The introduction of flexible working patterns is likely to become more important in retaining key staff after maternity leave, and this is the area where companies will be investing more,” says Lister.

This can include offering paid maternity and paternity leave above statutory minimums, as well as more family-friendly options such as term-time hours, home-working, job-sharing or compressed hours.

Mercer’s Hutchinson agrees: “The advantage of a flexible approach is that it benefits all staff, not just parents. By offering flexible hours, employers could reduce the need for childcare and the costs that come with it.”†

BSource: Accor Services’ Benefits Research 2006

Childcare benefits employers currently offer employees

Case study: Childcare vouchers help PwC win back mums

The introduction of childcare vouchers at PricewaterhouseCoopers has had an impact on post-maternity leave retention rates, which soared from 40% in the mid-90s to 92% in 1998 when the scheme was launched, before falling to 89% in 2005.

Women returning to work after maternity leave are now offered 12 months’ worth of vouchers, equivalent to 20% of their base pay. Sarah Churchman, head of diversity, says: “We offer a broad range of options, including reserved places at local nurseries.

“We are also aware of the need for emotional support for those coming back to work, and have an active parents’ network where you can get in touch with others who have been through the same experience. There are also childcare advice sessions, which take place during the lunch break, to provide practical help and support and [help staff] feel valued.”†

PwC employs 16,000 people across the UK, and has a workforce which is 47% female.