About childcare vouchers
Questions answered on this page:
What are childcare vouchers?
What is Childcare Choice?
What types of childcare voucher scheme are there?
What is Salary Sacrifice?
What is a benefit in kind scheme?
How do the schemes differ operationally?
How do my employees sacrifice salary?
How do childcare vouchers save employees money?
How much can employees save by taking childcare vouchers?
In what circumstances can an employee leave the scheme?
How much does it cost and how much does it save?
Is there a minimum number of employees required?
What are childcare vouchers?
Childcare vouchers are a government-led initiative with the aim of encouraging employers to help employees with their childcare costs. By running a childcare voucher scheme, you save on Employer National Insurance Contributions and enable employees to save tax and National Insurance Contributions. Childcare voucher scheme provider Sodexho Pass helps employers to set up and run a scheme. Vouchers are ordered and used by employees to pay for their childcare arrangements.
What is Childcare Choice?
Childcare Choice is a childcare voucher scheme which is offered by Sodexho Pass to employers over the Internet. Sodexho Pass provides the means of setting up and running the scheme in a cost effective and efficient fashion with support for employers, parents and carers.
What types of childcare voucher scheme are there?
Childcare vouchers can be offered to employees in three ways:
- As a straight benefit (benefit in kind) where the employer provides the employees with childcare vouchers on top of their normal salary
- As a solo salary sacrifice scheme where employees nominate to take part of their salary as childcare vouchers
- As part of a benefits scheme where employees either nominate to take childcare vouchers in place of an alternative benefit or fixed benefit allowance or as part of a salary sacrifice.
This site is modelled on the salary sacrifice options. If you wish to run the scheme as a benefit in kind scheme please contact Sodexho Pass.
What is Salary Sacrifice?
Salary Sacrifice involves the employee agreeing to formally give up existing taxable salary, usually in return for financial gain. In the case of childcare vouchers, this is a tax and NI exemption up to a maximum of £55 worth of vouchers per week and requires paperwork to show a variation to an employee’s terms of employment.
What is a benefit in kind scheme?
A benefit in kind scheme involves the employer giving childcare vouchers to employees on top of salary. In this case, the vouchers are free from Employer NI contributions for up to £55 per week and employees save on tax and NI up to this amount. Any amount over this attracts tax and NICs.
How do the schemes differ operationally?
In a benefit in kind scheme, employers fund childcare vouchers for employees rather than employees sacrificing part of their salary for vouchers. All of the guidance contained on this site is the same for both Salary Sacrifice and benefit in kind schemes except for the Salary Sacrifice Agreement which does not apply for employees taking part in a benefit in kind scheme. Contact Sodexho Pass for the alternate formwork.
How do my employees sacrifice salary?
Employees must agree to a formal revision of their contract of employment. It must be indicated that henceforth the employee is legally entitled to a lower cash salary plus the Childcare Choice vouchers. The employee must sign a document agreeing to the new contractual terms proposed by you. Our standard Salary Sacrifice Agreement fulfils this obligation.
How do childcare vouchers save employees money?
By taking childcare vouchers employees save on tax and National Insurance Contributions on the amount of vouchers they take. The amount an employee saves depends on the rate of tax and NI they pay and the amount of vouchers they take, but savings can be up to £1,195 p.a.
How much can employees save by taking childcare vouchers?
The amount an employee saves depends on the rate of tax and NI they pay. The maximum an employee would save is £1,195 per year. Click here to access our calculator.
In what circumstances can an employee leave the scheme?
HMRC guidance states that an employee can leave the scheme in exceptional circumstances which equate to life-changing events including, but not limited to, birth, death, marriage, divorce, etc. There may be other circumstances which you may wish to consider on an individual basis. It is your decision whether an employee can leave the scheme.
How much does it cost and how much does it save?
The management fee charged by Sodexho Pass for the administration and processing of vouchers is a percentage fee based on the face value of the vouchers ordered. This management fee reflects the frequency of orders and the number of employees on the scheme. Even if you only have one person using Childcare Choice, you will still save money. The management fee is subject to VAT, but the voucher face value is not.
Is there a minimum number of employees required?
There is no minimum number of employees required to set up a childcare voucher scheme. One employee on the scheme creates savings for the organisation.