Employee benefits: child’s play?

Gordon Brown announced at the 2009 Labour Party conference that he proposed
to scrap tax benefits on childcare vouchers for anyone claiming them after April

But parents have been given a stay of execution after a public backlash and,
allegedly 92,000 signatories on a petition against it on the Downing Street
website. The vouchers will now stay, but tax relief on them will change.

A basic rate tax payer saves £944 a year on their childcare bill, while a
higher rate tax payer saves £1,173. From April 2011 that will change and the tax
relief for all working parents, regardless of their tax band, will be 21%.

George Farrow, client services director of employee benefits company
Asperity, says that most of the people taking this benefit are on the basic
rate. It’s a massively undervalued benefit though, with take up surprisingly
slight as just 190,000 of 24.7m parents in the UK are using the vouchers,
according to Farrow. There are also tax advantages for employers offering them
to staff as they achieve Secondary National Insurance savings of 12.8%.

Shared leave

The government has also announced its intention to allow new fathers to take
advantage of additional paternity leave and pay during the second six months of
the child’s life, if the mother wants to return to work with maternity leave
outstanding. This enables parents to share a period of paid leave between them
and it will be applicable to parents of children due on or after 3 April 2011.

Although the change in maternity and paternity arrangements will allow
parents greater choice and flexibility, it could prove problematic for
employers, according to Ros Kindersley, a corporate search expert at Judy
Farquharson Search and Selection.

“Parents should be permitted to ask to swap maternity leave, but the company
should not have to accommodate them,” she says. “It could be arduous and could
encourage companies to discriminate against women of child-bearing age or
against a man who might want to stay at home if his partner earned more than he
did. It could be a complete dog’s dinner because it is so difficult to
administrate,” says Kindersley.

“Who is going to benefit? When you employ someone, you employ them as a
person, not as a family. It puts too much of the onus of responsibility on

Given the pending general election, it is interesting to note the direction
of policy in this area from other parties. Kindersley’s views are echoed by the
Conservative Party, where officials say it supports flexible working for
parents, but gingerly approaches the issue of companies managing the
consequences. It says that as companies will not always be able to allow
flexible working suited to each parent, it would be “inappropriate to compel
employers so it will limit the policy to the ‘right to request’ rather than
allowing a ‘right to demand’”.

The Liberal Democrats would allow parents to share leave between them in
whatever way suits them, but has said that it would extend the policy of
flexible working to all staff – not just parents – in acknowledgement that there
may be other members of families or even friends supporting a working family and
its childcare needs. It also proposes to introduce 19 months of paid parental
leave from when a child is born and wants to offer all parents free childcare
for children aged 18 months to five years.

Under pressure to compete for the best staff in recent years, many companies
have gone beyond legal requirements where supporting the needs of working
parents are concerned. Travel management company HRG and PricewaterhouseCoopers
both give an enhanced salary as encouragement to mothers who return early from
maternity leave. HRG also has 200 home workers out of a total workforce of
1,700, which helps working parents where childcare is expensive – childcare
vouchers or not.

Meeting the requirements of working parents will be a thorny issue for any
government but if there is to be any hope of supporting the recovery of the UK
economy, it will be a case of all hands on deck. But it will be interesting to
see whether any of the three main contenders can fulfil their intentions.

The cost of childcare

* The average childcare cost for 25 hours per week is £88 in England – more
than half gross average part-time earnings of £153 per week.

* The average yearly expenditure on childcare is £4,576 for English parents,
£4,368 for Scottish parents and £4,056 for Welsh parents for 25 hours of nursery
care per week for a child under two.

* Parents in London pay the most in the UK, up to £11,050 each year for 25
hours childcare per week or £22,100 for 50 hours.

* Childcare cost rose above inflation for all types of childcare despite the
UK being in recession – the cost of a nursery place for children aged two and
over rose by 5.1% in England, almost double inflation.

Source: Daycare Trust, 2009

This article first appeared in sister publication Financial

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