Susan's Legal Bits
In August 2008 Susan was interested in.....
Childcare Vouchers
Hello everyone!
Well, this month I have been thinking about childcare vouchers. In fact I have been doing more than just think and have been researching the possibility of offering this employee benefit through the umbrella scheme that we provide to our clients.
Childcare vouchers are often provided by one's employer. This can be done through salary sacrifice therefore reducing the amount of Tax and NI that employees have to pay on their total reward package. For example, if you have a weekly gross of £500 but chose to salary sacrifice £55 per week only £445 would be liable for Tax and NI and the £55 would be sent to a childcare voucher provider (who would in turn apply £55 to an electronic account for you to use when paying your registered childcarer).
We have recently introduced a pension scheme which works similar to this and there is no doubt that childcare vouchers are a tax-efficient benefit for employees (although it could affect some employees' entitlement to tax credits). However, we have a difficult situation when we try to apply the salary sacrifice principle to employees of umbrella companies. Firstly you are not guaranteed an annual salary but are guaranteed a minimum number of hours work in the year and may find that in some weeks or months you do not have an assignment - therefore there is no way of making a promise at the beginning of the year about how much you wish to sacrifice per week or month - there may be times when you aren't able to fulfil that commitment.
Secondly, there are certain amendments to employment legislation which affect female employees whose expected week of childbirth is on or after 5 October 2008 which state that such females choosing to take additional maternity leave (which is unpaid) still have the right to expect contractual non-cash benefits to be continued by their employer. In our case for umbrellas - if a female has previously made a salary sacrifice arrangement and then takes maternity leave - the employing umbrella company will be legally obliged to continue making those payments to her childcare voucher provider even though she is not earning any money.
As I'm sure you all know, there is no profit in an umbrella company - all of it is paid out to those of you who are employees of it in relation to pay and expenses each week or month.
As such it was a sad day for me when I passed my initial advisory summary to our Managing Director here. Upon the research I have done so far I don't believe we can offer this benefit to you all because of the high risk of the umbrella companies failing to comply with legislation that takes effect from October this year.
I will of course keep looking for a solution to the block I have forseen and will keep you posted.
To give Susan your suggestions and comments you can get in touch here.
All comments provided on my blog are for informational purposes only. My thoughts and opinions are my own with agreement from my employer as being suitable for sharing with the wider world. Any advice, or writing that might be taken as advice, should not be deemed in any way as professional Legal advice and are only the musings of a HR practioner whose sole aim is to help where she can.
