The FINANCIAL — Mercer supports the objectives of the Government’s proposal to broaden the numbers of parents covered by tax-free child benefits but has expressed concern that it is not yet explicit what the role and benefits for businesses will be in the new scheme, according to Mercer.
Under the current Employer Supported Childcare (ESC) scheme, many businesses offer childcare vouchers to their employees, allowing working parents to tailor their pay and benefits package to suit their needs. This is cost-effective for the business and for employees, who save tax and National Insurance, which, according to Mercer, can lead to better recruitment and retention and greater employee engagement. The consultancy believes therefore that the Government should ensure that businesses feel that they have a stake in, and benefit from, the new system.
In the 2013 Budget on March 25, the Chancellor announced changes to tax-free childcare benefits with the intention of replacing the current system with online voucher accounts that top-up payments from parents with contributions from the Government. The new scheme will be more accessible to parents. Under the current Employer Supported Childcare (ESC) scheme, employers were tasked with facilitating the scheme and in return were granted National Insurance savings. This has the advantage of providing proof of parent’s employment status, the method of which, under new scheme, still remains unclear. In consequence, however, the new approach is intended to increase the number of households receiving childcare support from around 500,000 to an estimated 2.5 million parents, according to Mercer.
“Broadly, we support moves that help companies maintain a diverse workforce and ensure productivity by helping parents and skilled workers return to employment,” said Charlotte Godley, Mercer Health and Benefits Principal. “However, there are winners and losers from this new announcement and we’d welcome further clarity on the role of business. What is important is that employers provide their employees with the information necessary to find out if they are eligible under the new scheme and make informed decisions regarding the benefit,” Godley added.
The self-employed will be a major beneficiary from the new plans since they are currently not able to participate in the current voucher scheme. However, in contrast, families where one parent stays at home will not now be eligible for the childcare benefits. The suggestion being that they can provide their own childcare. Furthermore, under the new system vouchers will be allocated per child rather than per adult as they currently are. This may benefit single parent households but will leave families with only one child worse off, according to Mercer. The new scheme will be available for parents of young children up to the age of 5 (in 2020 this will be extended to children up to age 12), versus the current arrangement where the benefit is available for children up to age 15.
“Tax and NIC’s relief, available on workplace nurseries, will remain available to all employees, where offered and will not be closed to new entrants," said Ms Godley, “Moreover, the government has suggested that it will work with employers who still want a role in supporting employees, but it is not clear how this will work in practice, especially since it has said that the childcare voucher scheme will be phased out,” she added.
Mercer believes that clarity on the issue is required to ensure that businesses are aware of the new regime’s benefits. Whilst the impacts of the scheme are unknown it may give cause for companies to re assess their benefits and pay package to make sure parents struggling with childcare costs find it is a viable option to remain in their employment.
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