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Employers are expected to take a more proactive role in the provision of childcare benefits to employees under a new scheme announced by the Government. Currently less than 5% of employers offer assistance through the Childcare Voucher scheme and the Government wants to achieve a five-fold increase in the number of parents in receipt of employment-based childcare support.
The new tax-free scheme will be phased in from Autumn 2015 and will eventually be open to 2.5 million families.The Government will shortly consult on how the benefit will be implemented but would like to see employers' continued involvement in their workers' childcare arrangements.
To be eligible under the scheme, both parents will have to be working and neither can earn more than £150,000 a year or be in receipt of Universal Credit. The benefit will be 20% of the annual childcare costs, capped at £1,200 per child. It is expected that families will open an online voucher account with an independent provider. For every 80p they pay in, the government will add 20p. For the first year of operation the scheme will only be open to families with children under 5 but will eventually include children under 12.
The existing Childcare Voucher scheme will continue to be open to new joiners until the tax-free system is operational. Recipients will then have the choice to move to the new tax-free system or continue receiving Childcare Vouchers. It is possible that employers will have to operate both schemes until the Childcare Voucher scheme is completely phased out.
The Government will, hopefully, take the opportunity to introduce a simpler system for administering the new regime. The current Childcare Voucher system is complex and imposes fairly onerous obligations on the employer which is partly why so few offer Childcare Vouchers. The Government intends the new scheme to be open to all who are eligible, removing the current right employers have not to have a Childcare Voucher scheme.
Pam Loch, Managing Partner of niche employment law practice, Loch Associates Employment Lawyers and Managing Director of HR Advise Me Limited.
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