How Can Employers Help With Childcare?

Work/life balance has been a topic that has gained a lot of steam since the 2020 quarantine, with many companies being forced to apply flexibility to working arrangements to ensure they remain afloat. One area of renewed interest has been childcare support, especially in areas where there’s a single childcare provider in the home.

But how can employers aid in childcare? In this article, Real Business will outline the avenue which employers can take to aid with childcare costs efficiently, the tax benefits that are given out to employers that do, and best practices for ensuring quality childcare is given to those who need it.

Should Employers Aid In Childcare?

Employers are technically not bound by law to provide help with childcare, but as many modern businesses have come to realise, treating your employees as if they are internal customers has fantastic outcomes for your company.

Various studies have found the following true of businesses that have some sort of childcare scheme in place:

• Increased female applicants – A field experiment in the U.S. by the Harvard Scholar found that offering extended on-site childcare (such as a workplace nursery) led to an 18.4% rise in applications from women of childbearing age for managerial positions.
• Increased productivity – Reduced absenteeism was an immediate result of having reliable childcare services at hand, and productivity increased as a result.
• Financial incentives – Childcare scheme-offering employers pay tax to a lesser degree, as many tax and national insurance exemptions are made available to encourage the practice.

 

What Are The Childcare Support Options That Employers Can Make Use Of?

If you are interested in letting existing and prospective employees know that your business institutes employer-supported childcare, then the following are the best avenues you can go down:

• Directly contracted childcare – In this employer-supported childcare scheme, the employer directly partners with childcare providers and pays either all or part of the costs. The employer has to do some digging on their own to find viable providers, however, and is also responsible for negotiations.
  • Notes – Employers often negotiate discounted rates by contracting group bookings or long-term agreements with these facilities, helping with the costs. Employees prefer to work with a childcare provider that is held to the high standards that a partnership entails, as it reinforces the security of their child. It streamlines care by giving reliable, consistent access with predictable expenses whilst offering tax benefits for the company in question.
• Tax-free childcare – Available to working parents, including those who are self-employed, with children under 12 years old. The involved nature of this process often leaves it unclaimed by parents, so employers should make sure to spread the word in the workplace about this benefit. Parents must set up a HMRC account through the Tax-free childcare service. This scheme mandates the government add £2 for every £8 you apply to the account, which is then used to pay registered childcare providers directly.
  • Notes – The best way to encourage the use of this system is not only to notify your employees, but also to announce that you’ll be looking for local childcare providers to partner with, widening the pool of available options, and potentially lowering the overall price of the service on top of the tax-free childcare scheme.
• Childcare voucher scheme – Unfortunately, this scheme is currently closed for new applicants, but it’s worth keeping an eye on in case it reopens, as has been promised. It allows employees to exchange part of their salary via salary sacrifice to claim childcare vouchers, which can be used to pay registered childcare providers.
  • Notes – For employees who are already registered, the employer can still help. Not only are the employee’s childcare vouchers exempt from income tax and national insurance contributions, but the employer can still save on national insurance contributions based on the amount employees sacrificed on vouchers.
• Workplace nursery provision – This is a long-term investment offered by some employers. It provides on-site workplace nurseries managed and funded by the employer, making this childcare option both convenient and reliable. There is a lot to say about this provision, so we will dedicate the bulk of the information in the next section.

 

What Is A Workplace Nursery, And Should I Install One?

A workplace nursery is an on-site facility funded by the employer, allowing employees to deposit their children in safe care whilst they work. Whether or not you need it depends on the demand for childcare amongst your workforce and space availability.

They are subject to various laws and regulations, however:

• Ofsted – Ofsted requires registration of all workplace nurseries if they provide care for children under 8 years old for more than two hours a day. Furthermore, they will be inspected regularly to ensure compliance with the Early Years Foundation Stage framework, which ensures the protection and function of young dependents.
• Health and safety – Employers must ensure that the environment is safe and secure according to the parameters laid out in the Health and Safety Act of 1974. Furthermore, all food provided to the children must adhere to the food hygiene standards laid out in the Food Safety Act of 1990 and the Food Hygiene (England) Regulations of 2006.
• Staffing requirements – Ratios must meet the statutory requirements laid out under EYFS. This means 1:3 for children under two years, 1:4 for children aged 2-3 years, and 1:8 for children aged 3 and above (or 1:13 if a qualified teacher is present).
• Parental agreements – Employers must create a binding contract with parents that outlines terms for nursery use, applicable fees and policies on sickness, holidays and behaviour management.
• Children safeguarding – The Children Act of 1989 and 2004 outline policies to safeguard children and report concerns to local authorities. All staff must undergo Disclosure and Barring Service (DBS) checks to ensure allocated staff are suited to work with children.

 

How Much Does It Cost To Set Up A Workplace Nursery?

The costs of establishing a workplace nursery are affected mainly by the space currently available to you. The following is a breakdown:

• Premises – Adapting the current office space to meet the regulatory standards applied to childcare can range from £10,000 to £30,000. This price includes structural modifications to make way for partitions, child-friendly flooring and safe access points, plumbing and electrical work, and decorations. If you need a new build, you’re looking at a lot more – between £150,000 and £300,000.
• Operational costs – The staff-to-child ratio laid out earlier could potentially see you hiring one member per three children. Annual salaries for these qualified nursery staff range from £20,000 to £25,000. Utilities and maintenance will likely range between £5,000 to £10,000 per year.
• Ongoing expenses – Insurance coverage for public liability and employers liability insurance will cost between £500 and £1,500 annually. Also, Ofsted requires between £1,000 to £3,000 annually for inspections.

 

How To Assess Childcare Needs In Your Business

Whether you should apply employer-supported childcare in your business, and which type, depends entirely on the needs of your business. The following will be a rundown on how to assess childcare needs:

• Anonymous surveys – Digital tools such as Google Forms or Microsoft Forms being distributed to your employees can ensure privacy, which is key to getting those honest responses you need. Include questions such as “Do you need childcare? If so, for how many children, and how old?”. Also determine whether they’d prefer childcare close to home, or close to work.
• Workforce needs – The number of employees requiring childcare must be tallied, and find patterns in the demands. For example, flexible hours are preferred over particular childcare locations.
• Analyse data – Align your childcare solutions with both your workplace capacity and needs.
  • Workplace nursery – If employees want childcare to be local to the business, cutting out the middleman and installing a workplace nursery may be highly efficient.
  • Directly contracted childcare – If near home is more prevalent in the answers, find a local childcare provider that is accessible to all workers.

 

Do Employers Have To Work Around The Childcare Plans Of Employees?

Technically, no. Employers do not have to support childcare plans by adapting to the needs of the employee.

That being said, there are some rights that an employee can leverage.

Flexible Working Request

If your employee has worked for you for at least 26 weeks, they can request changes to work hours, times or location to accommodate childcare. From the point of request, the employer has three months to give a response. As an employer, you have a right to refuse if you have a valid business reason, such as being unable to meet customer demands in the event of the change.

In the case of a refusal, the matter is almost always considered settled. That being said, we recommend trying to meet them at least halfway where possible.

Indirect Discrimination Claims

In the case of a refused flexible working request, you should understand that the employee may have a claim of indirect discrimination under the Equality Act of 2010 if the refusal to meet childcare needs disproportionally affects one gender over the other. Of course, this is typically women in this category.

Parental Leave And Time Off For Dependents

Parental leave is a statutory right of parents or guardians to take unpaid time off to care for their children. If your employee has worked for you for at least a year, then they are entitled to take up to 18 weeks of unpaid leave per child over their lifetime, although it’s typically limited to 4 weeks per year per child. The employees must provide 21 days’ notice before taking the leave, and it can be for any reason they so choose, including simply spending more time with the child. That being said, employers have the right to postpone leave for up to 6 months if it would disrupt business.

Time Off For Dependents

Time off for dependents is a right that employees can leverage to deal with unforeseen emergencies involving their dependents. It is much more flexible for parental leave, but it’s also unpaid. All employees, regardless of service length, can take this with no consequence, and it covers emergencies for all dependents, both child and adult.

Examples include children being sick or injured or regular childcare arrangements being suddenly broken down, such as a childcare provider being shut. The time off given must be “reasonable”, usually 1 to 2 days for child illness but each case should be individually assessed.

Are There Any Other Resources To Take Advantage Of?

Yes, there are some additional resources that you can direct employees to, although employers are not directly involved:

• 15 hours of free childcare – Parents or guardians of 3 and 4-year-olds in England are entitled to a total of 15 hours of free childcare per week during term time, which totals 38 weeks per year (570 hours annually). Parents and guardians of 2-year-olds qualify if the family meets specific criteria, such as receiving means-tested benefits, or if the child has a disability.
• 30 hours of free childcare – Working parents of 3 and 4-year-olds are entitled to 30 hours of free childcare per week if they earn at least £152/week, and less than £100,000 per year. Families can stretch these hours across a whole year for efficiency but this doesn’t come into affect until September 2025.
• Universal credit – Families on universal credit can claim up to 85% of childcare costs.

 

Conclusion

We would always recommend helping your employees get high-quality and consistent childcare arrangements and making it easy for them to access resources that would assist in the matter. Employer-supported childcare has been proven to have many benefits in the workplace, including employee retention. We hope this article helped outline the options available.

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