Communicating the Tax changes on Childcare Vouchers – April 2011

Communication is a crucial part of any employee benefit and when changes such as this occur it becomes more important than ever.  Clear, far reaching communication will ensure that employees are fully aware of what is happening and cut down on queries.  This will minimise any disruption or administration that results from the changes:

Pre 6^th April

 There has never been a better time to communicate the benefits of childcare vouchers! All working parents who have enrolled on the scheme before 6^th April will continue to be entitled to £243 a month indefinitely as long as they remain within your employment and don’t stop receiving vouchers for more than 12 months.  As long as they have a qualifying child, they are able to enrol, even if their childcare costs don’t start until later on in the year.  It is important that this is communicated to ensure that no one misses out because they were not aware that they could benefit.  It should be made clear that anyone with a child under 15 could take advantage of these savings if they are using formal childcare.  Edenred have created a range of tools to help employers to communicate the changes.  Larger companies may also find it useful to arrange presentations and drop in sessions with an Edenred representative to answer questions from staff or arrange telephone consultations for employees who have queries. 

More detailed information and case studies of successful communication of a Childcare Voucher scheme can be found in the white paper ‘Childcare Vouchers – Increasing scheme engagement’.

Not just higher rate taxpayers…

Some employees may think that because they are a basic rate taxpayer they are unaffected by the changes and therefore there is no point in enrolling before the 6^th April, however this is not necessarily the case.  It should be considered that if an employee enrols before the 6^th April, they remain entitled to £243 a month tax and NI exempt indefinitely.  So, if an employee enrols now and becomes a higher rate taxpayer in a few years time, they will still be able to receive £243 a month tax and NI exempt.  However if they leave it until after this date to enrol, whilst they will be able to get the full tax and NI exemption this year, if they become a higher rate taxpayer at a later date, they will be subject to the new restrictions.  Therefore it is important to communicate this information to all employees with children.

Existing beneficiaries

It is likely that employees currently receiving childcare vouchers will be aware of the changes but may not know all of the details, which could cause confusion and uncertainty as they fear their savings could be reduced.   With this in mind it is certainly worth sending a communication to existing beneficiaries, however any communication needs to primarily make clear that they will remain unaffected and just give an overview of the changes.   We have put together some suitable text that can be sent round to existing scheme members.  After the 6^th April, employees need to be aware that they can stop receiving vouchers for up to 12 months and still be considered continuously in the scheme; but if they stop receiving 

vouchers for longer than 12 months, they will be subject to the new restrictions when they rejoin.  Relating this information could become part of the procedure when an employee applies to leave the scheme.

After 6^th April

Communication remains important beyond the 6^th April.  Parents who enquire into the scheme after this should be made aware of the restrictions and be provided with the necessary tools to make informed decisions based on their own financial situation.  The basic earnings assessment needs to be completed by their employer, and therefore the employee will not know exactly what they are entitled to. However employees could be provided with the use of an estimator, such as the Edenred savings calculator which will provide an initial estimate of how much they can receive tax and NI exempt and the subsequent savings based on all the information provided.  This will ensure that they have a good idea of what to expect when they receive their payslip and therefore reduce queries.

Successful communication can help to ensure the new legislation is introduced seamlessly and greatly reduce the level of admin involved from an employer’s perspective.  Communication in the run up to the 6^th April will also help to maximise savings for employers and employees.

If you have any questions related to the legislation changes to Childcare schemes it would be good to hear from you, just leave a comment below and I will get back to you.