Childcare Vouchers (or Salary Sacrifice)
Some employers give vouchers on top of your normal salary, but most will ask you to do what's called a 'salary sacrifice' for the vouchers.
Employees “sacrifice” or give up some of their salary in exchange for the same value in vouchers. Yet the tax and national insurance relief means for every £100 a basic rate taxpayer loses from their pay packet, they get £140 worth of vouchers back (and higher rate taxpayers get even more).
Childcare vouchers are generally accepted by nursery, playgroup, nanny or childminders registered and regulated by Ofsted. Ask the Children’s Information Service on 0800 9172917 or your childcare provider if they accept vouchers.
Are there any disadvantages?
It is recommended that before entering into an agreement, employees must check how it affects pension contributions and any other benefits received such as statutory maternity pay, tax credits, etc.
Your employer, childcare voucher provider (of which there are many) or HM Revenue & Customs will be able to provide more information.
There's more guidance at HM Revenue and Customs: http://www.hmrc.gov.uk/manuals/eimanual/eim42774.htm
Where do you get the vouchers from?
Parents or those with parental responsibly for a child living with them are eligible for the vouchers but only if their employer runs a scheme.
So:
Ask your employer if it runs a childcare voucher scheme.
If your employer doesn’t offer vouchers speak to them about the benefits – your colleagues may also benefit which may save your bosses money in staff retention.
Your employer could offer voucher schemes in two ways, either by operating themselves or by using one of the many voucher companies. These companies will do all the administration of the scheme for them, fees should be less than the firm gains in national insurance, so they'll still profit.
Most voucher companies have a website or you can find them in phone directories, they will be keen to explain to any business how their scheme works.