If I use vouchers, am I restricted in the type of childcare I choose?
What counts as registered and approved childcare?
How much better off will I be if I join the scheme?
What about the minimum wage?
If I use vouchers, am I restricted in the type of childcare I choose?
You do not have to change your childcare provider to take part in the Childcare Voucher Scheme. For your childcare provider to receive vouchers, they must be registered with OFSTED or the equivalent authority for Scotland, Wales or Northern Ireland or have approved status through NESTA.
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Registered childminders, nurseries and play schemes.
Out-of-hours clubs on school premises run by a school or local authority. Childcare schemes run by school governing bodies under the ‘extended schools scheme'.
Childcare schemes run by approved providers, for example an out of school hours scheme or a provider approved under a Ministry of Defence accreditation scheme.
- In England only, childcare given in the child's own home by a person* approved to care for your child or children.
- In England only, childcare given in the child's own home by a domiciliary worker or nurse from a registered agency that cares for the child or children.
- In Scotland only, childcare given in the child's own home by (or introduced through) childcare agencies, including sitter services and nanny agencies, which must be registered.
- Approved foster carers (the care must be for a child who is not the foster carer's foster child).
* Childcare provided in the child's own home will not qualify if the person approved to give that childcare is a relative of the child. Relative means a parent, grandparent, aunt or uncle, brother or sister (whether by blood, half blood, marriage or affinity), and includes step parents.
Please note that it is the employee's responsibility to inform Linking Up and their employer of any changes to their Childcare Provider including changes to registration or approval status.
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The amount of Income tax and National Insurance contributions you will save when you join the scheme depends upon your current salary.
From 6 April 2006 each parent or legal guardian can receive Childcare Vouchers, which are non-taxable and exempt from National Insurance up to £55 per week (£243 per calendar month).
The savings outlined below are available from 6 April 2006.
How much can you save?
Example one:
If you earn at the TAX bracket of 22% plus the NIC of 11% on salary sacrifice of £243 per month which is exempt from NIC and TAX you will save £80.19 per month / £926 per year.
Example two:
If you earn £35,000 per annum and are on a split TAX bracket of 22% and 40% the savings will be £99.63 per month / £1,196 per year.
Contact Linking Up on free phone 0800 019 4590 for a guide to your savings.
If you currently receive tax credits it is important to assess whether the amount you save on the scheme does not affect your tax credits to the extent to being better off by not joining the scheme. (This is discussed in question 18).
PLEASE NOTE:
A number of state benefits are dependent on maintaining a minimum level of NI contribution (e.g. Statutory Sick Pay and Job Seekers Allowance). The Childcare Voucher "salary sacrifice" arrangements may not be appropriate if the amount of "pay" that you would receive under the "salary sacrifice" arrangement means that your "pay" or income which is paid to you as cash, either directly in your wage packet or into your bank account, would be less than £4,895 per annum (£409 per month) (06/07 tax year).
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What about the minimum wage?
The current minimum hourly wage was increased to £5.52 per hour for staff aged over 22 years. When you take part in a salary sacrifice scheme your employer reduces the amount of cash salary you receive to enable you to receive childcare vouchers. As the minimum wage is calculated on this amount, it is necessary to ensure that the total value of Childcare Vouchers you receive under the salary sacrifice arrangement does not reduce your hourly rate below £5.52 per hour. If this may be an issue please contact Linking Up using the free phone no. 0800 019 4590 or your payroll Department.
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Any employee who takes part in the childcare voucher scheme will be required to state a set amount that he/she wishes to receive in childcare vouchers. This would be up to a maximum of £55 per week in every pay period. For example if paid every calendar month, the maximum amount is £243 per month. The amount taken in childcare vouchers is agreed at the beginning of the scheme and will remain fixed until the end of the agreement (one year term).
If things change for you, such as when you become pregnant, substantially change your hours of work, your partner is made redundant, etc, you will be permitted to either change the amount of Childcare Vouchers you have agreed to receive or, withdraw from the Childcare Voucher Scheme. (In these circumstances please contact Linking Up with one month’s written notice where possible).
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On pay day your employer sends the voucher value (your salary sacrifice) to Linking Up. Four days after Linking Up have received payment the payment is transferred to your childcare provider electronically via BACS.
Whether the money transferred, pays for childcare already received, or acts as an advance payment, is agreed between employee and childcare provider.
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As Linking Up transfers the value of the salary sacrifice directly into the childcare provider’s bank account we need to register the childcare provider and receive their bank details. It is also a requirement for Linking Up to ensure all childcare providers are registered with OFSTED or with the equivalent authority for Scotland, Wales and Northern Ireland or have approved status.
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Nothing at all, the scheme is free to join!
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If I use childcare vouchers what changes do I have to make?
You are not required to change anything with regards to your current childcare arrangements as long as they are approved or registered. The scheme simply allows you to pay your childcare provider in a different way.
All childcare providers must have approved status or be registered with OFSTED or the equivalent authority for Scotland, Wales and Northern Ireland.
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For every week in the scheme you are allowed to have vouchers worth up to £55 per week, which equates to £243 per calendar month. You will be exempt from paying income tax and National Insurance Contributions on any amount up to this maximum.
Where both parents/legal guardians work and are registered with the scheme it is possible for both parents to salary sacrifice up to a maximum of £55 per week, allowing approximate savings of up to £1,196 and £2,392 to be realised.
If your partner’s employer is not currently running a scheme, call 0800 019 4590 and ask for more information.
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Yes, so long as the voucher value does not exceed the maximum allowed, (£55 per week or £243 per calendar month). The payment may be used for both children’s childcare. Where children attend more than one childcare provider setting the payment is divided and sent to the separate childcare providers as detailed when first registering with the scheme.
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No, in order to take advantage of the arrangements and receive childcare vouchers you must be the parent or legal guardian of the child that is to be provided with childcare. This does not include foster children.
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Most providers will accept vouchers, if however you have any difficulties please contact Linking Up on free phone 0800 019 4590.
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Please inform both Linking Up and your Human Resources department in writing a minimum of one month prior to the date you wish your Childcare Vouchers to stop.
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If you are pregnant and expect to have a period of maternity leave, dependent on how your employer calculates maternity pay it is likely you will benefit from withdrawing from the scheme a number of weeks prior to the expected date of leave. It is therefore necessary to contact Linking Up and your Human Resources Manager as soon as possible to help you establish the date by which you should exit the scheme.
If you are already receiving Statutory Maternity Pay (SMP) and are considering joining the childcare voucher scheme contact Linking Up who can help you to establish whether or not you would benefit in joining the scheme at this time.
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The rights to paternity leave and Statutory Paternity Pay (SPP) allow an eligible employee to take paid leave to care for his baby or to support the mother following the birth. If you expect to have a period of paternity leave or Statutory Paternity Pay (SPP) you should think very carefully as to whether you should take Childcare Vouchers during this period. Please contact Linking Up to help you establish the best course of action to take.
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In many cases there is no effect on your pension but if you have any questions about your pension arrangements please contact the Human Resources Department.
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Under the ‘childcare element’ of WTC it is possible to receive help with the cost of childcare. If you enter into a "salary sacrifice" scheme, the calculation of how much in tax credits you receive is based on your reduced cash salary or wage and any childcare vouchers received will not be used in the calculation of tax credits. So, if you receive childcare vouchers through this scheme any contributions in the form of the ‘childcare element’ of WTC will not be based on the full childcare costs. The ‘childcare element’ of the WTC contribution will be calculated on the childcare costs remaining after the childcare vouchers have been deducted.
For example if you enter into a childcare voucher scheme and receive childcare vouchers worth £55 per week and your childcare costs are £75 per week, your ‘childcare element’ of WTC would be calculated on the remaining £20 costs that you incur.
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In order to register with the scheme you must complete an RF2 form from your employer – this form should be available online Summer 2007. Agree and sign the terms and conditions and sign an employee contract amendment which enables your employer to provide you with childcare vouchers as part of your salary.
Contact Linking Up on free phone 0800 019 4590 to gain copies.
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The completed RF2 form along with a signed copy of the terms and conditions (RF3) should be returned to:
Linking Up
Children’s Links
FREEPOST NEA8551
Horncastle, LN9 6BR
Or faxed to Linking Up Ltd on 0870 460 4062
Or signed, scanned and emailed to enquiries@linkingup.org.uk
I would like to know more about the scheme. What do I do?
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