What are Childcare Vouchers?
Childcare Vouchers are not paper vouchers at all. They are an amount of money paid into an online 'pot' by the parent's employer. The parent can use the money to pay for childcare such as nurseries, after school clubs, childminders and 'approved' nannies.
'Approved' or 'registered' nannies
'Approved' means different things in different parts of the UK. In Scotland, nannies are registered via a nanny agency. This applies even if the nanny was not recruited through an agency; she still has to be associated with an agency in order to receive payment in vouchers. The agency will charge a fee for the service.
In England, nannies much be registered on the voluntary section of the Ofsted register. The Ofsted registration fee is just over £100, and the same again each year at annual renewal time. The registration process can take up to 12 weeks. The nanny will also need an enhanced DBS check (formerly CRB), first aid training and her own insurance, all of which adds up.
In Wales, the Childcare at Home Approval Scheme applies, with a similar charging structure. In Northern Ireland the scheme is called the Home Childcarer Approval Scheme, for which there is no charge.
Is it worth it for the nanny?
The nanny benefits from increased professionalism and employability, but she doesn’t benefit financially by accepting vouchers. She just gets paid part of her net pay from the childcare voucher account.
Can the employer pay the fee?
Many parents choose to pay for the registration and/or renewal themselves, together with some or all of the associated costs.
Is it worth it as an employer?
Generally, yes. In the vast majority of cases the tax savings for parents are substantial and do outweigh the registration costs.
New Childcare Voucher Scheme
The government is introducing a new Childcare Voucher scheme that parents will be able to access directly. This opens the tax relief up to all families where both parents work, not just those whose employers have chosen to provide the benefit. The new scheme launches in 2017, at which point the old schemes will close to new entrants, but continue for those already in. The new scheme has different rules about who can join and the amount of vouchers that can be purchased. It may not suit everyone, so it could be important that you join your employer's scheme now, if you are given the opportunity.
How much paid holiday should you provide?
All employees are entitled to 5.6 weeks of paid holiday each year, including bank holidays. It’s easier to think of that in days:
For a nanny that works Monday to Friday, 5.6 weeks = 28 days, including bank holidays.
Those 28 days are normally taken as 20 days + 8 bank holidays (although in some parts of the UK sometimes 9 or even 10 bank holidays are allowed).
Fewer working days means fewer days of holiday entitlement. Someone working just 3 days per week is entitled to 3/5ths of 28 days = 17 days, including bank holidays.
Who chooses when those holidays are taken?
Parents can choose all the holidays if they want, but their nanny might not be too pleased. The ‘norm’ is for the nanny to choose 2 weeks, the parents to choose 2 weeks (and the rest are taken on the bank holidays).
It gets a little more complicated for part-timers. Having arrived at the annual entitlement in days, we then need to set aside the days needed for bank holidays (the nanny only takes the ones that fall on a normal working day). Having done that, we are left with the number of ‘floating’ days, and parents and nanny can decide between them when they will be taken.
What if there is not enough holiday time?
It’s a common problem. Often parents want to take more than their share of the annual holiday entitlement, for trips abroad or grandparents visiting. Ideally, this will be spotted at the outset, in which case we can easily build it in to the employment contract. If not, it may still be possible to reach an agreement with the nanny beforehand so that some of the hours are made up at a later date, or taken as unpaid leave. Failing that, the parent may have to pay the nanny in full.
Can a parent refuse a particular holiday request?
Yes, provided they allow the nanny to take the holidays at another time, before the end of the holiday year. If the nanny requests holiday at a time that is simply too inconvenient, then the parent can deny the request. That’s why it is so important to get the holiday authorised before making a booking.
The nanny is off sick, what do you do?
If your nanny is sick, you don’t have to pay her anything at all until her 4th consecutive day off. That’s when SSP kicks in, at the rate of £88 per week. To be clear, the first 3 days are generally unpaid.
If the nanny has been with you for some time, and never been sick before, you might decide to pay her anyway. However, if sick leave causes you a major childcare meltdown, you might prefer to make the deduction from pay, and reward reliability instead (perhaps with a Christmas bonus, or some extra holiday days).
How should you handle maternity leave?
Maternity is often a source of concern to parents, because they know from experience the impact a pregnancy can have. However, in practice it is much easier to deal with than sick leave, because you know when the baby is coming and can plan accordingly.
Also, the full cost of the SMP is met by HMRC up front, so that you are not out of pocket. There are extra holidays to plan for, and the administration of the payments, but NannyMatters take care of that for all our clients, at no extra charge.
How do you work out different hours in and out of term times?
This is another subject that causes concern, but many nannies work variable hours and we easily manage the pay.
Some work term-time only, others ‘top and tail’ in term-time and work full days in the school holidays. Whatever the arrangement, parents and nanny need to decide if they want to pay the actual hours worked each month, or spread the pay evenly across the year.
How do you spread the pay evenly?
We do this by paying 1/12 of the nanny’s annual salary each month, regardless of when the school holidays fall. We work out the annual salary by looking at the hours worked in term-time and in school holidays and adjusting for paid annual leave. The arrangement is popular because it help both parents and nannies to budget. We can easily adjust for extra hours as and when they are worked.
Is paying the actual hours worked any easier?
This method requires a bit of counting and keeping track, but we have ways of simplifying that. The main benefits are complete flexibility and transparency. However, if there are significant peaks and troughs, both employer and nanny may pay more in National Insurance.
Sometimes we use both methods, e.g. the core hours make up an annual salary and then any extra hours worked during the school holidays are paid at the time.
Whatever your arrangement, we’ll find the best method to suit you and your nanny.
Will a nannyshare give me significant savings?
Nannysharing is a great way to access all the benefits of your own nanny, at a significantly reduced cost. However, it must be set up properly, with each family aware of their responsibilities. DO NOT enter into a share with your eyes closed!
One employer or two?
Nannyshares can be particularly confusing, and there is a lot of conflicting advice about the best way to deal with nannyshare payroll. That’s because it varies from situation to situation.
In a clear cut share where one family uses the nanny for 2 days and the other for 3 days, that’s a two-employer situation, with two separate payrolls.
In a joint share arrangement, when the nanny looks after both families for 5 days, that’s a one-employer situation, with all the wages going through one payroll.
Many shares fall somewhere in between, so they have to be looked at on their own merits.
What rate should I pay?
Generally, a nanny will expect a higher pay rate if she is looking after two families at the same time. Note the distinction: it’s not the number of children that necessarily makes the difference, it’s managing the needs of two different families.
The amount varies considerably, but could be an extra £2 p/hr, or an extra 20% (just as examples).
Whatever the type of share, there is one overriding consideration: never, ever agree a net rate. In a share situation you simply cannot run the risk of a dispute over who pays extra taxes, nor can you expect your share partner to pick up unexpected costs. If you do find yourself negotiating a net, all is not lost: we can translate it into a gross offer for you.
Any other considerations?
Think carefully and plan in advance for everyone’s holidays. Think too about what will happen when the nanny is sick. Will a parent stand in and look after all the children? And when the children are sick, are all parties happy for the nanny to cancel the day’s activities and share the germs like one big family?
You should also agree to give each other plenty of extra notice when one family decides that the share is no longer for them. This will give the other family time to find a replacement share partner or make alternative plans.
Thanks Alison, most helpful !