Vouchers: firms warned that staff who take up tax-exempt option must be aware of changes to contract of employment

Law firms must ensure employees are made fully aware of the consequences of signing up to childcare voucher schemes and also make sure contracts of employment are changed correctly, a tax specialist at Birmingham and London firm Wragge & Co has said.


Wragge & Co launched its own scheme last week to enable parents to take advantage of tax rules introduced earlier this year, which allow employers to provide childcare vouchers worth £217 per month to employees with children.


The benefit is offered through a salary sacrifice scheme and the vouchers supplied are exempt from tax and national insurance.


The firm agreed a contract with childcare voucher company Sodexho. Money is deducted from the employee’s salary and paid to the voucher company. E-accounts are set up for each employee using the scheme, and Sodexho transfers the value of the voucher into the employee’s account. The employee then transfers the money electronically into the account of their accredited childcare provider.


Deborah Clark, a tax lawyer at Wragge & Co’s Birmingham office, said: ‘The scheme is simple in principle but a challenge to implement. Any employer considering a childcare voucher scheme needs to pay careful attention to a number of issues.’


She explained that as the value of the vouchers comes off gross salary, employees are sacrificing some of their basic pay. This is a change in the terms of their employment contract and one which may have consequences for tax credits, pension contributions, mortgage applications, overtime and other benefits.


Ms Clark advised: ‘Employers should take legal advice to ensure that the terms of their contract of employment are changed correctly and that their employees are fully informed of the implications of joining the scheme.’


Amanda Pridmore-Wood, benefits and travel manager in the firm’s human resources department, said: ‘We are lucky – we have specialist lawyers here who guided us through the implementation procedure to ensure our employees get the most out of it.’


She added: ‘We had considered on-site childcare but after consulting staff we found most parents did not want to bring their children into Birmingham or London, as the majority live outside the cities.’


Ben Black, director of Tinies, which provides emergency childcare to organisations including law firms, said: ‘In our experience, lawyers seem to be the slowest among all the professions to embrace the work/life balance. Others have learnt they need to look after their staff, and bend over backwards to implement good childcare policies to retain staff.’