Workplace nursery

What is a workplace nursery?

A workplace nursery is a way for employers to support any employees who need childcare by providing on-site or local facilities. It's commonly provided through a salary sacrifice scheme. Employees can benefit by saving money on nursery fees by opting into their workplace salary sacrifice scheme, where childcare costs are deducted from their gross pay.

As an employer, you can set up a workplace nursery either directly or through a third-party provider. They are usually open during normal office hours to align with employees’ schedules, but you might choose to also offer extra hours or out-of-hours care.

More and more businesses are recognising the need for workplace nurseries, especially as the financial costs of childcare continue to increase. Not to mention, there are considerable social and health benefits that come with offering childcare support, so it’s worth looking into.

The benefits of a workplace nursery

Implementing a workplace nursery can provide a number of benefits for both employers and employees. 

Firstly, it can help employers to attract staff and increase the loyalty of employees, ultimately improving retention rates. Knowing their childcare is taken care of onsite can help to relieve any stress or worries they might have – particularly for parents with younger children just starting nursery. And with more talent sticking around, the business is likely to become more productive and successful.

There are also financial and ethical benefits for businesses who offer workplace nurseries. They can save money on recruitment costs and retain their brightest talent without paying a penny. Meanwhile, they can feel good about themselves knowing they’re helping parents who might otherwise struggle to return to work after having children.

For employees, the obvious benefit is that they don’t have to worry about arranging childcare while at work. This can give them more time to focus on the job at hand. 

Plus, there’s the financial element. The workplace nursery salary sacrifice scheme enables parents to save tax and National Insurance (NI) on their nursery fees from birth up to the age of five. This is because the cost of the nursery scheme is covered by the business, and then deducted from an employee’s gross salary. Considering that parents now pay up to £7,000 a year for a part-time place at nursery, this could result in a significant saving.

There’s also the added benefit that workplace nurseries can provide employees: socialisation. Enabling parents to mingle with other young parents can boost morale and create a sense of team spirit, making for happier employees all round.

Who can use a workplace nursery?

Typically, workplace nurseries cater for nursery-age children (birth - five years old). But it’s up to the  employer to set their own eligibility criteria, and you may only allow parents who meet certain criteria to use your workplace nursery. You can even open it up to the public, if you like.

A workplace nursery in the UK might be open to people employed directly by the business or those on secondment or fixed-term contracts. But casual or agency workers might not be eligible, and certain low-paid employees may be excluded from the requirement for childcare to be available to all employees.

It’s also important to note that workplace nursery schemes tend to cater only to employees who work full-time. It’s not always possible for these set-ups to accommodate parents who have part-time or flexible working hours.

How can an employer set up a workplace nursery?

Follow these simple steps to understand how to set up a workplace nursery:

  1. Choose a local nursery you’d like to partner with and reach out to them to see if they’re interested in teaming up.
  2. You can always use a third-party provider to handle the set-up for you. They’ll take care of setting up staff, resources and overseeing the whole scheme.
  3. You’ll need to draw up a contract that confirms the fees payable to the nursery as well as how much extra funding you’ll give the nursery. Remember that HMRC requires you, the employer, to partially or fully fund the nursery for the whole length of the contract.
  4. Once the contract is signed by both parties, you’re ready to onboard employees and start saving! You’ll need to hold a face-to-face meeting with the nursery at least once a year to make sure you’re playing a sufficient role in managing the scheme.

Before you take the first step, it’s worth making yourself familiar with the workplace nursery scheme HMRC requirements.

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