Workplace Nursery Salary Sacrifice – How It Works
The scheme works by an employer setting up a partnership with a local nursery. Employees who opt in then have guaranteed places and the costs come out in the form of a salary sacrifice, thus saving them thousands of pounds.
The partnership has to be set up correctly and not just a paper exercise, however at Enjoy Benefits we are experts in setting up the schemes correctly. In reality, there is little for the employer to do.
The scheme also benefits the nursery as they get additional funds, these contributed by the employer (but at no cost to them as they are offset). Parents with their children at the nursery then get a say in how these extra funds are spent – it might be on learning resources, revamping outside space or for educational trips out.
The nursery also gets all payments from parents using the scheme at the same time, with no need to chase payment.
We mentioned the savings available via a workplace nursery scheme but just how much can parents save via salary sacrifice?
To give a few examples:
For basic rate tax payers.
If monthly nursery bill is £1,000, savings will be £2,942 per year.
Monthly nursery fees of £1,250 – saving is £3,678
Monthly fees of £2,000 (two children in nursery) – savings £5,885
For higher rate tax payers
If monthly nursery bill is £1,000, savings will be £4,274 per year.
Monthly nursery fees of £1,250 – saving is £5,343
Monthly fees of £2,000 (two children in nursery) – savings £8,549