Onsite Childcare: How Does It Work?

Posted in Employee Benefits and Wellbeing, Childcare Vouchers, Financial Wellbeing

by James Malia on Apr 20, 2017 12:00:00 AM

We’ve all heard of the office creche. But how common is it to see one in action?

Onsite childcare is rare, and it’s far from something that employees expect from their employers – so don’t panic about suddenly needing to provide one to compete for top performers who may have kids in tow.

In fact, workplace nurseries are something that many businesses struggle to offer, as the costs can be high.

But some organisations have had success in providing onsite childcare, so let’s take a closer look at how it works – and whether it really is the best childcare option to consider.

Why provide onsite childcare?

Childcare is a major expense – and a major cause of stress – for working parents. Our childcare survey of over 1,000 parents in the UK found that two-thirds had had to make financial sacrifices to cover the cost of childcare – which is always on the rise.

With available resources for childcare in the UK disappearing – the number of childminders in England alone has fallen by 10,000 in just five years – finding childcare at any cost is even more difficult. And even if parents do manage to find affordable care for their kids, rushing off to collect children can be incredibly stressful.

Onsite childcare can address these issues with one straightforward solution – convenient childcare that fits into the working day, either provided wholly by an employer, or at a rate far more affordable than childcare elsewhere. Workplace nurseries are also exempt from PAYE tax and National Insurance, adding further financial benefits – provided employers can afford to offer them.

Workplace nurseries in action

One of the most successful onsite childcare facilities in the UK has been Goldman Sachs’ on-site creche, offered as part of the company’s benefits package.

As profiled in the Guardian, the programme began in London in 2003, offering all employees with children 20 days of free childcare a year. By 2010, the nursery had been extended, providing four weeks’ free childcare after parental leave ended to help the back-to-work transition, and full-time care for children up to age three.

Goldman Sachs’ creches have very successful, spreading from London to Tokyo and New York. But Goldman Sachs has a net income that runs into the billions every year, and can afford the costs. Are they within reach of smaller companies?

When you look at the challenges facing smaller organisations, it’s obvious that they’re not for everyone. Previously more common in universities and public sector organisations, workplace nurseries have dwindled over recent years because of high costs for a service that benefits a relatively small portion of the workforce.

At London Goldsmith’s College, for example, running a nursery was costing £70,000 a year while only offering 23 places – that’s over £3,000 per child per year, which is higher than the average annual costs found by Department for Education research. It’s not a particularly good deal for parents and, if the employer is to subsidise costs, it’s potentially very expensive, particularly when there are so many alternatives available.

Free ebook: Family Matters  Childcare support is now expected from employers more than ever. Find out what  your options are, and why it's so important, in our ebook.

The arguments against workplace nurseries

As discussed, the main argument against providing onsite childcare is cost – but for organisations who consider it a price worth paying, there may be other downsides too.

Distractions at work

When kids are on site, parents may be unable to resist looking in on their little ones at lunch breaks, or on coffee breaks, or with any excuse… which is a distraction enough.

As we all know, though, kids can be a handful – they may get hurt, feel unwell, or have behavioural issues all throughout the course of a day. But kids are also incredibly resilient, and many times more minor issues have completely disappeared by the end of the day.

When parents pick up their kids from the childminder after work, they may have no idea that anything was ever wrong. But when parents are nearby, they may panic if something goes wrong, feeling the need to take children home when everything will be fine. It takes a tough boss to say no to heading home with a screaming child, after all.

Work-life balance

We’ve already discussed distractions where life takes precedence over work, but onsite childcare could cause the opposite, too. Depending on how late facilities are open, onsite childcare could encourage parents to spend even longer at the office, having a negative impact on work-life balance – which is a major contributor to stress.

Alternatives to onsite childcare

Although onsite childcare can be effective, there are tried-and-tested alternatives with much lower operating costs, and providing similar levels of convenience.

Childcare vouchers

One of the most common ways in which organisations can support their staff with childcare costs, childcare vouchers are a government initiative that can save parents hundreds of pounds every year. Staff swap some of their pay for childcare vouchers through your organisation, and use them to pay for childcare costs.

Childcare vouchers are generally provided through a salary sacrifice arrangement. This means that staff give up a portion of their pre-tax salary to pay for benefits. So the vouchers don’t provide a discount on childcare – the provider is still getting paid the same amount as if your employees were paying cash. The savings are made through the salary sacrifice arrangement, which reduces your employees’ taxable salary, and hence lowers the proportion of the overall salary lost to tax and National Insurance contributions.

Employers offering childcare vouchers will save 13.8% of the voucher value. Employees will save 32% of the voucher value (or 42% for higher rate taxpayers) – all of which can add up to some very substantial savings.

Flexible working

Parents have the right to request flexible working in order to care for their children – and employers must have a sound business reason for rejecting any request. Flexible working could be used for earlier starts and finishes to make the school run or dash to the childminders stress-free. Or it could be used to allow parents to work from home, whether that’s as a transitional period after maternity leave, or to reduce the number of days needed for paid childcare.

If your employees can fulfil their role outside of normal hours, or from home, then there’s potentially no reason to reject their request – particularly if it’s made to help their childcare arrangements. Giving parents more of a say in setting their own agendas to ease childcare costs and stresses are also a fantastic way to keep your top talent, appeal to new employees, and make your organisation a far more supporting place to work.

For more guidance on workplace childcare, download our ebook below – it’s full of childcare guidance for employers.

Free ebook: Family Matters  Childcare support is now expected from employers more than ever. Find out what  your options are, and why it's so important, in our ebook.

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