What might I need to consider if I am thinking of taking up childcare vouchers being offered by my employer?

Childcare support operating within a salary sacrifice scheme can impact on current or future entitlement to a range of benefits. This is because the entitlement to some benefits is based on the amount of NICs that are paid on an individual’s salary and entitlement to other benefits is based on actual earnings. Any individual who chooses to take up childcare support offered within a salary sacrifice scheme by their employer must carefully consider what the sacrifice may mean in practical terms.

For example she or he should consider whether accessing childcare vouchers will have an effect, or a potential effect, on their future right to the original (higher) taxable salary; what the effect will be on any pension scheme that is being contributed to by the employer; whether entitlements to any tax credits will be affected; and whether other benefits such as state pension or Statutory Maternity and Paternity Pay will be affected.

Salary sacrifice schemes may affect entitlement to state benefits and tax credits and so the implications of joining a scheme should be thought through carefully by the individual before they agree to taking them up and altering their contract of employment.