Scottish Government

CHILDCARE VOUCHERS - PROMOTING INCREASED USE IN SCOTLAND

BACKGROUND

1. Childcare vouchers are one means by which employers can support their staff with the costs of childcare. Since 2005 the UK Government has allowed income tax and National Insurance (NI) exemptions for participating employees (up to a maximum of £1196 pa per parent) and NI exemptions for employers (up to £370 pa per participating employee), provided certain conditions are met. [1]

2. As part of its strategy to help parents to have accessible, flexible and affordable childcare, the Scottish Government's Early Years Framework, published in partnership with the Convention of Scottish Local Authorities (COSLA) in December 2008, commits it to promoting childcare vouchers among employers in Scotland. This commitment is also reflected in the Scottish Government's response to the First Annual Report of the Council of Economic Advisers, which asked the Government to give priority to high quality childcare, as a means of increasing participation in the labour market.

3. From January-June 2009 the Scottish Government ran a project to promote greater use of childcare vouchers among Scottish employers in the public, private and voluntary sectors. This report sets out the work undertaken to deliver the project.

SCOPING THE PROJECT

4. The initial phase of the work involved making contacts, information gathering and developing an appropriate approach for promoting childcare vouchers. Contacts included:

· the UK Departments with the main interest in childcare vouchers - HM Treasury, HM Revenue and Customs (HMRC), Department for Children, Schools and Families and the Child Poverty Unit.

· a number of childcare voucher providers, which administer schemes on behalf of employers and which are members of HMRC's Childcare Forum.

5. One key issue arising from these discussions was the fact that the project coincided with the implementation of changes to the 1975 Sex Discrimination Act (SDA), the result of which has been to increase the costs to employers of providing childcare vouchers (see paragraph 9 below). This, in addition to the general economic downturn, meant that our promotional activity was taking place in a difficult external environment.

DELIVERING THE PROJECT

Public sector employers

6. All public sector organisations subject to Scottish Government public pay policy were surveyed about current provision, as well as local authorities, NHS Boards, police forces, fire and rescue services, universities and higher education institutions, further education colleges and key other public sector organisations, such as the Scottish Parliament and Audit Scotland. The results are provided in Appendix 1.

7. This shows that provision is currently high - around 90% - of those public sector employers surveyed. This is not the whole of the public sector in Scotland as there are a number of organisations, for example tribunals, which do not employ staff but is likely to be representative of the whole public sector. It is not possible to compare these figures with public sector provision in other parts of the UK, because similar surveys have not been conducted.

8. Where employers provided reasons for not offering childcare vouchers, the most common reason was a lack of demand by staff. Since these respondents tend to be based in more rural areas this could be because of limited provision of registered childcare in these areas.

9. Employers were asked for their comments about the benefits/disadvantages of childcare vouchers. A number of employers pointed to:

· the positive benefits felt by staff and the ease of administration of schemes;

· the unexpectedly low take-up by staff, even where employers regularly publicised their schemes. There are likely to be a number of reasons for this, including possible misconceptions among staff about what "salary sacrifice" actually means. [2]

· the possible impact of changes to the 1975 Sex Discrimination Act which has meant that employers are now required to provide childcare vouchers to women on additional maternity leave, as well as during ordinary maternity leave, which was previously the case. A number of employers expressed concern about the likely additional costs they might have to bear. There is no evidence at present that public sector employers are withdrawing their schemes as a result of the changes, although a numbers said they were reviewing their schemes in light of this.

10. In order to ensure that organisations coming within public sector pay policy are aware of childcare vouchers, from 2009-10 information about childcare vouchers will routinely be included in the public sector pay policy issued by the Scottish Government. This will include the assurance that the costs associated with the provision of childcare vouchers do not count against public sector pay policy limits. We have also highlighted the value of childcare vouchers in the workshops which were run for public bodies as part of the roll-out of the 2009-10 Scottish Government pay policy.

11. We have also taken a number of steps to raise awareness of childcare vouchers among Scottish Government and associated agencies and NDPB staff, including staff briefings and screen saver advertising. This has resulted in an increase of 16%, from December 2008 to June 2009, in the number of staff claiming childcare vouchers. These will be repeated at regular intervals in future.

Private sector employers

12. We were advised against undertaking a similar survey of private sector employers, because of the likely low response rate. We therefore targeted the main employer organisations in Scotland and sought their agreement to publicising childcare vouchers through their membership newsletters/websites. This included CBI Scotland, the Federation of Small Businesses, the Institute of Directors, Scottish Chambers of Commerce, Scottish Financial Enterprise and the Scottish Council for Development and Industry.

Voluntary/Third sector employers

13. The Scottish Council for Voluntary Organisations (SCVO) is also promoting childcare vouchers amongst its members and through its network of around 60 local Councils for Voluntary Service (CVSs), which represent between 24,000-26,000 voluntary organisations.

14. We have also publicised the scheme through a wide range of other childcare provider networks and voluntary organisations, including Scottish Childminding Association, National Day Nurseries Association, Scottish Out of School Care Network, Children in Scotland and the Scottish Social Enterprise Coalition.

Scottish Trade Union Congress (STUC)

15. The STUC General Council agreed to join the Scottish Government in promoting childcare vouchers among its members and trade unionists. This has included providing promotional material to:

· c 400 delegates to the 2009 STUC annual conference in April; we intend to do this annually in future;

· c 50 delegates to a STUC conference in Highlands and Islands this month;

· the 120 STUC-affiliated unions; and

· TUC education tutors at Stow College for training courses for workplace representatives.

16. We have also worked with colleagues in the Scottish Government/STUC "Close the Gap" project to include childcare vouchers as a case-study in the gender equality duty toolkit for trade union representatives.

ASSESSING IMPACT

17. We cannot assess the impact of the project in the short, medium or longer term, because it was not possible to establish an accurate baseline of provision across Scotland at the start of the project. While a number of childcare voucher providers provide quarterly data to HM Revenue and Customs it cannot be disaggregated to a Scotland level. In addition, changes in level of provision could have been affected by a variety of factors outside the control of the project, for example the changes to the SDA legislation and the difficult economic climate.

18. However, we are confident that the range of activity undertaken has raised the profile of childcare vouchers, both among employers and parents. We will ensure that awareness raising continues on an annual basis.

Appendix A

SCOTTISH PUBLIC SECTOR EMPLOYERS - PROVISION OF CHILDCARE VOUCHERS

2009

TABLE A - Scottish Government Main Bargaining Unit/Agencies/NDPBs and Nationalised Industries subject to public sector pay policy (at January 2009)

Children, Young People and Social Care

The Scottish Government

July 2009

For more information, please contact Laura Powrie at laura.powrie@scotland.gsi.gov.uk

[1] Exemptions only apply for registered childcare and for children under 15 years old (or for a child under 16 years if they are disabled).

[2] While the UK Government does not advocate its use, many employers offer childcare vouchers as a "salary sacrifice" whereby an employee agrees to a reduction in his/her salary and receives the equivalent in childcare vouchers.