Spiralling childcare costs: Does it pay to work?

Simon Moore, Managing Director of CVS, said: “Many parents clearly consider that it may be more cost effective not to work than to pay for childcare; with reports that childcare costs in the UK are higher than in any other country it’s a position that’s easy to understand. What we do not know is the number of people who decided it was more cost effective not to work than to pay for childcare.
 

 “We believe that more must be done to raise awareness of what is available to help parents. Employers, carers and government all have a role to play in making sure that the return to work for parents, particularly new parents, is made as easy as possible.”
 

Moore says that childcare vouchers is one way of keeping costs down. They help parents save money on all types of registered childcare for children aged up to 16 years old.
 

Eligible working parents can exchange up to £243 per month of their gross salary for childcare vouchers.

They can be exchanged as part of the salary is exempt from tax and National Insurance contributions; allowing parents to each make savings of up to £1,196 per year on their childcare costs. Higher rate and additional higher rate tax-payers may save even more.
 

The CVS survey also found that 71% of working parents who use childcare vouchers spend less than one hour each week planning and organising childcare.
 

The same percentage 71% also agreed that they worried less about childcare than before they began to use childcare vouchers.
 

Remember, however, that childcare vouchers aren’t always the right option. Jacquie Mills, managing director of MyFamilyCare says that there are special circumstances to heed if you are receiving statutory maternity pay: “If you want to get your full SMP entitlement then you need to come out of the scheme at 17 weeks otherwise the first six weeks of SMP that you get that is based on 90% of your salary would be based on the salary excluding that sacrificed for childcare vouchers.” It’s also worth noting that if you receive Working Tax Credit or are earning on or just above the minimum wage, you should contact your local Tax Office for advice, as childcare vouchers may not be your best option.
 

Similarly Statutory Sick Pay and other benefits such as pension, or death in service may be affected if you take up the voucher scheme so you should check with your employer or voucher provider.
 

Another way of keeping childcare costs down is to get some help from your own parents. The Workingmums.co.uk survey found that nearly half of respondents (44%) of working parents admit that they depend upon their own mums and dads to help out with childcare.
 

One in four working mums said they put their children into a nursery, while the rest used childminders, friends or other family.  Only 4% employed a nanny or used an au pair.
 

Gillian Nissim, founder of Workingmums.co.uk, said: "This year’s survey shows just how important grandparents are in helping parents get back into the workplace.  Working mums are able to contribute significantly to the British economy as a result of their parents looking after their children.  Without their help, it would be impossible for many mums to go back to work – grandparents not only help with the childcare but also keep childcare costs to a minimum."
 

Nanny sharing may be the answer if you have more than one child. Nannies can be expensive but if you share with a friend then it may work financially for you. One advantage is that you have year-round childcare and won’t be left with the headache of what to do over nursery holidays. A downside is that they will be using your house as their base so working at home may not be practical. And you need to think about what you will do if the nanny is ill as well as ensuring there is consistency of care – if your nanny is planning on moving on after a couple of months this may be unsettling for your child.
 

Nanny sharing is usually used for pre-school children but you may find one that is willing to pick up the children after school if you can’t leave work before the school gates open.
 

We’d like to hear about any ways you have managed to keep childcare costs to a minimum so please post your comments to this article.