Workplace Nursery Scheme. Information Booklet

Transcription

1 Workplace Nursery Scheme Information Booklet

2 Workplace Nursery Scheme Introduction Staffordshire University employees can make savings on their nursery costs by signing up to a Scheme which provides tax-free benefits. Staffordshire University is pleased to introduce a Workplace Nursery Scheme to assist employees with their childcare costs at the onsite nursery. The Scheme takes advantage of a Government initiative which allows employers to assist their employees with their childcare costs where childcare facilities are provided at the workplace. At the present time, it is likely that you pay for your childcare costs from your net (after tax) pay or you may participate in the University s childcare voucher scheme. However, as the University operates childcare facilities at the workplace, the income tax legislation provides exemption in respect of the full childcare costs (not merely the first 55 per week currently provided through the childcare voucher scheme). Therefore, employees that use the workplace nursery facility can choose to enter a salary sacrifice arrangement under which the employee agrees to a reduction in gross salary, equal to the full cost of the childcare place. The advantage is that you no longer pay tax or National Insurance Contributions ( NICs ) on the amount that you have sacrificed. So, instead of paying your workplace nursery costs from your net (after tax) salary, you pay for it from your gross (pre-tax and NICs) salary. How to join the Scheme All you need to do is follow the steps outlined below: Step 1: Step 2: Step 3: Read the Frequently Asked Questions and Terms & Conditions You will need to establish the salary sacrifice amount which will be based on all or part of your childcare costs at the workplace nursery. Once you have established the salary sacrifice amount, complete and return the Application Form. What happens next? Provided your Application Form is received before the monthly deadline, your participation in the Scheme will start from the next pay date. Following your completed application, your salary will be reduced accordingly and payment will be sent directly to the nursery.

3 Frequently Asked Questions 1. Who is eligible to participate? All employees of the University are eligible to apply to join the Scheme. However, employees who do not have a salary each month should contact Payroll to discuss the suitability of the Scheme and, specifically salary sacrifice, to their circumstances. In addition, if by sacrificing salary, your earnings fall below the National Minimum Wage, you will be unable to participate in the salary sacrifice arrangement. Please talk to the Childcare Team on for advice and the options available to you. 2. What do we gain from the Scheme? First and foremost, we see this Scheme as providing a tax-efficient benefit to staff and an opportunity to reduce your overall childcare costs. 3. How does the Scheme work? If you wish to take advantage of the Scheme, you will be required to sign-up to a salary sacrifice arrangement under which you formally agree to accept a reduction in your gross salary which is equal to the cost of your childcare. This involves a commitment on your part to enter into an arrangement to reduce your gross salary for a minimum period of 12 months. 4. How much will I save? The amount you will save will depend on amount salary sacrificed and the rate at which you pay tax and NICs (Basic Rate or Higher Rate). If you join the Scheme, your basic gross salary will be reduced by the amount you have sacrificed (equivalent to the cost of your childcare). The advantage is that you do not pay tax or NICs on the amount that you have sacrificed and as a result, you will save the tax and NICs that you would have paid on the sacrificed amount. The example below is based on tax and NICs rates (2014) and assumes the employee participates in the University s Pension Scheme. Average cost of childcare is per day and average usage is 3 days per week (average per week/ 6110 per year) EXAMPLE 1 - BASIC RATE TAXPAYER (amount salary sacrificed) Tax & NICs savings Actual

4 EXAMPLE 2 - HIGHER RATE TAXPAYER (amount salary sacrificed) Tax & NICs savings Actual Should I be worried by the fact that you are reducing my gross pay? Generally employees should not be worried. We will track your original salary which we will now be calling Notional Salary. Please also see questions What will happen if I have a pay award, promotion or other increment? Any future pay awards, increments or promotions will be based on your original salary, prior to your participation in the Scheme. This original salary is known as Notional Salary'. If you leave the Scheme, your actual salary will revert to the level of your Notional Salary, so you will not lose out. 7. Will participating in the Scheme impact on any salary related payments? Your participation in the Scheme may have an impact on the following earnings-related statutory benefits: Statutory Maternity Pay Statutory Paternity Pay Statutory Adoption Pay Statutory Sick Pay If you are eligible for any of the above payments, the statutory amount due to you is based on your earnings during a certain period. Therefore, by taking part in the Scheme, the statutory benefits will be calculated by reference to your reduced salary and the amount of benefit you receive could be lower. If you are likely to receive these benefits, you should first consider carefully whether your participation in the Scheme will be worthwhile. Please talk to Payroll for advice as to how this may affect you individually and the options available to you. 8. What happens if I eligible for any earnings related benefits i.e. Occupational Maternity Pay Occupation-related benefits are calculated on your gross earnings in a set period. As a result of participating in the Scheme, your salary will have been reduced during this period. This means your occupational benefits will be affected and the amount you receive will be reduced.

5 9. I currently receive Tax Credits. Will joining the Scheme affect my entitlement to tax credits? The Tax Credit calculation is based on your taxable (P60) income. By signing up to the Scheme, your taxable income will be reduced and therefore your Tax Credit entitlement may change. Given the complexities involved in calculating entitlement to Tax Credits, we recommend that if you have any queries you go to: https://www.gov.uk/topic/benefits-credits/tax-credits for more information or contact HM Revenue & Customs helpline on I am currently re-paying a student loan. Will the payments alter? Yes, it will alter as the trigger point is based on the salary on which you are liable to pay NICs. Under this Scheme your total gross salary on which NICs is paid will reduce, hence your loan repayments will decrease. You should bear in mind that any decrease in your loan repayments will result in you repaying for an additional time period. 11. Will participating in the Scheme impact on any contribution-based benefits? If entering the Scheme means that your gross pay is less than the annual Lower Earnings Limit (LEL) for NICs, it may affect your eventual entitlement to the Basic State Retirement Pension and you may lose entitlement to certain other benefits. Therefore, if your weekly pay is less than the LEL you should first consider carefully the possible effects before joining the Scheme. 12. Can I participate in any other salary sacrifice scheme provided by the University? The University currently provides an opportunity for employees to participate in a range of salary sacrifice schemes. You may participate in more than one scheme, but, if by increasing your salary sacrifice amount, your earnings fall below the National Minimum Wage, you will need to consider which scheme(s) to join. 13. Will my occupational pension be affected? The University is permitted to treat this sort of payment as part of your pensionable pay and, therefore, the contributions that both you and the University make will continue as though your salary had not been reduced. Consequently, your occupational pension will be unaffected by your joining the Scheme I have more than one child for whom I have to pay childcare costs, can I pay all my of my childcare costs this way? As long as your children attend the workplace nursery and meet the definition of a child for the purposes of the income tax legislation, you can salary sacrifice all of their childcare costs. 15. What is a child for the purposes of the income tax legislation? For the purposes of the workplace nursery legislation, a child is a person under the age of 18 who either: is a child of the employee and is maintained at the employee s expense

6 is resident with the employee is a child for whom the employee has all of the rights, duties, powers, responsibilities and authority which, by law, a parent of a child has in relation to the child For the purposes of the above, child includes a stepchild. 16. What happens if I do not pay for childcare for the whole year for example, during school holiday periods? The University will advise you of the normal full annual costs of using the nursery and you will be invited to sacrifice the confirmed amount from your gross salary. Your gross salary will then be reduced in 12 equal monthly instalments. However, if you decide that you do not require the benefit of the workplace nursery for the full period, you should contact the Childcare Team to establish the correct amount. 17. Can I withdraw from the Scheme? Normally, under the terms of the salary sacrifice agreement, once you enter the Scheme, cancellation will not be permitted for a minimum 12 month period. However, the University may permit cancellation in this period where there has been a lifestyle change or a change in circumstances that mean the arrangements are no longer suitable. This may include the following circumstances. Parental or Adoption leave Long-term sickness Change of work location If the University agrees to an early termination of the agreement, you may not be able to able to rejoin the Scheme for a minimum of 3 months. To withdraw from the Scheme, you must complete and return a Cancellation Form, giving one month s notice and return it to the Childcare Team. 18. What happens if I am absent from work for a long period of time. (Maternity leave or long term sickness) If you are participating in the Scheme and you are absent from work by reason of maternity leave or long term sickness, your entitlement to the benefit continues throughout the period subject to statutory requirements. 19. What happens if I leave my employment with the University? If you employment with the University terminates for whatever reason, your entitlement to participate in the Scheme will cease immediately.