Business, Innovation and Skills CommitteeWritten evidence jointly submitted by Computershare Voucher Services, Edenred, Grass Roots Group and Sodexo Motivation Solutions

Executive Summary

This submission is made on behalf of the four largest providers of childcare vouchers in the UK:

Computershare Voucher Services, Edenred, Grass Roots Group and Sodexo Motivation Solutions.

Our comments are focussed on issues pertaining to childcare, and how improving the access and affordability of formal childcare can help reduce gender inequalities in the workplace.

Childcare remains an enormous obstacle for women, who typically share the greater burden of caring responsibilities.

The submission argues for the extension, promotion and enhancement of the childcare voucher scheme, so as to best aid women in their chosen careers.

We make clear the negative impact of an increasing affordability gap in the childcare market, and how this is dissuading women from either seeking employment or furthering their opportunities.

The submission demonstrates how greater promotion of the childcare voucher scheme would encourage women to re-enter the workplace, and how extending the parameters of the scheme to the self-employed could foster increased economic activity and entrepreneurship amongst women.

We recommend the Committee calls on Her Majesty’s Treasury, the Department for Education and the Department for Work and Pensions to adopt the recommendations for enhancing the childcare voucher scheme that we outline in this submission.

1. Introduction to Childcare Vouchers

Childcare vouchers are a salary-sacrificed employee benefit, enabling working parents to sacrifice up to £55 per week (for basic tax rate payers) towards the cost of their childcare.

For the average two-parent working family, childcare vouchers can help provide support with the cost of childcare worth up to £1,800 per annum.

Currently, approximately 550,000 individuals are benefitting from the scheme’s support.

The scheme operates within a closed-loop mechanism, meaning the amount sacrificed by the employee can only be spent on childcare facilities registered with Ofsted, or the equivalent organisations in Northern Ireland, Scotland and Wales.

This closed-loop mechanism ensures that children receive high quality care and education, supporting early childhood development.

The support from childcare vouchers can be used at all Ofsted registered breakfast clubs, after school clubs or holiday camps, supporting working parents with wrap-around childcare.

2. The Gender Equality Duty and the Equality Act

Although childcare voucher providers welcome any initiatives that are aimed at reducing gender inequalities in the workplace, we believe more can be done to address the social barriers that prevent women from achieving career parity.

We believe underlying issues, such as the cost and inaccessibility of childcare, exacerbate gender-related workplace disparities.

Typically, women shoulder the greatest caring responsibilities in their household.

Consequently, as mothers spend more time out of the labour market than men and other women without children, they cannot accumulate the same level of experience and therefore have restricted employment opportunities.1

If these mothers have ease of access to high quality, affordable childcare, these obstacles may be mitigated, and a return to work made more attractive.

Similarly, although working mothers may be able to take advantage of schemes such as childcare vouchers, there is a widening affordability gap that is weakening the positive impact that these schemes can have on women and their employment opportunities.

For instance, with childcare vouchers, the maximum sacrifice for basic tax rate paying parents is £55, a number that has remained static since 2006.

We propose raising this figure, as childcare costs have risen by an average of 5% year-on-year since 2005 (the year the scheme was initiated).

If this were implemented, basic tax rate paying parents would be able to sacrifice £73 from their weekly salary, an amount we believe would have a greater impact on women’s access to high-quality childcare. By improving the impact childcare vouchers can have, Government will be improving the appeal of returning to work after having children.

We believe Government could do more to reduce the financial burden and accessibility of childcare, thus enabling women to re-enter the workforce and improving workplace gender composition.

3. Impact of the Current Economic Crisis

The current economic crisis has had an adverse impact on both male and female employment and wage levels.

However, there are a number of reasons why the on-going crisis impacts women differently than it does men.

Firstly, women are more commonly employed in part-time roles, often as a result of their child-caring commitments, and are therefore vulnerable to changes in the economic climate.

Secondly, as a result of caring responsiblities, some women are less flexible in what jobs they can take on, and are therefore disadvantaged in an increasingly competitive employment market.

Moreover, research commissioned by the Equality and Human Rights Commission found that from previous recessions, evidence suggests that “women with childcare responsibilities were often at a greater disadvantage than either men or other women in continuous employment, due to restricted internal labour markets and employer perceptions of unreliability and flexibility.”2

According to recent research by the Centre for the Modern Family, women (48%) are more likely than men (32%) to say that the biggest challenge they face is financial.3

Recent research by the Joseph Rowntree Foundation shows this squeeze is a result of the rising costs of childcare and transport, as well as cuts to family tax credits.4

The difficulty of entering the employment market, compounded by wage freezes and the increasing cost of childcare, means women are being dissuaded from seeking jobs after starting a family.

Companies therefore need to place greater emphasis on offering employee benefits to increase retention rates, and ensure that women are encourage to—and indeed not dissuaded from—returning to the workforce.

By promoting the childcare voucher scheme, and ensuring relevant bodies and industries are kept well informed of its benefits, Government can ensure women are made aware of the support which can improve their work-life balance, and lessen the impact of the current financial crisis.

One way of increasing awareness of the scheme would be to require employers to offer childcare vouchers to their employees who have children. Given the minimal administration of childcare vouchers and the cost neutrality of the scheme for employers, this would be a simple change which would provide a significant support to working parents, and especially employed mothers.

Finally, the coalition Government has asserted that economic recovery should be led by private sector growth.

One way of achieving this is by encouraging innovation and enterprise through the promotion of entrepreneurship.

However, although women make up 46% of the economically active population5, they comprise only 26% of those who are self-employed.6

We believe a culmination of factors, including the cost of childcare, are inhibiting women from pursuing their entrepreneurial ambitions.

Government could help alleviate the problem, and thus encourage this untapped economic potential, by ensuring that self-employed persons have the same access to employee benefits that others have.

Currently, the childcare vouchers scheme does not support self-employed parents.

The childcare voucher providers recommend that, by adapting the current employee model, Government could easily extend the scheme to self-employed mothers and fathers.

This would ensure that self-employed women are not disadvantaged by their entrepreneurial ambitions, and would ensure fair access to childcare support.

4. Conclusions and Recommendations

In conclusion, childcare voucher providers support the Government’s desire to reduce gender inequalities in the workplace. However, we believe that the increasing cost of childcare and a lack of accessibility to high quality care remain barriers to women seeking to return to work after starting a family.

By enhancing schemes such as childcare vouchers, Government could mitigate some of the obstacles that women face when re-entering the workforce. For instance, by raising the salary-sacrifice limit for childcare vouchers; making the scheme compulsory for employers to offer; and extending the initiative to self-employed parents, Government could help ensure women have access to the high-quality childcare the need to enter the employment market.

The childcare voucher providers would be delighted to provide more information about the scheme should that be required, and to provide spokespeople to submit oral evidence to a subsequent hearing of the Committee.

3 October 2012