Scrapping childcare voucher tax relief will cause gender pay gap to widen warn HR chiefs

Government plans to scrap tax exemptions on childcare vouchers will set the equality agenda back and discourage women on maternity leave to return to work, HR directors have warned.

At the Labour Party Conference last week, Gordon Brown announced childcare vouchers would lose tax and national insurance contribution relief by 2015, with the money instead being used to provide free nursery places for 250,000 two-year-olds.

Scrapping the tax exemptions would cost basic rate taxpayers £900 and higher rate taxpayers £1,200 a year, and employers would lose out on a £373 incentive per employee using the scheme.

Ahead of the Conservative Party Conference in Manchester this week, HR professionals warned politicians that any attempts to remove the financial incentives linked to childcare vouchers would make the gender pay gap worse as women would opt to stay at home.

But a spokesman for the Conservatives told Personnel Today the opposition party could not rule out a similar policy to scrap tax exemptions on childcare vouchers, stating that the party would have to “see what the costings are”.

Linda Scott, HR director at the British Transport Police, told Personnel Today: “If you take the tax benefits for childcare vouchers away you could find people won’t return from maternity leave, so we will lose talented people. It will just make the gender pay gap worse as women will be out of the workplace for longer.”

Sean Wheeler, group director of people development at Malmaison hotels, added: “There is the potential for us to lose some good people as up to £1,200 per year is a lot to find and so it may not be worth people working.”

The Chartered Institute of Personnel and Development (CIPD) warned that halting this tax relief could stop HR functions providing the vouchers altogether.

Charles Cotton, the CIPD’s reward adviser, said: “The only reason employers provide [the vouchers] is tax advantages. I am sure some employers will look at it and make a cold, rational decision in light of what’s going on in the economy at the moment.”

Meanwhile shadow families minister, Maria Miller, said Brown had reneged on his promise last year to offer free childcare to all two-year-olds.

She said: “He’s now going back on his word by providing childcare for only some families with two-year-olds. And he will pay for that by taking support from other families who benefit from employer-supported childcare.”