Parents and employers face a childcare cost crisis

Ele Theochari, Partner said:

The Government’s own figures show that over 70% of parents with children between 0-4 years old are using some form of childcare on a regular basis. The recent hike in employer’s NIC and the National Minimum Wage requirements will result in childcare fees dramatically increasing to cover the additional costs nurseries will be facing.With over 75% of all nursery costs relating to staff and strict legal mandates in place that dictate the staff-to-child ratio, there is little nurseries will be able to do to mitigate additional staffing related costs.

Economists are suggesting that parents will face up to a 20% increase in fees to cover nurseries rising costs. As over 35% of parents already find it difficult to meet existing childcare costs, there is the real risk of a childcare crisis causing wide-reaching consequences for employers and the UK economy.

Childcare fees can often exceed mortgage or rental costs for a family, and many working parents find that there is already little or nothing left in their disposable finances after tax, NIC and existing childcare costs have been accounted for.

This will increasingly lead to parents leaving the workforce as the cost of working and sending a child to full or part-time childcare becomes financially unviable. Taking any individual out of the workforce for up to 4 years will lead to a drop in economic productivity and lower tax receipts overall. This will disproportionately affect women as the primary caretakers of children.

While the Government does need to develop a clear strategy for the UK childcare sector, in the absence of this employers will need to consider how to support employees who have children. They could provide increased work-from-home flexibility, which might help mitigate some employees’ need for childcare, meaning that working remains a viable option.

Ele added:

In other cases, employers, either alone or in combination with other companies, could provide employees with subsidised workplace childcare, especially as these facilities can potentially be provided to employees on a tax-free basis.

Would you like to know more?

If you would like to discuss any of the above, please speak to your usual Blick Rothenberg contact or Ele Theochari  using the form below.