The cost of childcare can be daunting for any family – and even unaffordable. It’s becoming increasingly expensive, with the average parent spending two-thirds of their salary on nursery fees for children under the age of two. Too many parents are left facing the difficult decision of whether to resume working full-time or reduce their working hours to take care of their children.
But it gets worse. A recent survey from Pregnant Then Screwed revealed that 48% of pregnant mothers will have to cut their maternity leave short – which allows new mothers to recover from the birth and care for and bond with their baby – due to financial hardship.
The same research found almost two in three (60.5%) mothers who had an abortion in the last five years said childcare costs were a factor in their decision to terminate the pregnancy. An additional 43% of mothers said they were considering leaving their jobs due to childcare costs.
The toll on working parents
Whilst the Government does subsidise the cost of childcare to some extent, with 30 hours of free childcare available to most parents with children aged between three and four, it is still a significant burden on working parents. The UK is one of the European countries with the highest percentage of average earnings spent on full-time childcare (23.82%), compared to Sweden, which has a rate of just 2.62%.
The Government also provides a tax-free childcare scheme, but it has delivered varying results due to accessibility issues and delayed payments. This means that childcare costs have put further pressure on working parents. In turn, this has a detrimental impact on overall physical and mental wellbeing as well as how they do their jobs. Claro’s research revealed that two-thirds (67%) of people say financial stress affects their performance at work.
Traditional childcare support
Many employers offer childcare vouchers to subsidise costs, although this was closed to new applicants in October 2018. They can be offered on top of normal pay or by a salary sacrifice arrangement. This method is beneficial as employees don’t pay tax and National Insurance on the value of the vouchers up to certain limits, whilst employers can save on National Insurance contributions.
Employers could also set up directly contracted childcare where an arrangement between the childcare provider and employer is established privately. This also saves on income tax and National Insurance.
However, employee benefits have evolved significantly over the last 20 years and perhaps even more so post-pandemic. Flexible working has significantly risen on the agenda as something people actively seek when applying for new roles. Research shows that 40% of global candidates report that workplace flexibility is among the top three factors they consider. This is particularly important to parents who can reduce their childcare costs by cutting their working hours, if they can afford to, or working more flexibly around their child’s needs.
However, the financial practicality still needs to be considered, as reducing hours means a smaller pay packet. This means additional employer financial support is still necessary if childcare and other household costs are to be met.
Financial wellbeing support
Whilst offering financial products like childcare vouchers is important and offers immediate relief from the costs of childcare, it is not a long-term solution to financial challenges. On the other hand, financial wellbeing support helps employees become more confident about their money and make smarter financial decisions on a longer-term basis.
The demand for financial wellbeing is apparent amongst employees, as according to our research, child support and financial wellbeing support are the top three most important benefits to employees. Despite this, employers are twice as likely to offer mental wellbeing programmes than financial ones.
But the benefits are not only for the employees themselves. We have also identified a strong link between strong financial wellbeing and employee retention. Our research found that over half (52%) of employees would be more likely to stay at their job longer if they had a programme, with 26% saying they would stay years longer. With the clear connection between retention and personal finances, it pays to invest in the wellbeing of the team.
Support can be offered through one-to-one coaching, interactive workshops, and on-demand courses on essential financial topics, all from a professional financial coach.
Employers have the opportunity to play an important role in supporting their team with the high cost of childcare if they want to retain staff and encourage people to return to the workforce after having children. While many employers offer childcare vouchers and flexible working, arguably, this does not go far enough.
Financial wellbeing support is necessary alongside these products to increase their employees’ confidence and financial knowledge. This ensures they feel prepared to make smart money decisions in all aspects of their finances. Not only for their benefit but for the employer, too.