'Hidden cost of childcare vouchers'

Parents could be worse off as a result of taking advantage of tax-free childcare vouchers, a law firm has warned.

Thousands of families with pre-school age children have signed up to buy vouchers worth up to £55 a week as a "salary sacrifice", before tax and National Insurance deductions, which is claimed can save over £1,000 a year in childcare costs.

However, law firm Lewis Hymanson Small has said that although the scheme offers advantages, many people are unaware of the downside, meaning that thousands may have been mis-sold the vouchers.

The "salary sacrifice" could result in reduced pension rights and lower maternity and paternity pay, Lewis Hymanson Small has said.

Operations director at the firm, Brian Rogers, said: "Many voucher providers only present companies with basic information packs about how to set up schemes.

"This leaves employers under the impression that they can easily manage the schemes, even if they are an SME (Small & Medium-sized Enterprises) without any HR (Human Resources) and accountancy support, and means that employees are not provided with all the facts."

He added: "Businesses are failing to fully appraise the potential pitfalls of salary sacrifice schemes, including pension rights, state benefits and other salary related benefits such as maternity and paternity pay.

"As a result, employees opting for childcare vouchers are losing out financially."

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