When HR teams and business owners first hear about the workplace nursery scheme, they are often surprised by two things. First, that such a benefit exists. Second, that it also benefits the employer. Far from being a costly gesture to support staff, this scheme delivers genuine National Insurance savings to businesses while doing something meaningful for working parents.

What Is the Scheme and Why Should Employers Care?

The workplace nursery scheme is a government backed benefit that enables employees to pay their nursery fees from gross salary before income tax and National Insurance are calculated. For employers, the most important thing to understand is that running this scheme also generates savings on employer National Insurance contributions.

When an employee's salary is reduced through a salary sacrifice arrangement, the employer pays NI on a lower figure. From April 2025, the employer NI rate is 15%, which means the saving for each employee using the scheme can be substantial. For a company with multiple employees using the scheme, the aggregate NI saving can be very significant indeed.

What Employers Are Required to Do

To offer the childcare salary sacrifice arrangement through this scheme, employers must be willing to enter into a formal financial partnership with a nursery or multiple nurseries. HMRC requires that the employer partly finances and manages the nursery setting. In practice, this means making a regular monthly financial contribution to the nursery, typically a minimum of £150 per month per employee using the scheme.

For most employers, this contribution can be funded directly from the NI saving generated by the salary sacrifice. This makes the scheme financially neutral or even beneficial for the business, particularly once you factor in the value of the employee retention and satisfaction benefits it delivers.

The HR Case for Offering This Benefit

Supporting working parents is increasingly seen as a key responsibility for forward thinking employers. Parents who feel supported by their employer in managing childcare costs are more likely to remain loyal to the organisation and to return to work after parental leave rather than reducing hours or leaving altogether.

Childcare is one of the most consistently cited concerns among working parents, and an employer who addresses it directly stands out in a competitive hiring market. Offering the workplace nursery scheme demonstrates genuine commitment to employee wellbeing without requiring significant cost to the business.

The Requirement to Offer the Benefit to All Employees

An important condition of the scheme is that it must be made available to all eligible employees, not just those who request it. This means employers cannot offer the benefit selectively or on a case by case basis. When a company decides to offer the workplace nursery scheme, it is offered as a company wide benefit to every employee who meets the eligibility criteria.

This universality condition is set by HMRC and is part of what makes the scheme legitimate. It also means that once the scheme is in place, it can benefit multiple employees across the organisation simultaneously.

Partnering With Multiple Nurseries

Large employers with staff spread across different locations can partner with multiple nurseries at the same time. There is no restriction on how many nurseries an employer can partner with, which makes the scheme scalable for organisations of different sizes. A company with offices in multiple cities can set up nursery partnerships in each location, allowing employees across the business to access the benefit regardless of where they are based.

How to Get the Scheme Set Up

The process for employers involves working with a specialist who understands the HMRC requirements and can guide the HR team through each step. The key stages include reviewing eligibility, establishing the nursery partnership or partnerships, drawing up and signing contracts with each nursery, and implementing the salary sacrifice adjustment in the payroll system.

The entire process is manageable for most HR teams, especially with specialist guidance. Once the contracts are in place, administration is straightforward and ongoing management is minimal.

Conclusion

The workplace nursery scheme is a win for employers, employees, and nurseries alike. By facilitating childcare salary sacrifice, employers support working parents meaningfully while also saving on National Insurance costs. The scheme is simple to administer with the right support and delivers lasting value in terms of employee satisfaction and retention. If you are an HR professional who has not yet explored this benefit, now is an excellent time to take a closer look.