Can we deduct childcare costs from wages?

As a rule, there is no automatic right to offset outstanding nursery fees against an employee’s wages.

One must remember that whatever may be agreed, the right to make a deduction from an employee’s pay is not without limits.

First of all, fees owed for childcare are those of a client and should be viewed in terms of the agreement between the nursery and the client. The fact that the client is also an employee does not give you the right to merge the two together, practically speaking.

Even if there is something written into the employee’s terms and conditions of employment, about deductions, there would need to be an explicit term covering this situation.

Always make sure that deductions are listed in the contract of employment. However, employers in Early Years should be careful as you are not entitled to deduct childcare that you provide from an employee’s wages if that takes them below the national minimum wage (NMW). Childcare provided by others is allowed, but as you will benefit from the deduct, this will always impact pay from the perspective of the NMW.

Breaching the NMW Regulations is an offence under the regulations and an employer can be subject to various outcomes ranging from civil law remedies such as a notice of underpayment through to criminal prosecutions and fines of up to £5,000. There is also the naming and shaming aspect that can be used.

Remember that just because an employee is also a parent who uses the nursery, that you cannot merge the two roles into one. It is best to treat the two aspects as separate and do not assume can be automatically clawed back. If they stop paying for their childcare, the childcare space should end, if they end up in debt to you, see if you can agree a payment plan and if not treat as you would any other debt.

If you need any assistance with any aspect of managing the employment relationship please call 01527 909436.