Workplace nursery partnerships: a diligence checklist for HR and reward teams

A practical checklist for assessing workplace nursery providers.

The workplace nursery tax exemption is well-established and is an extremely valuable option for employers who want to support working parents with the high cost of childcare.

If you want to partner with off-site commercial nurseries, rather than opening a nursery on your premises, the partnership conditions must be met. Different providers will have different protocols designed to meet those conditions. This is a practical checklist for assessing workplace nursery providers.

The legal footing

• The scheme relies on the workplace nursery exemption in section 318 ITEPA 2003
• The provider should be able to explain, in plain terms, how the arrangement meets the partnership conditions — not just assert that it does

Financing

The test asks for a real and substantial commitment to funding and sharing in the financial responsibility of running a nursery — more than paying fees for places.

• Does the employer make a real, ongoing financial contribution to the partner nursery, over and above the parent's fees?
• Is the contribution more than a fixed fee per child?
• Does the arrangement involve the employer providing financial stability to the nursery partner?
• Can the provider show where the contribution goes and how it reaches the nursery?

Management

The test asks for genuine influence over how the care is provided — more than being consulted from time to time.

• Does the employer, or a representative acting for it, have a real say in how the care is provided — not just occasional updates?
• Is that involvement regular, not a once-a-year formality?
• Where a parent or third party acts on the employer's behalf, are they genuinely empowered to do so?
• How are decisions and involvement recorded, so the management role can be evidenced?

The nursery and eligibility

• Are the nursery partners appropriately registered or approved (for example, Ofsted-registered in England)?
• Is the benefit offered across the workforce on a consistent basis, in line with the eligibility rules — not to a hand-picked few?
• Can parents use a nursery their child already attends, or can the provider bring it into the arrangement?

Evidence and advice

• Can the provider produce the paperwork behind all of the above — contracts, contribution records, management records?
• Has the provider taken specialist tax advice on the model, and can it tell you what it consists of?
• Will the provider let your own adviser review the structure?

The questions to ask directly

1. What does the employer's financial contribution to the nursery actually consist of?
2. What does the employer's management involvement look like in practice?
3. Can we see the management records?
4. What tax advice has the provider taken on the model, and can our adviser review it?

Related reading

• Workplace nursery partnerships: what the rules actually require