What is Salary Sacrifice for Childcare?
The complete guide to the Workplace Nursery Scheme: how it works, who qualifies, and how it differs from Tax-Free Childcare vouchers.
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How It Works
Salary sacrifice.
Salary sacrifice.
Simplified.
Your employer pays your nursery fees directly from your gross salary — before income tax or National Insurance. The result: every family saves, every month, automatically.
01
Employer Partners with YellowNest
We handle the entire setup — payroll integration, legal compliance, HMRC reporting, and ongoing admin. Zero burden for your HR team. Your employer also saves on their National Insurance contributions.
02
You Choose Your Nursery
Pick any nursery in our growing network, or ask your favourite setting to join — it only takes a few days. YellowNest pays the nursery directly on your behalf each month.
03
You Save Every Month, Automatically
Your gross salary is reduced by your nursery fee amount. You pay less income tax and less National Insurance — and the savings land in your pocket every payday, no self-assessment needed.
Who It's For
🏢
Employers
Attract and retain talented parents with one of the most valued employee benefits available. YellowNest manages the scheme end to end — you just approve. Your NI bill goes down too.
- Reduced employer National Insurance
- Improved staff retention
- Zero admin overhead
- HMRC-compliant from day one
👨👩👧
Parents
Save up to 41% on nursery fees — potentially thousands every year. Works alongside your 15 or 30 free hours entitlement. No complex forms. No self-assessment implications for most.
- Save 25–41% on nursery costs
- Immediate monthly savings
- Works with free hours entitlement
- One simple monthly agreement
🏫
Nurseries
Guaranteed monthly fee payments, reduced bad debt, and more families actively seeking out YellowNest partner settings. Join our network and grow your occupancy.
- Guaranteed fee payments
- Reduced payment defaults
- Access to employer network
- Marketing & visibility boost
What People Are Saying
"We're saving over £4,000 a year on our son's nursery fees. It took five minutes to set up — YellowNest handled everything with our employer. I genuinely wish we'd found this sooner."
"As HR, I expected this to create admin overhead. There was none. YellowNest integrated with our payroll in a day and our employees love it. Several have mentioned it when accepting their job offers."
"Since joining the YellowNest network, parents specifically ask if we're a partner setting when they enquire about places. It's become a real differentiator for us against nearby nurseries."
Salary Sacrifice Explained
Guides, tax breakdowns, and employer resources — everything in one place.
How Much Could You Actually Save?
A detailed walkthrough of the income tax and National Insurance savings at each tax band, with real-world examples for basic, higher, and additional rate taxpayers.
Read more →HMRC Rules & Eligibility Criteria
The exact conditions your employer and nursery must meet under HMRC's Workplace Nursery Benefit rules — and how YellowNest ensures you stay compliant.
Read more →Salary Sacrifice vs Tax-Free Childcare: Which Wins?
A side-by-side comparison of the UK's two main childcare support schemes — and why salary sacrifice saves most working parents significantly more.
Read more →Setting Up a Workplace Nursery Scheme
A step-by-step guide for HR and payroll teams — from your first demo through to employees saving on day one. Typical setup time: one week.
Read more →How Employers Save on National Insurance
Every pound sacrificed reduces your employer NI liability at 13.8%. We break down what that means for businesses of different sizes, with worked examples.
Read more →Salary Sacrifice & Your P60 / Self Assessment
How reducing your gross salary affects your P60, pension contributions, means-tested benefits, and any Self Assessment obligations you may have.
Read more →Using Your 15 or 30 Free Hours Alongside the Scheme
Salary sacrifice works on top of your government free hours entitlement. Here's exactly how to combine both to maximise your monthly savings.
Read more →Ready to Start Saving?
Calculate your savings in under 30 seconds, or book a free employer demo.