Guide · For employers
How to set up a workplace nursery benefit.
A step-by-step guide for the HR or finance person setting it up — the conditions to meet, who runs what, and how to get it live the compliant way.
Before you start
What a workplace nursery benefit is.
A workplace nursery benefit lets your employees pay their nursery fees from pre-tax salary through Halo Pay, which lowers their taxable pay. It sits under Section 318 ITEPA 2003 — the long-standing workplace nursery exemption.
You run the benefit yourself; you don't buy a packaged product off the shelf. Halo is the software that makes it manageable — it handles the partnership setup, nursery onboarding, governance documentation, and payment flows, so you can run your own programme without building the compliance infrastructure.
Step by step
Setting it up, the compliant way.
- 1
Understand what you're setting up
A workplace nursery benefit lets your employees pay their nursery fees from pre-tax salary through Halo Pay, lowering their taxable pay. It sits under Section 318 ITEPA 2003 — the long-standing workplace nursery exemption, which is separate from childcare vouchers (closed to new entrants in 2018) and from Tax-Free Childcare. You run the benefit; you don't buy a packaged product off the shelf.
- 2
Check the four conditions
The exemption applies where four conditions are met: the care is for a qualifying child under 16; the premises are registered and not wholly a private dwelling; the employer is at least partly responsible for both financing and managing the provision — not simply buying places; and the benefit is open to employees generally. The financing-and-management condition is the one most arrangements get wrong, so design for it from the start.
- 3
Choose how you'll provide the nursery places
Most employers don't run their own nursery, so Section 318 allows a partnership arrangement with one or more registered nurseries. Decide whether you'll partner with the nurseries your employees already use or a smaller set near your sites. Any Ofsted or Care Inspectorate registered nursery in the UK can be brought in.
- 4
Set up genuine financing and management involvement
To meet the third condition, the employer must be properly party to both the financial support and the governance of the nursery provision — not a fixed fee paid to a third party who does everything. Put the partnership agreements, the financial contribution, and a regular governance cadence in place, and keep a record of each as you go so the involvement can be evidenced.
- 5
Configure Halo Pay in payroll
Add Halo Pay as a pay element in your payroll system and apply each enrolled employee's nursery payment so it comes from pre-tax salary. The employer pays the nursery directly; Halo handles the calculation and the supporting documentation. See the payroll setup guide for per-provider steps.
- 6
Open it to your employees
Because the benefit must be available to employees generally, communicate it to everyone — not just senior staff. Employees with a qualifying child enrol, confirm their nursery, and start paying fees through Halo Pay. A typical family saves in the region of £3,000 to £8,000 a year, depending on salary and nursery fees.
- 7
Keep your compliance record current
The conditions aren't a one-off check — they need to hold for as long as the benefit runs. Halo records the partnership agreements, financial contribution, and governance meetings as you go, so the arrangement stays evidenced. Take your own independent tax advice on your specific position; Halo's full methodology is available on request.
The legal basis
The four conditions, in one place.
The exemption under Section 318 ITEPA 2003 applies where all four of these are met. Step 2 above is where you check them; this is the short reference.
A · Qualifying child
Care is for a qualifying child under 16 who lives with the employee, or for whom the employee has parental responsibility.
B · Qualifying premises
The premises are registered and not wholly a private dwelling.
C · Employer involvement
The employer is at least partly responsible for both financing and managing the provision — not simply buying nursery places.
D · Available to all employees
The benefit is open to employees generally.
For the full background on the legislation, see our Section 318 explainer, and the payroll setup guide for the Halo Pay configuration in step 5.
This is not tax advice. Actual savings depend on your circumstances, employer participation, and nursery costs.
FAQ
Common questions about setting it up.
- How long does it take to set up a workplace nursery benefit?
- The benefit itself can be set up quickly — the work is in getting the partnership arrangements and the financing-and-management involvement right, and configuring payroll. Halo handles the partnership setup, nursery onboarding, governance documentation, and payment flows, so an employer can get the benefit live without building the compliance infrastructure itself.
- Do we need to run our own nursery?
- No. Where an employer doesn't have its own premises, Section 318 allows a partnership arrangement with a registered nursery. The premises must be registered and not wholly a private dwelling, and the employer must be at least partly responsible for both financing and managing the provision — not simply buying places.
- Which nurseries can we use?
- Any Ofsted or Care Inspectorate registered nursery in the UK can be brought into the arrangement. Many employers start with the nurseries their employees already use.
- Who runs the benefit — us or Halo?
- You run your own workplace nursery benefit. Halo is the compliance platform that handles the employer partnership setup, nursery onboarding, governance documentation, and payment flows. Halo does not run the nursery and does not become the provider.
- Is this the same as childcare vouchers or Tax-Free Childcare?
- No. Childcare vouchers closed to new entrants in 2018, and Tax-Free Childcare is a separate government benefit with its own cap. The workplace nursery benefit under Section 318 is employer-run, has no equivalent cap, and can be considered alongside Tax-Free Childcare depending on a family's circumstances.
- How much can employees save?
- A typical family saves in the region of £3,000 to £8,000 a year, depending on salary and nursery fees. This is not tax advice — actual savings depend on individual circumstances, employer participation, and nursery costs.
Ready to set yours up?
Halo makes the workplace nursery benefit manageable for any employer, any size. Talk to our team and we'll walk you through it.