Workplace Nurseries: Boosting London’s Workforce & Family Stability

Childcare as Social Infrastructure

Childcare has become one of the defining social infrastructure debates in the UK. In cities like London, where the cost of living is among the highest in Europe and both parents in a household typically need to work, the question isn’t whether families need childcare; it’s whether they can access it, afford it, and trust its quality.

Within this landscape, workplace nurseries have re-emerged as a critical solution. Far more than an employee perk, these schemes directly address the structural challenges facing London’s workforce: enabling parents to return to work sooner, reducing absenteeism, and boosting productivity at a time when the UK is grappling with record-low labour force participation among parents of young children (ONS, 2024).

Why Workplace Nurseries Are Back in Focus

Over the last decade, the UK’s childcare sector has faced persistent crises: staff shortages, rising operational costs, and patchy availability across boroughs. According to the Coram Family and Childcare Survey (2024), the average cost of full-time nursery care for a child under two in London exceeds £350 per week, placing significant strain on household budgets. For many parents, returning to work simply doesn’t add up financially.

Workplace nurseries offer a twofold benefit:

1. Cost savings for families: Employees enrolled in approved workplace nursery schemes can benefit from tax exemptions on nursery fees, significantly reducing net childcare costs.
2. Stability for employers: By providing childcare close to or within the workplace, companies can retain skilled staff, particularly mothers, and lower turnover rates, a significant cost saving for businesses in competitive industries.

Shifting Economic and Demographic Pressures

The UK’s birth rate is at its lowest in 20 years (ONS, 2023), raising concerns about future workforce sustainability. At the same time, sectors such as healthcare, retail, and logistics are experiencing acute labour shortages, many of which require non-traditional hours that standard nurseries can’t accommodate. Workplace nurseries provide a direct lever to support workforce participation and ease demographic pressures by making it easier for parents to balance work and family life.

The Economic Case: Why Workplace Nurseries Benefit Everyone

Workplace nurseries aren’t just beneficial for parents, they’re a strategic investment for employers and the broader economy. A 2023 Institute for Fiscal Studies (IFS) report estimates that childcare barriers cost the UK economy £27 billion annually in lost productivity and tax revenue due to parents, predominantly mothers, reducing working hours or leaving the workforce entirely.

Employers that provide nursery access often see significant returns:

• Reduced turnover: Childcare is one of the leading causes of resignation among parents with children under five. Companies that offer on-site or partnered nurseries report up to 50% higher retention rates among new parents (Bright Horizons Workforce Study, 2023).
• Lower absenteeism: Employees with reliable childcare miss fewer workdays, an average reduction of 2–3 days per year per parent (CIPD, 2022).
• Enhanced recruitment: In a competitive labour market, family-friendly benefits are a major differentiator, especially for industries struggling with staffing shortages such as healthcare and education.

For the economy, improved access to childcare, including workplace provision, supports higher labour force participation rates, helping offset declining birth rates and aging population pressures highlighted in ONS demographic projections.

Policy Context: HMRC Rules and Compliance

The UK offers a unique tax advantage for workplace nurseries through the Workplace Nursery Exemption, a little-known but powerful benefit. Under this scheme, employees do not pay tax or National Insurance on nursery fees if the nursery meets HMRC’s qualifying conditions:

1. The nursery must be made available by the employer, either on-site or via a formal partnership with a local nursery.
2. The employer must have a direct financial involvement, such as contributing to the cost of provision or managing the facility.
3. Access must be open to all employees, not limited to specific roles or income bands.

This exemption can save parents thousands annually while reducing employer National Insurance contributions. However, HMRC has tightened scrutiny around “commercial promoter” schemes that exploit the exemption without genuine employer involvement (Financial Times, 2024). Businesses must ensure compliance to avoid backdated liabilities.

Global Comparisons: London vs. International Peers

Cities like Tokyo and New York have recognised workplace childcare as critical to sustaining urban economies. Tokyo’s government co-funds employer nurseries to tackle its low birth rate, while New York incentivises companies through zoning and tax credits. London, by contrast, lags behind, most workplace nursery offerings are private or ad hoc, leaving untapped potential for public-private partnerships.

Affordability: Closing the Childcare Cost Gap for Families

London’s childcare costs remain the highest in the UK, with average nursery fees for a full-time place for under-twos exceeding £360 per week (Coram Family and Childcare Survey, 2024). Even with government support, many families face what’s often referred to as the “childcare affordability cliff”, where childcare costs outpace earnings, particularly for middle-income households who do not qualify for means-tested benefits but still struggle with London’s living costs.

Workplace nurseries help address this gap through two main mechanisms:

1. Tax Exemption Savings: Under HMRC’s Workplace Nursery Exemption, parents can save the equivalent of 20–40% on fees, depending on their tax band, offering tangible relief for families.
2. Convenience and Reduced Commute Costs: On-site or partnered nurseries reduce travel expenses and time, easing the daily juggle of drop-offs and pickups, a factor frequently cited by parents as a source of stress and lost productivity.

The Policy Gap: 15–30 Hours Funding and Weekend Access

• Funded hours generally apply only to term-time weekdays, excluding weekends and evenings, leaving parents in shift-based roles unsupported.
• Funding rates to providers often fall below market costs, meaning families still face top-up fees and limited nursery availability.
• Workplace nurseries, though eligible to participate, are underutilised in this policy conversation, despite their potential to bridge gaps in flexible provision.

The London Assembly (2024) identified that flexible childcare solutions, including workplace models, could raise parental employment by 8–10%, particularly among mothers and single parents balancing non-standard work hours.

Workplace Nurseries as Social Infrastructure

• They enable economic participation, particularly in sectors vital to London’s 24/7 economy, transport, healthcare, hospitality.
• They counteract demographic decline, supporting parents to have children without sacrificing career ambitions.
• They build community resilience, fostering employer-employee loyalty and alleviating systemic pressures on public childcare provision.

Recognising this potential could reposition workplace nurseries from niche perk to mainstream workforce policy, a shift increasingly urgent amid labour shortages and cost-of-living pressures.

Parent Stories: Balancing Work and Care in a High-Cost City

Consider Sarah, a nurse at a central London hospital. Her shifts begin at 7 a.m. on weekends, long before most nurseries open. Without reliable weekend or early-morning childcare, Sarah faced a choice: cut her hours, or leave the profession entirely. When her employer partnered with a workplace nursery nearby, she gained consistent, affordable care. “I don’t just get to keep working,” she explains, “I feel less guilty, less stretched. I can be present for my patients and still be the parent I want to be.”

Stories like Sarah’s are increasingly common. Parents in transport, retail, and hospitality face similar dilemmas, juggling unpredictable schedules with scarce, costly childcare options. For them, workplace nurseries are not perks, they’re lifelines.

Policy Recommendations and the Path Forward

• Broaden funding flexibility: Extend the 15–30 hours scheme to include weekend and employer-provided care models.
• Incentivise employer partnerships: Offer tax credits or grants for businesses co-funding nursery places, reducing initial setup barriers.
• Integrate into planning frameworks: Require large developments and corporate campuses to consider childcare as part of social infrastructure, much like affordable housing quotas.
• Enhance awareness: Many parents and employers remain unaware of the Workplace Nursery Exemption; clearer government communication could boost uptake.

International examples show this is feasible: Tokyo’s subsidies for 24-hour childcare and New York’s employer incentives both demonstrate that childcare can be positioned as an economic lever, not a fringe benefit.

Conclusion: Reimagining Childcare for London’s Future

Workplace nurseries bridge a vital gap in London’s childcare landscape, supporting parents, enabling workforce participation, and bolstering economic growth. In a city facing declining birth rates, rising costs, and persistent labour shortages, treating childcare as social infrastructure is no longer optional, it is a necessity.

By recognising the wider social and economic returns of workplace nurseries, policymakers and employers alike can reshape childcare provision to meet the realities of modern working families, and create a fairer, more resilient city for generations to come.

FAQs

Q: Who can access workplace nurseries?
Any employee whose employer provides or partners with a nursery; access must be open to all staff to qualify for tax exemption.

Q: How much can parents save?
Depending on income, tax savings can reduce childcare costs by 20–40% annually under HMRC’s exemption scheme.

Q: Can workplace nurseries be used with 15–30 hours funding?
Yes, though availability varies; combining schemes can maximise affordability.

Explore Our Childcare Programmes

Book a Tour