Working Families - Flexible Working Guide

Interactive Flexible Working Guide - Money

Money Saving and Stress Reducing Flexible Working Arrangements

(N.B. these figures are for guidance only - tax credit and benefit amounts depend on a number of factors and you should ring the helpline on 0800 013 0313 for advice on your own situation)

Penny

Penny is a lone parent on maternity leave with her first baby. She feels unhappy about the idea of going back to work and leaving the baby in full time childcare. Her childcare and travel costs really eat into the money she earns and she wonders if she can organise things differently to improve her situation.

This means she makes £221 a week profit on going to work. In fact, Penny’s tax credits for the first tax year after she goes back to work are likely to be higher than this because the Tax Credit Office will use the previous tax year’s income in the calculation. Most of her SMP (or all of maternity allowance if she got that instead) is ignored. However, in the following tax year, the income taken into account will be higher because she will have been at work for all of the tax year. To make the decision about her hours, she needs to look at the long-term picture, not just what happens in the first tax year after she returns. For this reason these calculations use her actual income for the current tax year, not the income for the tax year she had her maternity leave.

She decides to reduce to three longer days a week. The baby's father negotiates an earlier finish on two of those days so he can collect the baby at 4 pm and Penny's mother offers to look after the baby one day a week. She works 9 - 6 pm with 30 minutes for lunch = 8.5 x 3 = 25.5 hours.

This means she makes £217 a week profit on going to work.

This is £4 more a week less than if she worked full time and she is spending two full days with her daughter, which she is much happier with. Another point to remember is that these calculations include the baby element of child tax credit (also called the additional family element), which stops when there is no longer a child under one in the family. So once her daughter is one, Penny will lose about £10.50 a week in both scenarios.

Julie

Julie is a lone parent with a son of 18 months who is disabled and gets Disability Living Allowance (highest rate care component). Her job pays £20,000 pa for a 35 hour week. She has to travel ½ hour each way. Fares are £5 a day. Because of his impairment, Julie's son needs to be cared for in their own home which costs £10.50 an hour, using a carer from a registered agency. She gets direct payments from her local authority which covers five hours of his care. She would have to pay for the remaining 35 hours childcare herself, subsidised by the childcare element of working tax credit. She wants to work but is making very little profit on going to work.

This means she makes £120 a week profit on going to work.

Julie arranges a job share. She now works 18 hours a week. She needs 21 hours childcare and pays fares three days a week. She clears £222 after paying the costs of going to work, spends 2 ½ days with her son and is able to take him to many of his appointments when she's not working.

This means she makes £243 a week profit on going to work.

Asser and Naima

Before having a baby, Asser and Naima had a joint income of £2200 a month. They have a high mortgage and a number of outgoings which make it difficult for them to see how they are going to manage now their baby has arrived. They also do not want to put their daughter in childcare every day.

This means they make £340 a week profit on going to work.

They each decide to reduce to working a four-day week. They will then have only three days childminding which considerably reduces the cost.

This means they make £303 a week profit on going to work.

Both the tax credit scenarios assume that their daughter is still under one, so the baby element is included. Once she has her first birthday, they lose about £10.50 a week in tax credits. The scenarios also ignore the fact that Naima probably had a large part of the tax year in which she was not working – in the first tax year after she goes back to work after maternity leave, their tax credits are likely to be higher than this.

This is only £37 a week less than when they both worked full time but they have a day each in the week with their baby which is what they wanted. They also consolidate their credit cards and car loan on to the mortgage, re-mortgage their house to another lender and extend the term of the loan back up to 25 years (it is a good idea to speak to an Independent Financial Adviser before you do something like this so you fully understand the effect it will have - you can see one for free - look on www.unbiased.co.uk). This reduces their outgoings by a further £200 a month.

Elaine

Elaine has been at home looking after the kids full time for a number of years. Dave has been working long hours and feels he has missed out on spending time with the children. Their two children are now going to school and Elaine is really keen to start working again. At the same time Dave has had enough of working so hard and wants to reduce his hours.

This means they make £372 a week profit on going to work.

Dave proposes reducing his days to four and using the salary saving to employ a part time assistant to do some of the more mundane administration aspects of his job. His employer agrees and he now works three days in the office and one day at home, with the fifth day free to spend with his partner or help at the children's school. Elaine takes a part time job three days a week. She starts at 9.15 a.m so she can take the children to school herself. Dave collects the kids one day a week and they arrange an after school club for the children on the other two days (they use a combination of holiday, swaps and family to cover the holidays.)

This means they make £413 a week profit on going to work.

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