Childcare costs subsidy

The tax- and social security-free childcare allowance (Section 3 No. 33 EStG) is a simple and cost-effective way for companies to support their staff financially with childcare. It is earmarked for the costs of childcare and accommodation for non-school-age children in daycare facilities or with childminders and is paid in addition to the salary. For company employees, this subsidy is often cheaper than a salary increase, for example. Companies that are unable to offer their own facilities or places can use this allowance to ease the financial burden on their employees.

You can find an overview of the framework and requirements in the document Childcare allowance.

Advantages for companies and employees

Although the childcare subsidy can be used very flexibly and individually, is cost-effective and offers employees direct and rapid relief without the need for advance planning, it is rarely used by companies. For this reason, here is a brief overview of the benefits:

Flexible, variable and individual: there is no upper limit for the amount of the subsidy. Even very expensive care can be financed via the subsidy. At the same time, the subsidy does not have to cover the entire costs; it is up to the employer to decide how much he or she wants to contribute. (Proof of the total amount of childcare costs is still required). Furthermore, the subsidy does not have to be granted to all staff. Large companies can limit the group of persons after consultation with the works council.

Inexpensive and effective: The subsidy does not cost the company any additional money if the conditions for tax and social security exemption are met and the amount is paid out in addition to the salary. It can be used immediately and requires hardly any organizational effort. For employees, it means quick and noticeable financial relief.

The allowance is an alternative to a salary increase and can be used if the number of hours is increased or if the contract is changed after maternity leave.

Not the solution for all childcare worries

Even though the childcare subsidy has many advantages, it unfortunately cannot solve all childcare worries and problems. On the one hand, the payment only supports and relieves parents if appropriate childcare facilities and places are available. In addition, the subsidy is only intended for childcare costs for children who are not of school age and does not benefit parents who, for example, have their children looked after in after-school care in the afternoons.

You can still provide financial support for your employees with school-age children. In this case, the subsidy is not exempt from tax and social security contributions. However, the employer can deduct the full amount from tax as operating costs. The same applies to childcare solutions where parents have their children looked after at home.