Compliance
HMRC guidance regarding Workplace Nurseries and the underlying regulations are the framework that YellowNest built its business around.
 
There are several conditions in the regulations. Here are some of the steps that YellowNest takes to ensure these conditions are met:
Financial Risk
The 'partnership arrangements', where an employer partners with an existing commercial nursery to provide a small number of places for its employees, is very different to a traditional workplace nursery (such as the Bright Horizons model), where the employer would carry full P&L responsibility as the workplace nursery is provided solely for the use of a single employer and their employees’ children. Under the Partnership Arrangements, your liability is limited to the fixed periodical financial contribution you make. That contribution is derived from your Class 1A National Employer savings and managed by YellowNest as part of the Operator Fee we charge (which tracks the Employer NI rate of 15%). HMRC say in their guidance regarding the Partnership Arrangements that where the viability of the nursery is unproven then funding can take the form of a regular financial contribution, which is what we do by allocating funds on a quarterly basis. If an employee terminates their 12-month agreement early, the employer will continue to cover the additional nursery funding for the remaining months (with a cap of £1.1k) to comply with HMRC's requirement of a regular financial contribution.
Nurseries
The nursery must be Ofsted (or equivalent in Wales, Scotland and Northern Ireland) registered, and the care provided on commercial premises. This benefit cannot be used where care is provided through a childminder within a home setting. The child receiving care must be aged 5 years old or under. Most providers take a similar stance to this.
Employer
The employer must make a tangible financial contribution to the running of the workplace nursery. This process is managed by YellowNest on behalf of the employer and is paid for through the Class 1 National Insurance savings generated through the salary exchange. HMRC highlighted in the above communication you referenced that a 'nominal contribution' of £100 does not meet their expectations, this is the standard approach from all other providers in the market. They simply remit an additional £100 per month with little or no oversight as to how that money is spent by the nursery. The YellowNest proposition is unique in that its funding to the nursery is uncapped and directly linked to the salary sacrifice amount as a percentage, therefore the higher the fees, the higher the employer funding will be to the nursery. This funding accrues and is allocated quarterly following a strict process which I will go on to explain below in the 'employee' section.
Employee
The employee, in exchange for receiving their savings, will undertake all activity required of them in terms of acting on behalf of their employer during the process of allocating the funds, which will be facilitated by YellowNest.
The employee, as a representative of the employer and working under guidance from YellowNest, will participate in the decision-making process for best use of funds according to nursery’s needs with the aim of improving the educational outcomes for children. The employee will evaluate areas of improvement, to create a collaborative and supportive process for the nurseries and their development. YellowNest will take responsibility for the procuring of goods and services to the value of the funding and ensure they are delivered to the nursery, thus creating a 360-degree audit trail between all parties.
 
YellowNest has always strived to go 'over and above' in terms of HMRC compliance, always working with HMRC, rather than against them which makes our approach to compliance unparalleled. But as the ultimate safety net, we maintain comprehensive insurance coverage (up to £5M per claim, as per our Terms and Conditions) to ensure the protection of all our clients and participating parents in the event of any changes to HMRC's guidelines.
 It is on that basis that we have rapidly become the provider of choice for businesses such as yourselves, who operate in regulated environments. To date we are working with 1,500+ nurseries and 590+ employers to provide this service, including law firms, global retail chains and financial services institutions. We have paid over £12,000,000 in nursery fees on behalf of working parents, and most importantly have saved them in excess of £5,000,000.