How to calculate if returning to work is financially worthwhile?

Missjoules

Hi all
Firstly apologies if someone has already asked this question. I couldn't find it amongst the threads.
I need to consider if going back to work is worthwhile, or whether we would be better off financially if I stay a full time Mama. My mind is boggling whenever I think about the calculation I need to do to work it out though. There seems to be a lot of different factors to consider. Nursery fees vs salary, but also tax allowance , NI, tax credits, working credits, pension? Does anyone have a definitive list of things to consider or the sums to do? Any help would be greatly appreciated!

onlyroz

Off the top of my head, considerations might be:


- Maternity pay (you would have to pay back anything above SMP if you didn't return to work)
- Salary, including potential salary increases due to promotion
- Cost of childcare (nursery, childminder, nanny and au-pair all have varying costs and flexibility)
- Any benefits, e.g. tax credits and childcare vouchers which would reduce the cost of childcare
- Effect on career of taking a career break, e.g. could you take a few years off and go straight back in at the same level?
- Flexibility of job, e.g. could you do it part time, or could you adjust your working day, or do a job-share with somebody else
- Flexibility of partner's job, e.g. could *they* go part time, or adjust their working day, or do a job-share with somebody else (for example maybe you could work Mon-Thur and your partner works Tue-Fri, and so you would only need childcare for Tue-Thur)
- Possible assistance with childcare, e.g. are there grandparents who would be willing to cover some of it for free?
- Are there any siblings, either now or planned for the future?

SmlSave

The way I worked it out was.....

A, I wanted to go to work but not full time. What do you honestly want to do?

B, Childcare, how much it cost and what the grandparents were happy to do

C, Logistics of dropping off/picking up

After I worked out my daily wage (get an old wage slip and work out a rough calculation after NI, tax etc) minus childcare I currently earn £20 a day.

Keeping it simple:

If you want to be a SAHM, can you afford to live just off your partners wage? (Assuming you have one) If so, then great Working credits and the like are added extras.

If you want to go back to work, does your wage cover childcare/travel costs? If so, hurray Think how many days you'd like to go back to work and see what they say.

SmlSave

I've assumed that you're not in debt hun

Many of the mums I know had no choice about how much they worked as their outgoings and lifestyles needed two incomes.

bambos

It's a tough one really and the cost of childcare is :eek:

When my son reached 2 we took the pilot funding and sent him to pre school for two sessions a week and I found a job which was zero hours and used to work only when he was at pre school, I then took a weekend job working 6am-11am sat and sun whilst my husband was at home with the children.

When my son started school my daughter was already there so I started to look for a new permanent job all the while still working zero hours and then at weekends. I managed to find a great admin job which is 9.15am - 1.15pm mon to fri term time only so I'm able to take the children to school and pick them up all the while being home in the holidays.

The only issue we encounter is if one of the children is ill and then we have to have a mad panic to find a way around things.

Spendless

16 years ago, my then employer did not employ any part-time workers and the childcare bill was equivalent to my net pay. I felt I had not choice but to pack work in, as working full time with no additional household income wasn't viable. When son was 7 months old I found a job working weekends and evenings instead when husband was home and could care for child. Would this be an option?

Kynthia

I don't have a spreadsheet with all the calculations on unfortunately, but I hope you find a site that does.

Is it purely a financial decision as there are non-financial considerations (in no particular order):
What do you want to do?
Will a break from work affect your future earnings greatly or make it difficult for you to get back into (as not all careers can easily take a break)?
Do you have support to help with days your child is sick and nursery won't take them?
What does your partner want?
Does your and/or your partners workplaces allow part time working?
Would you like your child to spend some time at nursery at some point (how I felt when my daughter was 12 months was different to when they were 2 years old)?
How stressful would you find drop offs, coming home late, having less time for home cooking and fun activities compared to the enjoyment of being with other adults, using your skills and having a break from being at home all day (we're all different at what we prefer)?

Financially you need to compare:
Your take home pay
Less main costs of working (eg commute or if you'd get a cleaner)
Plus benefit of childcare vouchers
Less cost of childcare
Plus any working tax credits


Compare this to:
Any working tax credits or assistance you'd be entitled to as a family.
The tax saved on sharing a portion of your tax allowance with your spouse.
Less the costs of regular classes you might do in excess of if you worked.

It's hard to calculate but being at home at least part of tge week does give you more time to save money as a family. Examples include bargain hunting (for anything and everything), cooking from scratch, having time to buy and sell on ebay, researching cheaper deals for utilities and insurances, etc.

AngelOfTheNorth

Agree you need to consider things other than finances too. How important is it for you to keep working versus how much time you would ideally want to spend with your child, how you feel about using paid childcare, whether you have a career that will suffer if you take time out, the potential impact of stopping work even if you don't have a career.

The personal allowance means both partners can earn 11k before tax. This is just under £900 a month once you take out NI, which you would still have to pay. It will likely be more efficient for you both to earn this amount, unless you have particularly high working costs (it 'saves' you about 2k compared to just having one personal allowance, so it's possible your working costs such as commuting are higher, especially when you factor in childcare). Also, if you're married and your spouse is a normal rate taxpayer, you can transfer 1k of your personal allowance to them, meaning the amount you 'save' from having two lots of personal allowance is about £1800 a year.

What are your salaries? People can tell you more about vouchers and childcare tax credits then. Remember also the tax free childcare scheme is coming in next year, which may save you more if you're higher earning.