By Andrew Knorpel on 24 March 2016
The EAT has recently held that stopping childcare vouchers during maternity leave was not discriminatory or detrimental treatment where those vouchers were provided under a salary sacrifice scheme.
Employers will be aware that a woman on maternity leave is entitled to the benefits of all her terms and conditions of employment except sums payable as remuneration which is defined as “wages or salary”. It has long been HMRC’s guidance that childcare vouchers are not remuneration, even where provided under a salary sacrifice scheme. But isn’t that unfair where the employee has only received the vouchers because she has given up part of her salary?
Although the Tribunal found that imposing a requirement that childcare vouchers would be suspended during maternity leave amounted to both discrimination and detrimental treatment, the EAT in Peninsula Business Services Ltd v Donaldson disagreed. The EAT held that the salary sacrifice arrangement was simply a “diversion of salary… redirected prior to it being placed in the employee’s pay packet, in order to purchase vouchers”. In making such a finding, the EAT held that the HMRC guidance was incorrect and that Parliament couldn’t have intended for an employee on maternity to receive a windfall as a result of a salary sacrifice arrangement.
If an employer is considering stopping childcare vouchers during maternity leave, please note that the EAT stated that it was expressing its findings “somewhat tentatively” as it had not had the opportunity to hear full argument on the issue. In any event, it remains unlawful to stop childcare vouchers during maternity leave where they were provided in addition to salary (rather than through salary sacrifice).
Finally, it was also announced last week in the Budget that the childcare voucher scheme will be closed to new entrants from April 2018. Any staff already participating in a scheme will be able to continue to do so as long as their employer keeps running the scheme.