Summary of Budget

It was announced in the Chancellor of Exchequer budget last week the following:

Employees who pay 40% tax will raise from £42,385 to £45,000 in April 2017.

Tax free personal allowance will raise from £11,000 to £11,500 in April 2017.

Class 2 National Insurance contributions will be abolished in 2018.

Redundancy taxes, there are plans to introduce National Insurance taxes onto redundancy payments.

Are child care vouchers a benefit when on maternity leave?

Childcare vouchers are a relatively common benefit provided by many employers, often provided via a salary sacrifice arrangement.  Whether such vouchers constitute “remuneration” has been debated for some time.  This interpretation is important as it impacts on whether the vouchers are payable during certain statutory leave periods, such as maternity leave.

During maternity leave an employee is entitled to benefit from the terms and conditions of her employment other than terms about “remuneration”.  All other benefits will therefore usually continue during maternity leave.

HMRC guidance classes childcare vouchers administered under a salary sacrifice scheme as a “non-cash benefit” as the vouchers are non-transferable, as they are paid to childcare providers and cannot be converted into cash.

In a recent case Peninsula Business Services Ltd v Donaldson the employment tribunal held that a clause limiting an employee’s entitlement to childcare vouchers during maternity leave was discriminatory because of sex and was unfavourable treatment because she was asserting a right to maternity leave.  In this case Ms Donaldson was pregnant and wanted to join the voucher scheme. However, she was refused entry to the scheme when she would not agree to a clause stating that she would cease to receive vouchers whilst on maternity leave.   The employer provided no enhanced maternity pay and ceased providing vouchers during other periods of absence as well.

The case was appealed and the Employment Appeal Tribunal (EAT) held that HMRC’s guidance entitled “Statutory Maternity Leave – salary sacrifice and non-cash benefits”, which states, in summary, that non cash benefits provided under salary sacrifice arrangements “must continue to be provided” during maternity leave, does not have any legislative basis.  Relying heavily on the input from its lay members, it considered that the proper analysis was that vouchers provided under a salary sacrifice scheme were a result of a “diversion of salary” and should properly be viewed as “remuneration”.  The EAT considered that Parliament could not have intended employees to receive, in effect, a windfall during maternity leave, nor for employers to suffer the additional cost and that the consequences of not construing the vouchers as ‘remuneration’ were damaging to a valuable scheme.

The Immigration Bill – ensure you are compliant

The Home Office wants to make it harder for an illegal worker to live and work in the UK.  The majority of compliant employers will have to be even more vigilant when implementing procedures that prevent employment of illegal workers, particularly in those sectors with a high employee turnover such as retail and hospitality.

In addition to the current £20,000 per illegal worker civil penalty, it will be a criminal offence to hire someone who an employer knows or has reasonable cause to believe is an illegal worker, with an increase in the maximum prison sentence from two to five years for the employer. 

The Immigration Bill introduces a power to close the business of an employer who continues to employ illegal workers for up to 48 hours.  If the business can prove that the employer has conducted right to work checks the closure notice can be cancelled.  Where this cannot be proved the closure may continue and the business will be subject to a greater degree of ongoing checks around its right to work checks.

When carrying out checks you should ensure that:

·         the check must be carried out before an employee starts work, not afterwards;

·         avoid discrimination claims by ensuring checks are carried out consistently on all potential new employees;

·         The Right to Work check is conducted properly, ensure that the documents are dated and signed when they are checked to avoid £20,000 penalty per worker.

If you currently do no carry out Right to Work checks and would like assistance with this, please call us on 01245 261883