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.
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.