InsightsInsight - Employment Advice - POSTED: April 5 2016
Entitlement to childcare vouchers on maternity leave challenged
The issue of entitlement to childcare vouchers during maternity leave has been uncertain for some time particularly where these are received under a salary sacrifice arrangement by which employees agree to vary their contracts, reducing their salary to receive the vouchers.
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During maternity leave, an employee is entitled to all her usual benefits, except her remuneration as this is replaced by SMP or contractual maternity pay. The question concerning childcare vouchers is whether they are remuneration and therefore stop during leave or if they are a non-cash benefit and should therefore continue.
This issue has now been considered by an employment tribunal. The case concerned Peninsula Business Services which required its employees to leave their voucher scheme during maternity leave. An employee, Ms Donaldson objected to this alleging she was being discriminated against and she initially succeeded in her claim. The conclusions reached was that it was discriminatory to make employees withdraw from the scheme while on maternity leave.
Peninsula appealed and the case was considered by the Employment Appeal Tribunal (EAT). The EAT has now decided that it is not discriminatory to suspend childcare vouchers paid by salary sacrifice during maternity leave. This is because the vouchers are substituted for pay and they, therefore, amount to remuneration which employees on maternity leave are not entitled to receive. Peninsula was therefore right to suspend vouchers during periods of maternity leave.
The EAT also said that Parliament cannot have intended for employers to have to continue to provide childcare vouchers during maternity leave and the added cost could discourage employers from offering a childcare voucher scheme.
This case provides some helpful clarity although employers will need to take advice before relying on this decision as we do not yet know whether the EAT’s decision will be appealed and contractual arrangements may give employees rights which exceed the basic statutory provisions
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