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10 March 2016

No discrimination by employer who stopped childcare vouchers during maternity leave

HMRC guidance states that salary sacrifice child care vouchers should continue to be provided during maternity leave. The Employment Appeal Tribunal has however found this guidance to be wrong in a decision which will be welcomed by many employers (Peninsula Business Services Ltd v Donaldson).

The EAT found that, although described as a salary “sacrifice” scheme, it was actually a diversion of salary in order to purchase vouchers, rather than a “sacrifice” of salary. When looked at this way, the voucher should be seen as part of remuneration, which can properly be discontinued during maternity leave; rather than as a non-cash benefit, which should continue. The EAT thought that to view this in any other way would provide both a windfall to those on maternity leave, and potentially discourage employers from offering such a scheme altogether. This would have a detrimental effect on mother’s returning to work, as the scheme assists with childcare costs through tax advantages.

It is not clear whether this will be appealed, but employers currently following existing HMRC Guidance may want to review their policies. Unravelling existing arrangements would need careful thought however and may prove difficult, so advice should be sought.

This article was written by Emma Bartlett.