Do Employers Have to Continue to Provide Childcare Vouchers During Maternity Leave?

During ordinary and additional maternity leave an employee is entitled to the benefit of all of the terms and conditions of her employment that would have applied had she not been absent, except those terms relating to her “remuneration”.  There has been some debate in law as to whether provision of childcare vouchers is provision of “remuneration”, such that it ought not to be continued during maternity leave.

In the recent case of Peninsula Business Services Ltd v Donaldson, the Employment Appeal Tribunal (“EAT”) decided that childcare vouchers provided under a salary sacrifice scheme are classed as part of the employee’s “remuneration”, meaning that vouchers do not have to be provided during maternity leave.  It is, therefore, neither an unlawful detriment, nor discriminatory, for the employer to cease to provide childcare vouchers during a period of maternity leave.  Pam Sidhu, Head of the Employment Team, discusses the case and implications for employers. 

Facts

The employer in this case operated a salary sacrifice scheme whereby employees could sacrifice part of their gross salary in exchange for childcare vouchers.  The terms of the scheme included a clause that membership would be suspended during maternity leave.  The employee refused to accept that term, believing it to be discriminatory.  The Employment Tribunal decided that those on maternity leave were entitled to “non-pay” benefits, and that the employer had acted unlawfully in requiring employees to agree to forgo such benefits as a condition of joining the scheme. 

The employer appealed against the Employment Tribunal decision that it had indirectly discriminated on the ground of sex, and subjected her to a detriment for taking maternity leave, based on the terms on which it operated its childcare voucher scheme. 

EAT Decision

The employer appealed the decision on the basis that the childcare voucher scheme was not a benefit, but was a salary diversion.  The appeal was allowed.  The EAT found that childcare vouchers were not a “non-cash benefit”, but were “remuneration”, so they did not have to be maintained during maternity leave. 

The EAT commented that from a public policy point of view, to require the continued provision of vouchers during maternity leave would have the effect of producing a windfall benefit for an employee, at the same time as imposing a cost upon employers and discouraging them from offering such a scheme. 

Comment

Pam Sidhu comments: “For some time, there has been uncertainty regarding how childcare vouchers should be treated under the maternity regulations: whether they should be classed as remuneration or a non-cash benefit which should be preserved during maternity leave.  This case has provided some much-needed clarity on the matter and overruled HMRC guidance which expressed that childcare vouchers were non-cash benefits rather than “remuneration”, even if provided by way of salary sacrifice. Although the obligation to maintain terms and conditions during maternity leave does not extend to remuneration, it remains the case that where childcare vouchers are provided on top of salary (without a salary sacrifice), they are not part of the employee’s remuneration and must therefore be continued”.

For further information or to discuss any employment law issues, please contact Pam Sidhu or any member of the Employment team on 0121 233 4333.