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  • Published:
    22 March
  • Area of Law:

Maternity sacrifices

It has long been accepted that an employer is not obliged to pay an employee her normal “remuneration” while she is on maternity leave. There has nevertheless been some dispute in recent years about whether childcare vouchers should be treated as remuneration, or whether they are actually a non cash benefit that should continue to be provided during maternity leave. If they are a non cash benefit, and the employer does not provide them, they risk employees bringing claims alleging an unlawful detriment, discrimination on the grounds of maternity and even constructive dismissal.

A recent Employment Appeal Tribunal (EAT) case has confirmed that the answer to this issue very much depends on how the vouchers are provided.

It’s quite common for employers to provide childcare vouchers under salary sacrifice arrangements. The EAT confirmed that if the vouchers are provided under such an arrangement, the employer does not have to provide them during maternity leave. It would not be an unlawful detriment or discriminatory in these circumstances as the salary sacrifice arrangement would form part of the employee’s remuneration.

Employers still need to tread carefully... Vouchers that are not provided under a salary sacrifice arrangement and are provided as a benefit in addition to normal salary would not be remuneration. Employers in these circumstances would still need to provide the vouchers during a maternity leave period. A failure to do so would place an employer at risk of significant claims.

We very much doubt that this is the end of this issue…The EAT has expressed some caution about its decision. Indeed, the decision is contrary to HMRC guidance. It may therefore be wise to wait to see if this case goes any further before deciding whether to change your practices in relation to childcare vouchers.

It’s perhaps worth highlighting that last week’s Budget announced that childcare voucher schemes are to be closed to new entrants from April 2018. Existing members will still be able to continue to receive that benefit for as long as an employer chooses to operate the scheme. However, the issues raised by this case may heavily influence a decision as to whether to continue with any such schemes.

Other announcements in the recent Budget that are of relevance to employment and HR practitioners include:

• The government will launch a consultation in May 2016 regarding the extension of shared parental leave to grandparents.

• From April 2018, termination payments that are subject to income tax on amounts in excess of £30,000 will be subject to employer National Insurance contributions too. Entire termination payments will still be outside the scope of employee National Insurance contributions.

• Legislation will be introduced making all payments in lieu of notice taxable earnings.

Please don’t hesitate to contact a member of the Employment Team if you need any further information about this article or any other employment related matters.

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Andrew Argyle LLB, Practice Director, Potter Clarkson LLP