Do you have to continue to provide childcare vouchers during maternity leave?

Dr Anne Sammon considers the important issues employers should be aware of when dealing with the provision of childcare vouchers during maternity leave.

There has always been debate about whether an employer is required to continue to provide childcare vouchers during periods of statutory maternity pay (SMP) and the unpaid portion of maternity leave. The Employment Appeal Tribunal considered this issue in the recent case of Peninsula Business Services v Donaldson.

The issue of “remuneration”

Whether an employer needs to provide childcare vouchers during maternity leave depends on whether these are deemed to be remuneration or not. This is because the legislation on maternity rights (the Maternity and Parental Leave Regulations 1999) provides that an employee on maternity leave must continue to receive the same terms and conditions as they did prior to the leave, except for those that relate to remuneration. The definition in that legislation of “remuneration” is open to interpretation and historically many employers have relied on HMRC guidance that provides that contractual non-case benefits provided under a salary sacrifice scheme (which would include childcare vouchers provided in this way) must be provided during maternity leave. Similar advice was also issued by the former Department of Business, Enterprise and Regulatory Reform.

Peninsula Business Services v Donaldson

In this case, the Claimant alleged that a term of her employer’s childcare voucher scheme, under which employees had to agree that during maternity leave, the employee’s right to vouchers would be suspended, was discriminatory. Surprisingly, and in spite of the HMRC guidance on this point, the EAT held that it was not.

The Claimant was, unfortunately, unrepresented and therefore there are a number of runnable arguments that do not appear to have been presented as part of her claim. In particular, the way in which the EAT characterised a salary sacrifice scheme, as being a diversion of funds, rather than the employee truly sacrificing her salary, might be open to challenge.

Should employers be changing their childcare vouchers schemes?

Those employers that already suspend childcare vouchers during maternity leave may take some comfort from the decision in Peninsula Business Services v Donaldson. However, the EAT heavily caveated its decision on the basis that the Claimant was unrepresented and they were therefore concerned that all the relevant evidence and legislation might not have been put before them.

Where employers continue to provide childcare vouchers during maternity leave (including periods where SMP is paid and the unpaid portion of leave), there is nothing in the decision Peninsula Business Services v Donaldson that means that this practice needs to change. Given the uncertainty around whether the EAT’s decision could be subject to challenge, employers would be sensible not to rely solely on the outcome of this case when deciding whether to make any amendments to their existing schemes.

If you have any questions in relation to this article or have a particular issue that you would like Anne to address in a future edition, please email anne.sammon@simmons-simmons.com

This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.