Childcare vouchers and maternity leave

June 27, 2016

childcare vouchers and maternity leave

There was a case you may have seen in Personnel Today reported initially in January, regarding the lawfulness of suspending membership of a childcare voucher scheme while an employee is on maternity leave.

The case of Peninsula Business Services v Donaldson, looks at Peninsula’s scheme which provides employees with a reduced salary in return for tax saving childcare vouchers.

The scheme requires employees to suspend their membership during various types of leave, including maternity and paternity leave.

The claimant brought a claim to the employment tribunal after she was refused entry to the scheme as she tried to join whilst she was pregnant. The claimant believed this was discrimination against women on maternity leave.

The employment tribunal held that the employer had committed discrimination.

But on 22nd January 2016, the appeal against the employment tribunal decision was heard.

The employer’s arguments included:

  • The nature of childcare vouchers and whether or not they count as a benefit that must be continued through leave.
  • Employers may be discouraged from offering vouchers in the first place if they have to add the cost of paying the vouchers out whilst an employee is on leave.
  • HMRC’s guidance on this issue has no legal basis.

On March 9th, and once again reported by Personnel Today, it was decided that employers do not have to provide childcare vouchers during maternity leave when offered through salary sacrifice.

The EAT made a distinction between childcare voucher schemes that operate via salary sacrifice, and schemes where the employer provide childcare vouchers in addition to employees’ pay. Where childcare voucher’s count as a ‘benefit’ and additional to salary, these must be continued throughout maternity leave. You can read the full details in XpertHR’s report.

Childcare vouchers will be phased out from 2017 anyway, once the new Tax Free Childcare Scheme comes in. Under the new scheme, arrangements will be made directly between parents and the government.

This post is in: Employment Law Blogs

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