Written by Sally Grundy, Senior HR Consultant

If you are an employer who currently provides childcare vouchers, you may be interested in the facts surrounding a recent employment tribunal and EAT case which addressed the issue of whether childcare vouchers should be continued during maternity leave.

Childcare vouchers can be provided by employers by means of a salary sacrifice arrangement. The issue of whether such vouchers constitute “remuneration” has been debated for some time and is important as it impacts on whether the vouchers are payable during certain statutory leave periods, such as maternity leave.

During maternity leave, an employee is entitled by law to “the benefit of all of the terms and conditions of employment which would have applied if she had not been absent, with the exception of any remuneration that would normally have been due to her in the form of wages or salary”.

In this case, the claimant applied to join her employer’s voucher scheme before commencing her maternity leave but was refused entry when she declined to sign a clause stating that she accepted that the vouchers would cease whilst on maternity leave. She claimed that this action was discriminatory because of sex and was therefore unfavourable treatment because she was asserting a right to maternity leave.

In accordance with the HMRC guidance that states that contractual non-cash benefits provided under a salary sacrifice scheme must continue to be provided during ordinary maternity leave, the employment tribunal concluded that it must therefore be discriminatory for an employee to lose childcare vouchers during maternity. The employer appealed the decision.

The EAT allowed the appeal and overturned the employment tribunal’s original decision by finding that there was no legislative basis to support the HMRC guidance. They concluded that the main question to debate was whether the vouchers constituted remuneration and, if this was the case, then the Regulations did not require the vouchers to continue during maternity leave. The Judge held that the vouchers did represent part of salary since pay had been substituted with vouchers under a salary sacrifice scheme. On this basis they were to be regarded as remuneration and could be discontinued during maternity leave. It was made clear that this would not have been the case if the vouchers had been provided as an additional benefit, over and above the employee’s salary.

It is worth noting, however, that the EAT remains cautious about its conclusions and employers should be aware that the EAT findings may be subject to challenge in the future.

Please contact your HR Consultant if you wish to discuss this topic further.