The EAT has held that as childcare vouchers provided under a
salary sacrifice scheme are part of the employee's
'remuneration' it is not discriminatory or detrimental to
discontinue them during maternity leave. However, where the
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.
The provision of childcare vouchers through salary sacrifice
arrangements is widespread and hitherto there has been some
uncertainty as to whether salary sacrifice makes the vouchers a
'benefit' or a part of 'remuneration'. The
distinction is significant because during maternity leave employers
are obliged to continue to provide benefits as if the employee were
still attending work. Employers can however lawfully suspend normal
remuneration and, if eligible, the employee will receive statutory
maternity pay instead.
The continued provision of childcare vouchers during maternity
leave represents a cost to employers and some have sought to avoid
it by making entry to their childcare voucher scheme conditional on
agreeing to give up the vouchers during a period of maternity
leave. That was the case at Peninsula Business Services Ltd
(Peninsula). Its employee, Ms Donaldson, who was pregnant at the
time of wishing to join the scheme, believed the condition of entry
was discriminatory and so refused to join.
Ms Donaldson brought claims for detriment and discrimination.
She argued that the Maternity and Parental Leave Regulations made
it mandatory to provide childcare vouchers during maternity leave,
and that by making it a condition of entry to the scheme that she
give up this right, Peninsula had treated her unfavourably,
subjected her to a detriment and indirectly discriminated against
The employment tribunal found in her favour and Peninsula
appealed. With some hesitation the EAT allowed the appeal and
accepted Peninsula's argument that HMRC guidance to the effect
that childcare vouchers are benefits and not remuneration is wrong,
and did not provide an answer to the questions of employment law
raised by the case.
The basis on which the EAT reached its decision could be subject
to further challenge and employers should be cautious about relying
on the decision to change their practices. The impact of the case
will in any event be limited by the phasing out of childcare
vouchers from 2018. The Government's intention is to replace
them with its new tax free childcare scheme which is due to launch
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