Employees who are due to give birth on or after 5 October 2008 have acquired a number of additional rights under the Maternity and Parental Leave etc and the Paternity and Adoption Leave (Amendment) Regulations 2008 (SI 2008/1966) (the "New Maternity Rules"). In summary, these additional rights mean that:

  • Employers should not discount additional maternity leave ("AML") when assessing seniority or non-contractual benefits based on length of service; and
  • With the exception of remuneration, all benefits available to a woman whilst on ordinary maternity leave ("OML") or should now also be applied during AML.

Below, we answer a series of common questions raised by employers in respect of their treatment of benefits for women on maternity leave. Reference to "maternity leave" refers to both OML and AML inclusive.

  1. Should employees continue to be paid car allowance whilst on maternity leave?

     There are varying views on this issue, with come commentators stating that payment of a car allowance is a non-cash benefit which should continue to be paid during maternity leave.

    It is our view that car allowance should be treated as remuneration and is therefore not payable to employees on maternity leave. A women's right to remuneration stops during maternity leave and is replaced with maternity pay.

    In support of this position, car allowances are often regarded as uplifts on salary and attract NICs, suggesting that they should be treated as wages, not as benefits. Also, when calculating normal weekly earnings for the sake of statutory maternity pay ("SMP"), any payment that is liable to NICs must be taken into account. Since the employee receives 90% of her normal weekly earnings during the first six weeks of maternity leave, she will in effect receive 90% of the car allowance as part of SMP and will therefore receive more SMP than an equivalent employee who has taken the car rather than the allowance. Maintaining the car allowance as a separate benefit would therefore lead to a degree of double-payment for the first six weeks.

  2. How should employers deal with salary sacrifice schemes for employees on maternity leave?

     The following will apply to all salary sacrifice schemes, including a scheme for the provision of Childcare Vouchers.

    A salary sacrifice scheme may also apply in a car lease situation. For example:

    • Option A: use of cheaper car
    • Option B: salary sacrifice and use of a more expensive car

    Legally, salary sacrifice benefits are contractual benefits and should therefore be paid throughout the duration of maternity leave.

    SMP cannot be sacrificed which means that the employer will need to meet the salary sacrifice cost for women receiving SMP only, throughout their maternity leave. Employers will also need to meet the salary sacrifice cost for women who have exhausted their entitlement to SMP (e.g. for weeks 40 - 52).

    Employers can deduct salary sacrifice payments from enhanced maternity pay provided this does not impact on the level of SMP. Deduction from enhanced maternity pay, however, may result in an inequitable outcome, with an employee who salary sacrifices receiving a smaller overall package than an employee who does not. Maternity policies should be drafted carefully to avoid this outcome.

  3. Should employee-paid benefits in respect of a Flexible Benefits Scheme continue to be paid during maternity leave?

     If the Flexible Benefits Scheme works on the basis of salary sacrifice benefits should be treated as discussed at question 2.

    If the Flexible Benefits Scheme works not on a salary sacrifice basis but by giving employees preferential rates (e.g. reduced gym membership rates where payment is made by the employee to the gym) this should not be affected by the employee being on maternity leave. The employee can choose to continue the payments but the employer is not obliged to pay the benefit on behalf of the employee.

    If employee and employer-paid benefits are linked (e.g. the employer will make a contribution of 0.2% of salary provided the employee makes a contribution of 0.1%) and the employee chooses to discontinue their contribution during maternity leave the employer is entitled to also stop their contribution. An example given by one of the participants of such a situation was with regard to healthcare.

  4. Must employers continue to pay Give as You Earn (GAYE) contributions on behalf of employees during the course of their maternity leave?

     Donations made under a GAYE scheme do not tend to be made as part of a salary sacrifice arrangement although they are tax allowable deductions. The effect of GAYE is that the employee chooses to make a donation of a certain amount but the amount deducted from their salary is less due to the tax benefit e.g. the employee chooses to make a donation of £5 per month but the amount deducted from their salary is £4. This is a cash benefit and there is therefore no requirement for the employer to continue to make the payment during maternity leave.

  5. Are employees entitled to receive commission in respect of the period when they are on maternity leave?

    No. Commission is considered remuneration for the purposes of the maternity legislation. A woman's right to remuneration stops during maternity leave.

  6. Do women on maternity leave accrue annual holiday during the whole period of maternity leave? Can the employer stipulate when this accrued leave must be taken by? Can the employer ask the employee to take their full accrued leave entitlement at the end of maternity leave?

     Women on maternity leave should accrue both statutory and contractual holiday throughout their maternity leave.

    An employer can stipulate when the accrued leave must be taken by and the employer can ask the employee to take their full accrued leave entitlement at the end of maternity leave.

    Where an employee takes 52 weeks maternity leave the employer should consider rolling over some or all of accrued annual leave into the next holiday year. There is currently no obligation to do so however.

  7. Are employees entitled to accrue public holidays for the period they are on maternity leave?

     This is a grey area. If an employer's policy previously allowed employees to accrue public holidays during OML, it would be consistent to extend this throughout additional maternity leave AML.

    Employers implementing such a policy could consider removing this entitlement altogether however. It is our view that employers are not required to allow employees to accrue public holidays during maternity leave, if the public holidays are additional to the minimum statutory entitlement. As explained at question 5 employees are entitled to accrue their minimum statutory entitlement throughout their maternity leave.

  8. Does an employee whose baby is born prematurely but had an Expected Week of Childbirth ("EWC") after 5 October 2008 fall under the New Maternity Rules?

     Yes. The New Maternity Rules refer to the EWC rather than the actual date of birth of the child. An employee is required to inform her employer of her EWC 15 weeks before the EWC. Employers should use this date when determining whether or not a woman falls under the New Maternity Rules.

Catriona Aldridge
Dundas & Wilson CS LLP
catriona.aldridge@dundas-wilson.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.