30
Mar 2016
Childcare Vouchers and Salary Sacrifice
The Employment Appeal Tribunal (EAT) has recently held that it is not discriminatory to stop childcare vouchers, provided under salary sacrifice schemes, during maternity leave as they . are part of the employee’s remuneration. The case did, however, make a distinction between vouchers provided as part of a salary sacrifice scheme and those provided on top of a salary. The latter would not be remuneration and would have to be provided during maternity leave.
HMRC had provided guidance to suggest that salary sacrifice scheme vouchers should be continued during maternity leave and the EAT’s decision stated that this guidance was incorrect. The EAT did however acknowledge the complexities of the position and stated that the issue is not a clear one.
Salary sacrifice schemes are offered by many employers, and require employees to give up a part of their salary which is redirected in order to purchase items, such as childcare vouchers. Such schemes offer various tax benefits. Prior to this decision, it has not been clear as to whether childcare vouchers should be treated as remuneration or not and, thus, whether they should continue to be provided during maternity leave or not.
At first instance in this case, the Employment Tribunal held that the childcare vouchers should continue during maternity leave as they were a “non cash benefit”. The employer appealed to the Employment Appeal Tribunal (EAT). The EAT dismissed all of the employee’s claims, although it did so tentatively. The EAT held that childcare vouchers were remuneration and therefore could be stopped during maternity leave. Policy reasons were partly behind the decision; namely that continuing vouchers during maternity leave would impose a high cost on employers whilst giving employees a windfall benefit in circumstances where the reason behind such schemes in the first place is to encourage women with young children back into work. By imposing a further cost on employers, this would discourage employers from offering the schemes.
In light of this case, employers should have in mind the decision of the EAT whilst appreciated that further case law may follow which challenges the decision. On 16th March 2016, the Chancellor announced as part of the Budget that childcare voucher schemes will be closed to new entrants from April 2018, though existing members will be able to continue from that date. The uncertainties of whether the vouchers should be classed as remuneration or a non-cash benefit may be one of the reasons employers decide to discontinue such schemes.
- Like this ? Share with friends