Salary Sacrifice schemes can be discontinued during maternity leave
11 March 2016
A recent Employment Appeal Tribunal has made a significant ruling in that it is not discriminatory to discontinue childcare vouchers during maternity leave.
Women on maternity leave are entitled to non-pay benefits pursuant to the Maternity and Parental Leave Regulations 1999. Based on HMRC guidance that contractual non-cash benefits provided under a salary sacrifice scheme must continue to be provided during ordinary maternity leave, an Employment Tribunal held that it must be discriminatory for an employee to lose childcare vouchers during maternity. Peninsula Business Services appealed.
The Employment Appeal Tribunal allowed the appeal and substituted a decision that the claim should be dismissed. No legislative basis had been found to support the HMRC guidance. The key question was: did the vouchers constitute remuneration? If they did Regulation 9 of the Regulations did not require this to continue during maternity leave. Langstaff J 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.
This is a significant change that will affect salary sacrifice arrangements when terms are renewed. Although the case was about childcare vouchers, it could be applied to other ‘benefits’ provided through a salary sacrifice arrangement. This ruling means agreements can be simplified because maternity can be treated like other longer absences; it doesn’t need to have separate terms. However salary sacrifice agreements are contractual variations, so employers cannot change the rules straight away as they are bound by their current arrangements until they are renewed (unless the terms include provisions for amendments).
This case should lead to revised HMRC guidance; the Policy Team will monitor amendments closely and advise members and the profession accordingly.
See the CIPP training area of our website for details on a half day Salary Sacrifice course which will provide delegates with up to date information.