The Employment Appeal Tribunal (EAT) has come down in favour of employers in clarifying that childcare vouchers do not need to be provided during maternity leave if they are provided under a salary sacrifice scheme. This had been a grey area until now.

Recent case on childcare vouchers and maternity leave 1
Pregnant” courtesy of Jacob Bøtter, licensed under CC

The law gives staff on maternity leave the benefit of all of benefits except normal pay. This includes ordinary childcare vouchers but until now, employment solicitors have not known whether that includes childcare vouchers provided through a salary sacrifice scheme.  Some said it was part of normal pay, others said it looked more like a perk. Guidance from HMRC was that it was pay but some employers chose to make savings and not provide it.

One employer going down this route was an employment/HR company. It made a saving but risked findings of pregnancy discrimination if a test case proved it wrong.

The EAT has held that this is a lawful practice. It warned though that where employers provide vouchers as a benefit in addition to salary rather than by way of salary sacrifice you have to continue it during maternity leave.

However, where the vouchers are provided by way of salary sacrifice, the vouchers are part of salary that has been diverted before appearing in the employee. So, as en employee you forgo this benefit during maternity leave and that is part of the cost to you of the tax advantage you get when you are not pregnant.

The EAT acknowledged that this was a case that could have gone either way. It may be that a later EAT or Court of Appeal case overturns it but for now this decision is binding on Employment Tribunals and employers can follow it safely.

Case report: Peninsula Business Services Ltd v Donaldson