Member Article

North East employers at risk over childcare vouchers

North East employers at risk of naughty step over childcare vouchers.

• New tribunal ruling complicates childcare vouchers during Maternity Leave.
• Whether they should be offered depends on contract
• North East employers urged to check their employment terms

Maternity discrimination is one of the big ones to avoid for UK employers. It can lead to huge pay outs in tribunals, cause upset and stress and lead to reputational damage. Whilst many instances of such discrimination are fairly obvious, the issue of childcare vouchers is not.

Jayne Hart from The HR Dept Newcastle explains why these waters are a little muddy: “When an employee goes on Maternity Leave, she is not entitled to remuneration from her employer – instead Statutory (or contractual) Maternity Pay kicks in. What she is still entitled to, however, are her usual benefits. So far, so good. Where it starts to get complicated, however, is that childcare vouchers tend to be perceived as a benefit, but actually they are often acquired by the employee giving up some of their salary before tax – an arrangement known as salary sacrifice. Therefore, the benefit is funded by remuneration.”

Jayne continues: “Given this technicality, perhaps surprisingly, HMRC’s guidance had been that employers should continue providing the childcare vouchers. This led to the odd situation where employees were supposedly sacrificing salary that they were not receiving to get the benefit, and employers were the ones having to pick up the tab.”

These technicalities have been put under the microscope recently by the Employment Appeal Tribunal, who have ruled that HMRC’s guidance that they should be paid had no legislative basis. So what does all this mean for businesses in the North East?

Jayne concludes: “The Employment Appeal Tribunal’s decision is generally favourable to employers, but has a sting in the tail for some. If childcare vouchers are offered as a salary sacrifice arrangement, there is now no need for them to be provided during Maternity Leave. However, if they are an additional benefit then they will still need to be provided. Our advice would be to review how your childcare vouchers are offered to staff, to ensure you treat staff correctly during Maternity Leave.

This was posted in Bdaily's Members' News section by Jayne Hart .