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Maternity Rights – a little clarity
15 March 2016

The Maternity & Parental Leave etc Regulations 1999 set out the rights of women on maternity leave and entitles them, whilst on Maternity leave, to benefit from all their terms and conditions of employment which would have applied if they had not been absent, except those relating to remuneration.

This week we look at a case that considered the status of childcare vouchers issued under a salary sacrifice scheme and whether they should continue to be issued during maternity leave. This has historically been regarded as a “difficult area” with much ensuing confusion, particularly in the light of the HMRC’s Guidance on “Statutory Maternity Leave - Salary Sacrifice and Non Cash Benefits”, which provides that contractual non-cash benefits must continue to be provided during Ordinary Maternity Leave.

In Peninsula Business Services Ltd v Donaldson the Employment Appeal Tribunal had to consider whether it was discriminatory for an employer to offer a woman the opportunity to enter a salary sacrifice scheme on the proviso that, during any period of maternity leave, the entitlement to receive childcare vouchers would be suspended. Mrs Donaldson refused to agree and as a result was not allowed to participate in the Scheme.

The Employment Tribunal held that Peninsula, by refusing to admit her to the Scheme had indirectly discriminated against her.  It found that the scheme was a salary sacrifice scheme and that the vouchers were paid for by the employees out of their sacrificed salary.

However, the Employment Appeal Tribunal, in a very clear judgment, found that:

  1. There was no statutory basis to support HMRC’s guidance.

  2. In the context of a salary sacrifice scheme, the reality was that salary was being diverted to purchase the vouchers to the value of the salary sacrificed. On that basis, the vouchers were to be regarded as remuneration.

  3. Having reached that conclusion it found that, in the context of this scheme, there was no obligation on the employer to continue to provide access to vouchers, as this would be to grant the employee a windfall.

In reaching its conclusion, the EAT also noted that there are many cases in which vouchers are provided as a benefit additional to salary and that, in those circumstances, the 1999 Regulations require the vouchers to continue to be offered during maternity leave.

The decision is extremely helpful to employers as it clarifies the position of salary sacrifice schemes, something that has long been an issue with which employers have had to grapple when participants have been on maternity leave.  Before taking any action to alter benefits offered to employees, employers should seek professional advice on the full implications of this judgment.

For a look at key employment legislative changes in 2016, please join us for our next webinar at 11am - noon on 17 March 2016.

For more information about the issues raised in this case and how they could affect you or to find out more about how the Employment team could help you please contact Barry Stanton on 0118 952 7184 or email [email protected].

Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.

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