Are employees allowed to receive childcare vouchers, or other benefits, whilst on maternity leave?
The simple answer is yes they are. But you are not allowed as an employer to deduct the value by way of a salary sacrifice from any statutory payments. You cannot salary sacrifice from statutory maternity or paternity pay. And this issue is not simply a childcare voucher issue, it applies to most benefits offered to your employees.
But you are allowed to deduct by way of salary sacrifice from any enhanced payments you make to them, over and above the statutory payment. You can also supply childcare vouchers as a salary addition whilst they are on leave.
The broader issue is regarding the advice given to parents.
The first issue is that some parents would be better advised to come off vouchers some time before they go on leave to minimise the impact of the vouchers on their statutory pay. They would need a pay award to re-calculate the correct SMP.
Benefit legislation that has been in place for some time does state that all employees that receive benefits, including vouchers, have the right to continue receiving them if they wish whilst on maternity leave, up to a period of 12 months. The period was extended from 6 months in 2008. It is also noted that companies must comply with any discrimination legislation as well.
There appears to be a section of the legislation that allows for employment contracts to override this, so an employees contract would state that certain benefits would be voluntarily excluded during leave or absence periods.
As far as we are aware the advice coming from the legal profession, HMRC and other bodies, including childcare voucher scheme operators is varied. And of course none of this has been tested in law as far as we are aware.
HMRC themselves cover this topic in their salary sacrifice sheet, http://www.hmrc.gov.uk/employers/sml-salary-sacrifice.pdf
and it clearly states on page 11
'subject to the terms of the contract the employee may be able voluntarily to opt out of receiving the non-cash benefit under the salary sacrifice arrangement. However it is important to emphasise that the employer cannot compel the employee to opt out of receiving the benefit.'
Our interpretation is that it is perfectly legal to have a contractual clause that limits the benefits at times of leave if the agreement is voluntary. The timing of the contracts would be important.
The financial exposure of companies is seen as quite small as most companies do offer existing benefits through leave and absence periods through enhanced benefits packages. And most benefits are given and taken by mutual agreement anyway.
You would be well advised to have a well published benefits policy that is distributed and agreed by your employees. We recommend that you take legal advice if you think it is appropriate, we are not legal or tax advisors so any recommendations are our considered opinion
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