Salary sacrifice childcare vouchers – not discriminatory to suspend
However, the EAT overturned this decision on appeal. It considered that the HMRC guidance, on which the Tribunal has relied in making its decision, was wrong. The EAT said that it could not have been the intention of Parliament to require employers to continue providing vouchers where there was no salary to be sacrificed in respect of them i.e when someone is on maternity leave and their maternity pay has expired.
Peninsula operated a childcare voucher scheme where employees could receive vouchers through salary sacrifice, conditional upon them agreeing that the provision of childcare vouchers would be suspended during a period of maternity leave when Peninsula only paid SMP. The Claimant (Respondent in the appeal) wanted to join the scheme but refused to do so on these terms as she believed they were discriminatory. She brought a claim under Section 18 of the Equality Act claiming pregnancy and maternity discrimination. The Tribunal’s reasoning for upholding her claim was that women on maternity leave were entitled to non-pay benefits during their leave in accordance with the Maternity and Parental Leave Regulations 1999 and as such it must be discriminatory to require an employee to forego such benefits during maternity leave. It relied on the HMRC Guidance which states that, during any period of ordinary maternity leave, contractual non-cash benefits which are provided under a salary sacrifice scheme “must continue to be provided”. The appeal was allowed by the EAT, not least because no legislative basis for the HMRC Guidance had been discovered to endorse their guidance that the childcare vouchers must continue to be provided. The EAT looked at the key question, which was whether the vouchers constituted “remuneration” because, under Regulation 9 of the Maternity and Parental Leave Regulations, remuneration does not need to continue through maternity leave.
Interestingly the experience of the lay members was found to be crucial in this case. They pointed out that many employers provide vouchers as a benefit in addition to salary and in these cases Regulation 9 would require the benefit to continue during maternity leave. However in cases where the vouchers are provided by way of a salary sacrifice, the true picture is that they represent part of salary that has been diverted before appearing in the employees’ pay packet. As such the vouchers are properly considered to be remuneration which can be stopped during maternity leave under Regulation 9.