Employment Appeal Tribunal rules on suspending childcare vouchers during maternity leave

The Employment Appeal Tribunal (EAT) has ruled that childcare vouchers administered by way of salary sacrifice scheme form part of an employee’s remuneration and may therefore be suspended during maternity leave.

During maternity leave an employee is entitled to continue to receive those benefits that she would have received had she not been on maternity leave.

Remuneration is expressly excluded from these benefits and is generally replaced during maternity leave by maternity pay. Whether or not childcare vouchers fall within the definition of “remuneration” is the crucial question that employers need to ask in determining whether they are obliged to continue to provide employees with childcare vouchers during maternity leave.

In the recent case of Peninsula Business Services Ltd v Donaldson, Peninsula invited employees to participate in a childcare voucher scheme by way of salary sacrifice agreement. Peninsula required employees to agree that their right to childcare vouchers would be suspended during periods of maternity leave and this was made a condition of entry to the scheme. Ms Donaldson refused to join the scheme on this basis. She consequently brought claims for unlawful detriment and discrimination on the grounds that she had been treated less favourably for claiming her right to maternity leave and had been indirectly discriminated against in account of her sex.

The EAT overturned the first tribunal’s decision and dismissed both of Ms Donaldson’s claims. The EAT held that childcare vouchers provided by way of salary sacrifice should be regarded as remuneration and that the scheme did not constitute unfavourable treatment.

The EAT did, however, acknowledge that childcare voucher schemes will not always constitute remuneration. The EAT made it clear that if an employee is entitled to the vouchers on top of their normal salary then the childcare vouchers could be properly classified as a non-cash benefit meaning that employees would be entitled to continue to receive them during maternity leave.

Whilst the Tribunal’s decision is significant and will be welcomed by many employers the decision should also be treated with some caution. The Tribunal itself held that it had drawn its conclusion in this case “somewhat tentatively” and acknowledged that it may not have identified all of the relevant legislative or other considerations in making its decisions. The EAT’s decision could well be challenged in the future and employers may wish to see how case law develops before making any dramatic changes to existing practices.