18 March 2016 #Employment
The Employment Appeal Tribunal (EAT) in Peninsula Business Services Ltd v Donaldson (9 March 2016) has held that suspending childcare vouchers during maternity leave was not discriminatory when carried out via a salary sacrifice scheme.
The Employer in this case operated a scheme which provided employees with reduced salaries in return for tax saving childcare vouchers. One condition of the scheme was that entitlement to childcare vouchers was suspended during maternity leave. The Claimant claimed that this conduct amounted to unlawful discrimination on the grounds of pregnancy and maternity, indirect sex discrimination and an unlawful detriment because she had sought to take maternity leave.
The Employment Tribunal found that suspending membership during maternity leave was discriminatory. Under the Maternity and Parental Leave Regulations 1999, women on maternity leave are entitled to the same terms and conditions that would have applied had they not taken maternity leave, with the exception of terms relating to ‘remuneration’. The Tribunal was of the view, in light of published HMRC guidance, that childcare vouchers did not amount to remuneration and so were a benefit which had to continue during maternity leave.
On appeal the EAT found that although described as a salary “sacrifice” scheme, the scheme was more accurately described as a salary “diversion” scheme. The childcare vouchers represented part of the employee’s salary which had been diverted from the employee's pay packet to the voucher provider, rather than being additional to the employee’s salary. The vouchers, therefore, fell within the meaning of “remuneration” and could be lawfully suspended during maternity leave.
Whilst this judgment is of assistance to employers operating salary-sacrifice schemes, employers who provide childcare vouchers as a benefit additional to salary will need to continue to provide such vouchers during periods of maternity leave.