Joined: 02 Nov 2004 Posts: 7 Location: South Coast
Posted: Tue May 06, 2008 10:34 am Post subject: Childcare Vouchers and SMP
I have just read in Payroll World that any employee receiving non cash benefits are legally entitled to those benefits free of charge during OML.
Specifically, employers must continue providing the salary sacrifice benefit eg childcare vouchers at the EMPLOYER cost for the 26 week duration of maternity leave. This to be increased to the duration of AML (52 weeks). Can anyone point me to the legislation on this and how far does this go - can it relate to ride to work schemes where the employer ends up paying for the bike completely! what about pension contributions? will the employer have to make up pension contributions missing due to reduced salary through SMP.
This seems to have passed me by so would be interested in anyones thoughts on it!
Posted: Fri May 09, 2008 9:08 am Post subject: Childcare vouchers and SMP
Alison, it looks as if we all trying to avoid this question!
I have not seen the Payroll World article and would be interested to know the basis for the approach described.
The statutory rules as I understand them do not sit very well with the situation where a woman going on maternity leave is already receiving childcare vouchers under a salary sacrifice arrangement. My general advice here is to make sure that maternity leave is a "significant live event" that would allow the salary sacrifice to revert. In many cases, now the woman is at home, her requirement for childcare changes and she may no longer require the vouchers.
What are the statutory rules that apply here? First, the Employment Rights Act 1996, as you correctly say, requires employers to maintain the provision of employment benefits during ordinary maternity leave (26 weeks) and, from October 2008, during additional maternity leave (the additional 26 weeks) as well. Second, what is left of the Social Security Act 1989 requires men and women to be treated equally with regard to pension type benefits during periods of paid statutory leave. While a woman is paid maternity leave (whether receiving SMP or occupational maternity pay), she must be treated, with regard to the employer's pension contributions and pensionable service, as if she is still at work and still receiving her full pay.
The employer pension contribution is clear and unavoidable and I doubt that even "pension holidays" are a legitimate method of avoiding the employer's obligations.
I have difficulty with the maternity leave rights however. There are a number of situations that are not clear. Is a monthly car allowance "remuneration" and should it stop or continue during leave? If it does continue, why should it be included in the average earnings calculation so that, in effect, she receives it twice during the first six weeks? And, in your situation, why should the employer have to continue to provide vouchers during leave without having any way of being paid for doing so, as is provided by her pay cut under the salary sacrifice arrangement? Or continue to pay for a bike to the extent of paying for it in full during maternity leave? It is unlawful to make any deductions from the SMP.
There is clearly a difference between (1) benefits that are already provided at the employer's cost and continue to be provided during leave and (2) benefits that are only provided at the employer's cost because the employee has voluntarily taken a salary sacrifice pay cut.
So, I come back to my first recommendation. The salary sacrifice agreement should include maternity leave as a "significant life event" that brings the agreement to an end. _________________ Ian Congreave, PayPerShop owner
I've found the following guidance 'Statutory maternity leave – salary sacrifice and non-cash benefits' on the HMRC website which is relevant to this topic.
Posted: Thu May 22, 2008 7:50 am Post subject: Matenrity leave and contractual benefits
This just missed my newsletter this week and I hope to cover it next week. In particular, the "misunderstandings" sections in the document are very helpful. But no direct mention of "significant life events"! _________________ Ian Congreave, PayPerShop owner
I don't believe you can force the employee to take a change in her terms of employement as a result of being pregnant, as that would be discriminatory under the SDA.
The HMRC guidance confirms that the employee cannot be compelled to opt out of receiving the benefit. They should be given the option in line with a life event, since they may choose to have the additional salary (albeit it taxed) at their disposal or might change their childcare arrangements. But its something of an assumption that they will be at home and therefore other sproglets will be back there rather than at nursery!
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