SMP & Childcare vouchers

markh · PayPerShop Newbie Joined: 22 Jan 2008 Posts: 18

Me again, on a roll at the moment

I'm a little confused with regards to the new law coming in regarding childcare vouchers as a salary sacrifice and SMP

I have a couple of points to raise

If an employee is receiving OMP & SMP and has childcare vouchers, can we deduct the childcare vouchers through payroll or do they just receive the vouchers from us

Likewise if in receipt of SMP only can we deduct the vouchers from them

In weeks 40-52 we have no money to deduct vouchers from, so even though the employee is still entitled to the vouchers, how do we reclaim the monies from the employee

Looking forward to the responses

Many thanks

Mark

Ian Congreave · Posted: Thu Jul 03, 2008 6:19 pm Post subject: SMP and Childcare Vouchers

Mark,

Your questions raise the unpalatable issues that are covered in the new guidance from HMRC. If you have not already done so, you may wish to read the summary of the guidance that appeared recently in our Newsletter, at http://www.thepayrollblog.com/salary-sacrifice-and-benefits-during-maternity-leave/

There is one important point to make clear before addressing the specific questions. The salary sacrifice agreement you have made with your employee involves a reduction in contractual salary and the provision of an equivalent value of vouchers. The employer's intention is that the savings from the salary reduction are used to pay for the vouchers. However, once the contractual changes are in place, they are no longer linked directly. You, as an employer are obliged to provide a certain value of vouchers each month. And the employee is receiving a lower salary.

Now that the employee is on maternity leave and receiving SMP and OMP, your contractual obligation to provide vouchers has not gone away. The employee must continue to receive all contractual non-cash benefits during maternity leave, so you much continue to provide the vouchers.

How does the employee pay for them? This is where employers have a misconception - the employee is not paying for them. The contractual change simply involved a reduction in salary, not an arrangement to pay for vouchers - that would not have been a valid salary sacrifice.

So, taking the question about SMP first - you cannot make any deduction from the SMP - not only do you not have any contractual basis for doing so - the employee is not paying for the vouchers - you are not legally allowed to reduce the SMP payments other than for deductions that you would have made if the employee had been at work.

What about the OMP - can you deduct anything from that? In principle you could, but only if you have a provision in the employment contract to do so - and I very much doubt whether you have. If you make such a deduction without contractual authority, it would constitute an unlawful deduction.

So, there you have the dilemma for employers raised by the new HMRC guidance. I may have concerns about whether the HMRC should be providing the guidance in the first place, but I cannot fault the guidance. As an employer you have entered into a contractual agreement to provide childcare vouchers and, during maternity leave, employment law obliges you to continue providing them. The fact that you cannot get any payment from the employee does not change that obligation.
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Ian Congreave, PayPerShop owner

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