Salary Sacrifice, Child Care Vouchers and Maternity Leave!
by Philip
The devil is in the detail as always. Some employers may operate a childcare voucher scheme, whereby the employee sacrifices, say £60.00 of their weekly salary, in return they receive a voucher from the employer which they can then use to pay for childcare. The benefits for the employee is that they can pay for childcare using gross (ie pre tax ) income, the benefits for the employer being a saving on employers NI.
However according to HMRC guidance issued recently a voucher is a non cash benefit (ie it is not remuneration), therefore the employer will be obliged to provide the employee with this benefit during both OML and AML (for women with due dates after 5 october 2008). The sting in the tail being that the employer cannot deduct the value of the voucher off the employee’s SMP. Ouch!
As always with well intentioned schemes like childcare vouchers, the road to hell is paved with such good intentions. I can see employers saying well if it costs me more to provide vouchers than I get back in benefit, I’m not going to bother.
For those of you who consider life to be too short to read HMRC Guidance documents, then I have pasted the relevant guidance below from page 8:
As explained above contractual non-cash benefits may sometimes be provided under a salary sacrifice arrangement in lieu of sacrificed salary. During any Ordinary Maternity Leave [OML] (weeks 1 to 26) they must continue to be provided.
In future, following amendments made to Regulations in 2008, the period during which such benefits must continue to be provided is being extended. The contractual non-cash benefits must continue to be provided during any Additional Maternity Leave (weeks 27 to 52) as well as during any OML – regardless of any contrary contractual agreement between employer and employee and regardless of any salary sacrifice arrangement
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Very useful info. thanks
early potty training said at March 8th, 2009 at 12:34 pm
Due to this ‘helpful’ legislation my employer is considering withdrawing from the scheme in case the only member of staff on the scheme (me) decides to have a another child! Is this legal?
Carolyn said at August 16th, 2009 at 7:42 pm
[...] get out clause for employers to scrap the scheme given the recent decision that the vouchers are a benefit which must be continued during maternity leave presenting employers with a hidden cost of the [...]
Childcare vouchers » PJH Law - Employment Law Blog » Blog Archive said at November 9th, 2009 at 12:36 pm
Me and my girlfriend come to your site often. We love reading your posts. Thank you!
Gillyard said at January 13th, 2010 at 3:38 am
This is correct regarding employers having to provide the vouchers whilst the employee is on maternity leave but there are other considerations. The employer will save the 12.8% employers NI for all employees on the scheme, both men and women. Also employees must be already in the scheme, therefore its not for all employees who go on maternity, only those currently receiving vouchers through salary sacrifice.
Our clients at Apple Childcare Vouchers have found that their savings generated in employers NI are far greater than any vouchers for employees on maternity.
Marcus said at March 19th, 2010 at 11:24 pm
Very helpful info. My employer is not aware of this so am arming myself with as much info as possible before I approach them. Can you confirm if I increase my monthly voucher amount, are they liable for this or do I have to have been recieving a set amount for a certain period of time?
Karen said at May 20th, 2010 at 3:25 pm