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ChildcareLatest NewsPay & benefits

Employers concerned about childcare voucher costs

by John Charlton 3 Jul 2009
by John Charlton 3 Jul 2009

Employers are getting cold feet about providing childcare vouchers for all 52 weeks of maternity leave, according to the British Chambers of Commerce (BCC).


Policy adviser Abigail Morris said members were contacting the BCC at local and national level to seek advice about the implications of offering childcare vouchers. “They want to know the financial risks. We tell them that once a new mother stops receiving maternity pay and is still on maternity leave the employer will have to pay the full cost of the voucher. Only now are some employers cottoning on to the full costs of offering childcare vouchers.”


She said enquiries had started to come in from about six months after changes to maternity pay and conditions were introduced on 5 October 2008, as the first women on maternity leave approached the unpaid period. The changes mean new mothers are entitled to the same terms and conditions that would have applied had they been at work, including during the final 13 weeks of the 52-weeks’ maternity leave.


The changes were stipulated by the EU Equal Treatment Directive and the Pregnant Workers’ Directive, and resulted in amendments to the Sex Discrimination Act 1975 and the Maternity and Parental Leave Regulations 1999.


Jane Anderson, solicitor at Matthew Arnold & Baldwin, said: “There is currently uncertainty over whether an employee’s entitlement to childcare vouchers should be treated as part of the employee’s remuneration or as a non-cash benefit. The issue is untested in the tribunals and courts, but Revenue and Customs last year published guidance that childcare vouchers are non-cash benefits rather than remuneration, even if they have been provided by way of salary sacrifice.


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“If this is correct, the effect is that the value of childcare vouchers should not be included for the purpose of calculating statutory maternity pay (SMP) and the employee is entitled to the childcare vouchers during her maternity leave without sacrificing any SMP. This interpretation is debatable, though it is supported by the fact the vouchers are non-transferable and cannot be converted to cash.”


By ceasing to pay the agreed amount of salary sacrifice into childcare voucher schemes while employees are on maternity leave, employers risk facing claims from employees for unlawful deduction from wages, breach of contract, sex discrimination, being subjected to a detriment connected with taking maternity leave, or possibly even constructive dismissal.”

John Charlton

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