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The hidden pitfalls of salary sacrifice schemes during maternity leave

Updated on 27 November 2015, 773 views

Practices need to be aware of a potential ‘financial banana-skin’ that has been found to exist in the interplay between an employees’ maternity pay and the provision of childcare vouchers under the salary sacrifice regime.

One practice in Cambridge unexpectedly discovered to its detriment when one of their employees went off on maternity leave and received statutory maternity pay that it was then liable to take on the costs of purchasing her childcare vouchers. The sting in the tail came when the practice discovered that it was unable to recoup such additional costs when attempting to reclaim the maternity pay contributions.

It is estimated that about 20% of employers provide employees with childcare vouchers as a benefit of their employment. This is usually by way of a ‘salary sacrifice’ arrangement under which the employee agrees to a reduction in their salary in exchange for the vouchers.

To comply with current legislation such employee benefits must continue to be provided throughout ordinary and additional maternity leave (i.e. for the full 52-week period of leave).

This means that where a salary sacrifice arrangement has been put in place, the non-cash benefit (in this case child care vouchers) that an employer has agreed to provide must continue to be provided throughout the full maternity leave. This applies even where the woman is not or is no longer entitled to receive pay. Practices are therefore advised to exercise caution when considering offering such a scheme to their employees and to seek appropriate advice before doing so.