Is this normal procedure, or is my employer being a bit tight?

[bran]

I use the salary sacrifice scheme (childcare voucher scheme) to pay for part of my childcare. When I started the scheme HR sent me a letter confirming the details, which also said that any future pay rises would be calculated net of the sacrificed salary. My pay rises recently have been a cost of living percentage (rather than a fixed amount) so I'm losing out a bit. Is this normal procedure?

Obviously I'm gaining overall with the reduction in tax so I'm not going to stop using the scheme, I just feel it's a bit petty on their part.

[hana]

I think petty too and I would bring this up - a friend's childminder raised her prices when she started using the vouchers to pay her as she told her she was 'saving money' by using them
unfair

[Iota]

IIRC they are right - it can also impact on your pension

[hana]

can impact on pension, but is fairly negligable as only for a few years - or so was told

[ScaryHairy]

That does seem tight.
Salary sacrifice does not cost the employer much (which most employers think is outweighed by the benefits it brings). Surely this means that in effect you are earning less than someone who does not use vouchers who is doing the same job? Have I understood this correctly?

[flowerybeanbag]

Have they given you a reason?

I find this a bit bizarre and mean - it wouldn't occur to me, I would always consider your salary to be the whole figure not the whole figure minus the childcare vouchers bit and would calculate any percentages on that basis, for pay rises/pension contributions/whatever.

[ScaryHairy]

It can impact on your pension, but many employers amend their schemes (if they are defined benefit) so that benefits are calculated by reference to pre-sacrifice salary.

[hana]

are other employees who perhaps use other 'salary sacrifice options' treated same way? (options like bike buying/private health care. etc etc)

[flowerybeanbag]

And yes, surely that means if two people start out doing the same job on the same salary, one has a portion of their salary in childcare vouchers, they both receive 3% or whatever cost of living increase, but only on the money part of their salary, the person taking the vouchers is then earning less.

[bran]

ScaryHairy, I've only been using the scheme for the past 6-ish months so my total salary is the same. But we all get a January salary review, which is usually just a cost of living percentage unless I'd had a promotion. So if there were someone else earning exactly the same as me she would have a dirisory (sp?) pay rise which is slightly larger than mine. And it would compound year on year, every year this (fictional) other person would get a pay rise that was increasingly larger than mine.

It's all a bit hypothetical really as I don't intend to go back after my next adoption leave (which could start in a few months or in 3 years depending on how long it takes to find a match). Anyway the difference between a pathetic pay rise calculated gross and one calculated net will probably be about the same as one day's train fare. I can't be bothered to work it out, but last year my total pay rise was in the low hundreds so it's not really life changing.

[bran]

I haven't asked them why flowery, I should really.

Hana, other options (healthcare/company car/annual travel loan/pension) are not treated the same way. In fact the non-contributory part of my pension is still calculated on my total salary, it's only the annual salary review that uses net salary for calculation.

[Millarkie]

Could it be regarded as indirect sex discrimination (more mothers (women) claiming childcare vouchers than men/fathers???)

Sounds dodgy to me anyway.

[ScaryHairy]

Hypothetically then if someone worked at this company for years, they could reach a position where they were actually being penalised for taking vouchers (as even taking the tax saving into account they would earn less than someone in the same job not taking vouchers). And if people who were using vouchers were disproportionately women, I would be a little concerned about being accused of sex discrimination if I were your employer.

At the very least this is not great HR practice. What they are doing is not in the spirit of childcare vouchers as there could easily be circumstances where no benefit at all is conferred on those using them.

It doesn't sound like you feel it is a big deal, but in answer to the OP it does seem tight to me.

[bran]

I don't think it could be considered sex discrimination, as the scheme is equally open to men and women. I don't think fathers would be any less likely to want to save tax than mothers.

I think perhaps I will just ask HR (repeatedly) to justify/clarify their position on this, until I have wasted more time than they have saved money. (I can be passive agressive when I need to be. )

[mollythetortoise]

that doesn't sound right to me at all. My income increases as a percentage of my pre salary sacrifice salary so i do not lose out in this way. My pension plus other benefits are not affected either as they are all based on my pre sacrifice salary. I think your HR department is wrong interpreting the rules this way. As others have suggested you would have a good case to challenge this (depending on how much it is worth to you etc). Perhaps speak to other mums at your work also using this scheme and see what they think and then discuss this with your HR department together. Not in a confrontational way at first , just a gentle enquiry - see what they say. My understanding is that apart from the cost of administrating the scheme, there are no costs to the employers, only savings, as they do not have to pay tax or NI on the salary sacrificed part of their employees' salary either.. HTH

[flowerybeanbag]

Go for it with the passive aggressive, pester them, particularly as they don't apply the rule to everything. It will be interesting to see what on earth justification they come up with!

Regardless of whether men have equal access to the scheme, if women are more likely to take it up than men, it could be indirect discrimination, especially as they don't seem to apply the same rule to other similar benefits.

I have no idea about the figures about male/female take-up of childcare vouchers, but if it is the case that loads more women take them than men, that could be iffy.

[bran]

Right, I've worked it out.

I sacrifice £423 per month, which is £5076 per year.

Assuming that this year's cost of living pay rise is 2%, the amount that I'm loosing by having my rise calculated net is £101.52, which is probably worth quibbling over.

[flowerybeanbag]

Definitely. Challenge them and see what they say.

[mollythetortoise]

definately worth a challenge. and don't forget the effect is cumulative so will get cost you more and more each year. best nip it in the bud now!

[foxinsocks]

Did you sign anything? You normally have to sign something to confirm you want to participate in a salary sacrifice (I need to check the details but I did this with another salary sacrifice scheme at our work).

In the letter I drew up for our employees to sign, I mentioned that their 'normal' salary (i.e. pre the salary sacrifice) would be used to work out % pay rises and benefits (like pension contributions - I think I had to check with the pension people). All state related benefits (like SMP) are paid out on the salary AFTER the sacrifice.

In fact, from memory, you have to sign something confirming how long you will be in the scheme (normally 12 months).

They are allowed to adopt the stance they have taken - I think I was told I had to decide a policy and stick to it (either paying pay rises on pre or post salary sacrifices) but it seems mindless not to use your pre sacrifice salary - in fact, it seems real penny pinching to do it any other way!

[bran]

Oops, actually I pay £243 a month, so my loss works out to be £58.32 (again assuming a 2% pay rise).

Still worth quibbling over, if only because I've already wasted so much time whinging about it.

[flowerybeanbag]

Anyway, it's something they need to iron out as a policy decision, over time it could cost lots of people quite a lot of money.