What is my "salary" while on maternity leave?

[namechangeforissue]

I'm on maternity leave with DC2 and DC1 goes to the workplace nursery while DC2 is due to start there shortly. Because of the fixed start dates for nursery and the fact I'd like DC2 to settle for a while before I start back, I chose to start DC2's place a couple of months before my start back date. This also means I can do one or two KiT days before I officially start back.

I pay for DC1's place through a salary sacrifice scheme and the payment has continued though I'm now on SMP (have just exhausted the occupational maternity pay).

The salary sacrifice scheme allows for changes midway through the year for any life event (e.g. birth of a child). However, HR are now telling me I can't add DC2's nursery to my salary sacrifice part way through the year because my "salary" is now too low (for the months when I'm on SMP, taking the salary sacrifice amount out would mean my wage was below minimum wage - if you have had this type of scheme, it basically means employers have to pay their employees benefits during such months).

I am however allowed to pay my pension contribution during the months I'm on SMP, and the rate I pay is the same as I would normally i.e. it is dependent on my contractual salary (not my pay during those months nor actually my annual take home cash which would be salary earned before going on mat leave plus occupational mat pay plus SMP).

Our union rep says she's confused too and is referring me higher.

Can anyone who knows about these things tell me whether my "salary" has changed? Clearly my take home pay has but previously when I have changed salary (change to part time hours, promotion), I've been officially notified of my change in salary by HR. When you go on maternity leave you are NOT told your salary has changed - I'm not sure they'd even be allowed to do that?

[Rockchick1984]

You aren't receiving a salary at present though so you wouldn't be able to take out a new salary sacrifice. Your contractual benefits continue while on mat leave which is why you still receive the current vouchers, and why they can't take them out of your SMP, however your employer don't have to fund any extra that you weren't already claiming.

[PenguinsandtheTantrumofDoom]

Sorry, I am a bit confused. Are you saying that, if you were allowed to add your DC2 to the nursery, because of the salary sacrifice set up, your employer would have to pay it until you return to work?

If so, yes, they are perfectly within their rights to refuse. They have to maintain your benefit during maternity leave, not agree to enhance them. I would be surprised if there isn't an option to pay 'cash' for the nursery though?

[namechangeforissue]

They would have to pay the DC2 salary sacrifice for a few weeks before I go back onto salary (I'm planning to use up some annual leave, too, before I physically set foot in the office). They already do this for DC1.

I can't find anywhere that says they have a right to refuse this, and it seems odd that I'm allowed to pay pension contributions based on my "salary" but they won't let me set up nursery payments based on my "salary". It seems rather in their favour that the first one is based on my contractual salary but the second one is based on my SMP. Surely my contractual salary should remain the same for both purposes.

[PenguinsandtheTantrumofDoom]

It isn't about your contractual salary. The pension is a whole other issue and 'salary' is a red herring. It isn't about salary, it's about benefits. It is the fact that it is a benefit that means it continues even when you don't have enough salary to cover it.

Your childcare scheme is that you give up salary to get the benefit of childcare. This is the same as childcare vouchers. But just as with childcare vouchers, whilst they have to cover what you have in place when you go off on maternity leave, they don't have to make your benefits better.

You are basically expecting that you should be able to demand that your employer pays your childcare. Why would they have to do that?

[FantasticMrsFoxx]

I'm about to go on maternity leave. I can't claim childcare vouchers until I'm back at work - although as you, following ML I'll be taking annual leave so 'earning' my pre-leave wage although not physically in the office for 4 weeks.
As stated above, your childcare scheme is 'salary sacrifice' (saving on tax and NI in your monthly pay packet). When paid SMP, your company can't offer the benefit as you are not earning enough to cover the costs.
I also have the option of repaying my pension when I return to work.
I can understand your confusion/frustration but they are two separate issues. Workplaces have to offer a pension, they don't have to offer childcare vouchers. You'll be able to claim childcare costs once you return from ML.

[namechangeforissue]

MrsFoxx they do have to offer it if they have offered it to you before going on mat leave though. They don't stop it - they aren't allowed to.

I think in your situation even if it's not right that you can change during a SMP period, you can start the benefit now (or as soon as the baby is born if you have to actually have a baby to claim it, while you have a child but before your pay is lower).

I really cannot find any regulation that clarifies this, and I've been pointed to a couple of things that DON'T clarify it, despite the person emailing me saying that it does. That's what's so annoying/frustrating/confusing.

I would ideally like to start the benefit now and if I'd been told I couldn't start it during my SMP period I would have started it during my occupational maternity pay period - but nobody told me. I also need to clarify whether they are going to stop me from starting it up until the next childcare enrolment period (as my pay will start before that but billing is in a confusing mix of monthly and enrolment periods).

I really don't get how my salary can be £X for pension purposes but just SMP for another purpose. The salary is £X (original salary) for AVC purposes too - not just for occupational pension - and they don't have to offer AVCs as far as I know.

[PenguinsandtheTantrumofDoom]

On the childcare vouchers - no they can't stop them. But they are within their rights to stop you starting them until are back onto a salary which can be sacrificed to pay for them. I think that's what MrsFoxx was referring to.

Same applies to your childcare. Salary is a red herring. What it becomes when you fund it through salary sacrifice is a non cash benefit - which is why it continues when pay stops. As a non cash benefit, it is up to them to say no to adding new ones whilst off in this scenario.

[namechangeforissue]

Well, I rang HMRC. They didn't say "don't be silly, of course you can't change it" but instead said "erm... We have no idea". I'm going to write to them formally, and tell work I have done that, but my current intention is to start my changes on my provisional return to work date.

[PenguinsandtheTantrumofDoom]

Why would HMRC know? It isn't their decision.

[namechangeforissue]

The regulation about not reducing your salary too far through salary sacrifice is an HMRC regulation. Likewise the advice in employers continuing non-cash benefits is an HMRC issued advice sheet. So I'd jolly well expect them to know what "minimum wage" actually means.

[PenguinsandtheTantrumofDoom]

Yes, HMRC will know about rules about not reducing salary.

But the fact is, employers have to continue benefits during mat leave, they don't have to continue salary. Nor do they have to enhance benefits (except if they do so for everyone - e.g. if everyone is given a company car whilst you are off, they can't decide you don't get one).

You are expecting them to enhance benefits by paying for an additional child in childcare. You keep talking about continuing benefits, but continuing benefits is continuing to pay for DC1, not adding DC2.

I get that the reasoning you have been given is hazy, but I really don't think you're going anywhere with expecting your employer to pay your childcare bill for DC2 until you return to work and can salary sacrifice to pay for it.

[PenguinsandtheTantrumofDoom]

Right, I've read your OP again and I've read the HMRC factsheet (which is just guidance on their interpretation of equality law btw, it's not really an HRMC issue).

I think that this whole business about NMW and HMRC has probably distracted from what has gone on here, and has been badly explained to you by HMRC.

I think that, what HR are trying to say to you, is that you can't add DC2 to the childcare because it would take your salary too low and they'd have to pay. That's true, they aren't allowed to deduct from SMP (it's not about NMW. It's about deductions not being permitted from SMP). So if they let you add DC2, they will have to pay.

However, you have latched onto this point about deductions and are seeing this as an HMRC type issue .It isn't. It's about how your policies are worded and whether they give you an absolute right to amend your childcare decisions at any time. If they have worded your policy monumentally badly and have given you an absolute right to alter your deductions at any time based on a life event, you might be right. I would be very surprised if that was the case. It is likely to be the case that the policy allows them not to allow you to amend at certain times. Otherwise they'd probably have lots of women on first maternity leaves suddenly claiming childcare vouchers/childcare 'free' when they dropped to SMP. Given your workplace is large enough to have its own nursery, I would be amazed if the wording was this naïve.

So I still think it's massively unlikely that this argument is going anywhere. But I'd get your union rep to try and pass the wording of the policy by their employment lawyer for a review, not waste time chasing it down with HMRC because I think that's a dead end.

[PenguinsandtheTantrumofDoom]

Argh. Sorry for the typo. Second paragraph should say 'badly explained to you by HR'

[flowery]

Your salary is what it was before you started maternity leave. You are just not actually receiving it.

I am confused by why people are saying that despite the fact that the scheme allows employees to vary salary sacrifice for life events such as birth of a child, you should be denied this right because you are on maternity leave.

Employers are not "within their rights" to stop you changing/increasing/starting salary sacrifice arrangements just because you are on maternity leave. If the rules of the salary sacrifice scheme allow changes to people who are at work, the same rules must apply to women on maternity leave. Otherwise they are being treated less favourably because of their maternity leave which is unlawful.

If they want to say to you that they are allowed to refuse you access to the scheme on an equal basis with employees at work, they should explain to you how they have the right to do that.

Some schemes only allow changes annually, or similar, and applying that rule universally is fine, even if it means you can't vary. But if you would be able to vary if you were at work, you should be able to on maternity leave as well.

[flowery]

Oh, and I agree it's not an HMRC issue. The HMRC bit is that you can't apply a sacrifice to statutory payments.

The relevant legislation is the Equality Act, ie you must not be treated less favourably than other members of staff because you are on maternity leave. There is nothing saying employers are only required to continue benefits at the pre-maternity leave level, only that they must be treated the same as everyone else.

[namechangeforissue]

Thank you flowery that is my point! But the union are also saying I can't change it due to NMW.
The wording has nothing prohibiting a change while on SMP though it does cite NMW. If I had been told of this restriction before starting my maternity leave I might have chosen
to start nursery earlier.

[flowery]

If the NMW issue were relevant, you wouldn't get any vouchers on maternity leave at all. While on SMP you are not required to be paid NMW and in any case deductions can't be made from the pay you are receiving, so NMW doesn't come into it.

They are all entirely separate pieces of law. Under HMRC rules deductions can't be made from SMP. Under minimum wage legislation salary sacrifice arrangements cannot result in breach of NMW requirements. And under the Equality Act, benefits must be provided equally to women on maternity leave as they are to employees at work, and no detriment must be suffered because of maternity leave.

Those pieces of legislation don't always sit comfortably together, but that's the nature of the beast. If one rule says deductions can't be made from SMP and an entirely separate law says benefits must be provided equally, the upshot is that employers are out of pocket, and have to apply the scheme as if the woman is at work, funding it themselves.

Which many may think is unfair, and is really accidental rather than by design, but that's just the way it is.