childcare vouchers and salary sacrifice during mat leave - think employer has got it wrong

[Nineveh]

Hi,

I'm wondering if anyone can help me with a query on receiving childcare vouchers through a salary sacrifice scheme while on maternity leave.

I understood that my employer could not deduct the vouchers from SMP but that I was still entitled to receive them while on mat leave because they count as a non-cash benefit. I put this to my employer and sent them this link from HMRC - www.hmrc.gov.uk/employers/sml-salary-sacrifice.pdf - which I think backs up my point but I got this response:

"When the HMRC say the SMP must be paid in full is that on the pay slip it must show the full payment, you can?t deduct say £100 from £500 SMP and then only pay £400 SMP through the payroll. You must pay the FULL £500 and then what the employee has deducted from that £500 is completely up to them including if they wish childcare vouchers."

That doesn't tally with my reading of the HMRC document but perhaps it's a question of interpretation. I've failed to get hold of anyone at HMRC who can explain it to me so am unsure how to proceed and want to make sure my facts are correct so I don't look like an idiot!

Would really appreciate any advice if any of you have been in a similar position.

Many thanks,

Nine

They are wrong. 'Paid in full' means just that. If they are deducting from it then it's not being paid in full. They are not allowed to make salary sacrifice deductions from SMP.

This para on page 5 is very clear:

"Paying SMP
No contractual agreements can exclude, limit or otherwise modify SMP payments due. Therefore any SMP payable must be paid in full and in cash, for up to 39 weeks, regardless of any contrary contractual arrangements. In particular, the SMP payable cannot be further reduced by the terms of a salary sacrifice arrangement."

Couldn't be clearer really imo. Your contractual agreement to sacrifice salary for childcare vouchers cannot exclude limit or modify your SMP due. SMP must be paid in full and in cash (not in vouchers), and SMP specifically cannot be reduced by salary sacrifice.

Many thanks for that. I guess I will respond by pulling that paragraph out and quoting it to them directly. Do you know what other recourse I may have if they stick to their argument?

We had this recently - an employee who had signed up to the nursery voucher scheme & therefore salary sacrifice, started her maternity leave. As we aren't allowed to deduct the salary sacrifice from her SMP during her mat leave, we can't provide the vouchers, as she isn't able to pay for them out of her salary.

I think some employer NV schemes are different in that they are offered as a 'contractual benefit' and therefore the employer has to continue to provide them during mat leave, however our scheme isn't like that, and as we can't legally deduct the cost of the vouchers from SMP, we can't provide the vouchers. The only way around this would be for us to pay for the vouchers ourselves, which is in effect, an increase in salary and taxable benefit, and one that isn't offered to all employees and so is therefore discriminatory.

It appears that your employer offer a similar scheme to ours, and so, as they can't deduct the salary sacrifice, they therefore can't provide the vouchers,

I thought the vouchers qualified as a non-cash benefit and therefore the employer has to continue providing them, but can't deduct from SMP for them so in effect you get them during maternity leave without paying for them. Maybe that is just wishful thinking, but I've had so many problems with my HR department recently that I don't trust their judgement on this at all.

On a slightly different note, I don't suppose you know how I can work out what should be in my payslip each month while on maternity leave? I've asked HR for a breakdown because I remember from my last pregnancy that it varied considerably month to month, I think because SMP is paid weekly, but they are ignoring my request. It's pretty tricky to budget when you don't really know what your income is until it appears!

They are a non-cash benefit nineveh, provided in exchange for sacrificing some salary. The contract between you and your employer is that you will sacrifice some salary and they will provide you with a benefit instead. And yes, employers have to pay for vouchers themselves during maternity leave. Schemes don't differ.

Asking for a breakdown is reasonable - no idea how to work it out yourself, no. Can you ask payroll directly?

We'd better have a rethink of the benefits to us of offering the childcare voucher scheme then!! We only offer it because one member of staff asked about it, and it seemed harmless enough as it didn't really cost us anything to put in place, and saved some employees money! If we now have to continue to provide nursery vouchers to some employees if they are off & not able to make the payments for them themselves, then it isn't worth us offering it at all - this wasn't at all clear in the literature that the voucher scheme sent us when we set the scheme up!!

On your other note OP, there may be a calculator on direct.gov.uk or HMRC to work out how much your net pay will be on SMP, if you input your gross salary now, tax code etc.

I think you're very typical Ellypoo, offering it because it seemed harmless, more or less cost-free, someone asked and you wanted to be nice.

The problem is two bits of law collide here, with HMRC regs on SMP meaning employers aren't allowed to make salary sacrifice deductions from it, and maternity/sex discrimination laws making it a requirement to provide all non cash contractual benefits throughout maternity leave.

Not surprising the voucher schemes don't publicise it really - they may not be very knowledgeable about maternity/sex discrimination legislation anyway and of course it's not in their interests for clients to realise the scheme may cost them a lot more than they thought if someone goes off on maternity leave.

I advise my clients to think carefully when considering implementing a childcare voucher scheme. Some have gone ahead fully aware that there is a risk someone could be in the scheme and go off on maternity leave, and some have decided against it.

Flowery, I'm struggling to get my head round this too.

If CVs are a non-cash benefit, are they supposed to go on my P11D?

Just spoke to our payroll lady about this thread, and she thinks that because I 'pay' for my voucher through salary sacrifice, then I don't get the voucher while I'm not 'paying work back'. She likened it to my healthcare cover. I don't pay work for it, they pay for it for me, so I continue to be provided with this while I'm on ML. And it goes on my P11D.

My head may implode soon. It doesn't affect me anyway right now, but we're planning another baby in 2012 (fingers crossed) so I need to be armed in advance with the right words and arguments!

Whether a benefit is taxable and not subject to an exemption and therefore should go on your P11D and whether it is a contractual benefit for the purposes of maternity legislation are two different questions. Just because a non-cash benefit you receive isn't subject to tax doesn't mean it's excluded from the rule that withdrawing benefits during mat leave is discrimination.

I'm confused by all this. I go on maternity leave next month so pulled out of the childcare voucher scheme as we won't be using childcare until next September. Should I have stayed in the scheme? Also for 4 months my employer tops up SMP to full pay so presumably could still deduct them?

But they say I pay them back the money they pay to the CV provider through my salary sacrifice.

So if I wasn't getting a voucher I wouldn't get a deduction from my salary. Or I wouldn't do a salary sacrifice if I didn't have the voucher (chicken and egg?)

Is that not right?

Yes that's right Stetsons. The reason your employer gives you the benefit is because you've sacrificied some of your salary, but that doesn't detract from the legal position that they are a non cash benefit you are receiving.

Frilly yes your employer can deduct from the non-SMP element of maternity pay but would have to provide vouchers throughout leave.

Sorry, just want to make sure I've got this right

So if they're paying me in part-salary and part-benefit, then while I'm on ML they can't withhold the benefit part of my package, just the cash salary part? Same as they continue to provide my healthcare (and hypothetical business car, if I had one)?

I've had a read through those links, and while the examples make my head spin, I think the Common Misunderstandings sections spell it out better.

Exactly :)

Hurrah! Thanks Flowery, you are truly wonderful.

Sorry OP for hijacking your thread. Hope you're making some headway with your employer. Will you give us an update when there is one? I'd love to know I'll be able to browbeat encourage my employer to interpret it properly

I hit this with major employer who had made me opt out. Colleague and I fought them and won - seem to remember page 12,13,14 in the HMRCs full doc was fairly indisputable. Good luck.

Well, I've just come off the phone to my payroll department who have taken until now to come back to me on this, and they are refusing to play ball. I must confess my head is spinning now too although that may be because I'm due in a week and my brain has turned to mush!
So, what my employer said is that they have to pay full SMP on the payslip to ensure they are paying the correct NI etc. Then what the employee chooses to have deducted from that is up to them so if I choose to receive childcare vouchers I am choosing to have that money deducted from my SMP - I can withdraw my permission at any point at which point they will stop the vouchers.

I tried to point out that a salary sacrifice scheme means I have given up my contractual right to part of my salary and therefore SMP (when you receive 90% of salary) is based on my salary after that sacrifice has been made, so they can't deduct it again. She said however that there was no other way for them to pay the childcare vouchers other than putting it through the payroll and deducting the equivalent from the money I receive. She said I would need to speak to HR if I wanted them to do anything differently because they couldn't make random payments without authorisation from HR. Clearly this is not a random payment, and I also said it wasn't HR's decision, it was a legal fact of what I was entitled to, so I got the earful of "I've worked in payroll for ten years, I know what I'm talking about" etc etc.

I really don't want to talk to HR as I've already spoken to them - they are unfortunately notoriously unhelpful in part because there is one person for 200 employees so he is never available and can take a month to return phone calls - and the guy clearly didn't know about this hence he passed me on to payroll.
If I am definitely in the right here and am entitled to receive full SMP plus childcare vouchers then I want to keep on fighting as its a considerable sum of money but I just don't know what to do next and to be honest am not 100% sure I am in the right. Any advice most appreciated! And if anyone has fought this battle and won, how on earth did you do it?! Many thanks

If the official HMRC guidance isn't enough to convince you I'm not sure there's anything stronger anyone here could say.

If you do want to take this further your next step would be a formal grievance, however if you've been referred to HR I think at least an email giving a week or so to respond before you put in a grievance would be fair.

Sorry flowery, I didn't mean that I wasn't convinced by the arguments, just that it's hard to know what to do when you meet a brick wall from your employer.
Thanks a lot for all your guidance, it is really appreciated. I've cut and pasted all the relevant documents from everywhere I could think of and will be sending them to my employer tomorrow to back up my argument so fingers crossed that will be sufficient and I can avoid the formal grievance procedure.

It will be interesting to see how this pans out - I sent the same info to my payroll and HR as they deducted the vouchers from my SMP. This was about 2 months ago! Payroll told me there was an investigation under way and HR have not responded at all. I work for the NHS and thought they may be alittle better in responding but it seems like they are avoiding me

does anyone know if there is a limit on when you can join the CCV scheme? I've been told I cannot join the scheme as I am due to go on maternity leave - this doesn't seem fair to me - surely I should be allowed to join regardless of whether I am pregnant or not?

Phone the ACAS Helpline on 08457 47 47 47. They will give you the correct answer and contact your employer on your behalf if you are right.

Terms and conditions during OPL
During OPL an employee has a statutory right to continue to benefit from all the terms and conditions of employment which would have applied to them had they been at work, except for the terms relating to wages or salary.

Interested to see what happens as I will be in this situation soon. However, there is a minimum amount you can earn before you can sacrifice salary and looking at what it says above I think they could not pay the vouchers.

More answers on a postcard please!

FWIW my old employer, very large business, tells women on ML that they recommend they stop all salary sacrifices including CV as it is not cost effective for employees as their salary is so little. Sounds like that is nonsense. I didn't use CV on ML but feel bad for those that are duped. It's not common knowledge.