heading for war with HR - Childcare vouchers & SMP

[PuraVida]

hello,

i see this has been discussed before, and i've garnered all sorts of useful information regarding the payment of childcare vouchers whilst on SMP

for anyone else wanting clarification this is it in a nutshell:

Page 9 of HM Revenue & Customs - How to help your employees with childcare E18(2009) www.hmrc.gov.uk/helpsheets/e18.pdf) says

'If you offer a childcare benefit or childcare vouchers to
your employees in return for a reduction in their cash
pay, they cannot sacrifice their cash pay below the NMW
rates. Nor can you reduce any statutory pay, for example
Statutory Maternity Pay (SMP) or Statutory Sick Pay (SSP)
for any form of employer supported childcare provided
by you for the same period.
Childcare vouchers are an employer provided non-cash
benefit. Employer provided benefits provided under a
contract of employment must continue to be provided
whilst an employee is absent from work on maternity
leave. This applies even if the employee is getting no pay
or only getting SMP.'

Furthermore here: www.hmrc.gov.uk/paye/payroll/special-pay/salary-sacrifice.htm

Says, in the section 'Salary sacrificed and non-cash benefits during maternity and adoption leave':

'When an employee is on statutory maternity or adoption leave, all of the terms and conditions of their employment contract continue to apply, other than those relating to wages or salary.
This applies to all non-cash benefits in the contract, including any that form part of a salary sacrifice arrangement. You must continue to provide these benefits in the same way as if the employee was still at work.
For example, if you agree a salary sacrifice arrangement that involves an employee losing £50 per week of their salary in return for £50 of vouchers, you will have to continue to provide those vouchers throughout any statutory maternity or adoption leave that the employee takes.
You cannot reduce the amount of any statutory payments due to the employee to recover the cost of providing any non-cash benefits to them while they are on maternity or adoption leave.
Please note that these provisions apply to childcare vouchers in exactly the same way as to any other non-cash benefits.'

The inference is, quite clearly, that childcare vouchers must continue to be paid, and that no deductions can be made from SMP.

Now then. To my problem,

i've sent this to my HR department who have said:

When an employee gets to the end of their period of full maternity pay they are entitled to continue in the scheme and purchase vouchers, as they would if they were not on leave. However, as they are no longer receiving money that can be used to pay for the vouchers, our approach is that we provide two options for making the payments to cover the vouchers. Either the employee can send us a cheque to the total value on a monthly basis, or the value of the vouchers received will be recorded and an arrangement will be made when the employee returns to work to repay the balance. During this period the employee will not be paying Tax and NI, so the usual Tax and NI savings would not apply. As there is no financial Tax or NI saving to the employee, employees would normally request to be temporarily removed from the scheme and be reinstated into the scheme on their return to work. Your SMP would not be affected in any way by choosing either of the repayment options or to be removed from the scheme.

this is wrong isn;t it?

firstly i need evidence to challenge this, if anyone can offer something in black and white? i'm stuggling to find evidence as clear as that above

secondly i have a moral dilemma. the response went on to infer that if the scheme was no longer cost neutral then they would cease to offer it. i don't want to be responsible for that

they also threw in a comment about the current budget restraints etc, which i am only too aware of, having had half my department made redundant

i'm finding it hard to reconcile....

sorry it's so long

Yes they are wrong.

Is the HMRC ruling on the issue not sufficiently official for your HR department to act upon?

I would suggest writing enclosing the guidance you've found, highlighting the appropriate words, and notifying them that should they withhold your vouchers or indeed any other contractual benefit during your maternity leave, this will be contrary to the Equalities Act 2010 and you will take the appropriate action.

Sounds to me as though the key point is are you in the period of statutory maternity leave (ie paid leave) or extended leave ....

I read the text from hmrc as being that during statutory leave they MUST continue your vouchers and can not reduce your SMP to cover the cost but if you take extended leave, they can do so?

I would be tempted to get some legal advice on this one before discussing with HR

Statutory maternity leave is the whole year. Statutory maternity pay is received for 9 months of that. Women are entitled to all contractual benefits for the whole duration of maternity leave, not just the paid portion.

Thanks both

It's the bit about reclaiming the costs once I return to work that I need to 'prove'

As I understand it there is no cash to reclaim as no cash has been paid, but I need to maje them see this. I've not found anything from hmrc that mentions this explicitly

Legal advice sounds expensive. Is this something CAB would be able to advise on do you think?

I'm not totally clear what the "full maternity pay" bit is - do you get 100% of pay for a while, or is this referring to SMP?
Assuming you have signed a salary sacrifice form, they need to pay you SMP and childcare vouchers - but if you have any income during the month, they can reclaim the childcare vouchers - e.g. if you did a keeping in touch day, and earn £100, they would take it back to part fund the childcare vouchers. If they top up SMP, they will use the top up part to pay the vouchers.
I have been receiving SMP and vouchers. I'm expecting next pay packet to by £0 and childcare vouchers. Will wait and see what happens!
Ring Acas
They are who sorted all my questions - and an e-mail to HR with "I have spoken to Acas, and they have said XYZ, please contact them on abc to confirm" got the required decisions made.

The key here is that they are not providing vouchers at a reduced cost to the employee.

They are seeing it as follows:

1. You want childcare vouchers
2. HMRC allow you to reduce the cost of these by making them tax/NI exempt.
3. Each month you pay us for childcare vouchers and we take the cost of them away from your gross pay.
4. You won't be receiving pay
5. The vouchers still need to be paid for
6. We can either bill you for them, or you pay us afterwards

It's step 3 that they've misunderstood.

Although the practice is the same, legally, you are NOT paying for childcae vouchers.

Legally, you are choosing to replace some of your contracted salary with childcare vouchers as a benefit of your employment. If you look at it in annual terms, your options are:

(examples):

£14000 gross salary PA.

OR

£13400 gross salary + £600 towards childcare in the form of vouchers.

It just so happens that HMRC have decided that the childcare vouchers are not subject to tax/NI.

So, the childcare vouchers are a non-cash employment benefit.

Just as company cars, gym memberships, private healthcare, etc., are non-cash employment benefits, the employer has to continue providing them regardless of whether you are on maternity leave.

So, I would say the issue here is the misunderstanding on the part of your employer about exactly what is happening when you get your childcare vouchers.

You aren't taking advantage of buying some cut price childcare, you have legally varied your contract on a permanent basis.

Yes what Lougle said. You are not paying for vouchers. You have agreed to accept a lower salary and enhanced your contractual benefits to include childcare vouchers.

Put in your letter that you will treat any attempt to reclaim the costs of your vouchers or any other contractual benefits you will receive during your maternity leave from salary at a later date as an unlawful deduction from salary.

Actually I feel sorry for employers who have to fund the scheme through maternity pay, especially if they are small businesses trying to be family friendly etc. It can make the difference between an employer offering the scheme or not.
What ever the law and the HMRC say women in this situation are getting something for nothing aren't they.

"What ever the law and the HMRC say women in this situation are getting something for nothing aren't they."

Just as men who are employed with a contractual right to Private Healthcare would remain so entitled if they were off sick, yes.

I do feel bad about it. Our budgets have been slashed, my colleagues made redundant, it's a horrid time and situation. And yes, I get fantastic maternity leave - 6 months full pay

But I do earn considerably less than I would in an equivalent role in a commercial organisation, that's the balance.

But, if this is something I'm entitled to, then I should get it. I shouldn't be made to feel bad about it. The Hr dpt should know this, it shouldn't be up to me to 'fight' for it

That aside, there's done excellent advise here, am going to have s thorough read and put together a response

Thank you for your help

.

Can you put this in simple terms for me as I appear to have picked up on the end of the discussion i.e.
Month 1
If the woman gets £1500 in SMP (90% of pay) then she also gets the £243 childcare voucher but the money is not taken off the £1500?
Month 2
The woman gets combined SMP and OMP (Occupational maternity pay) of £1800 and they can take away the OMP to cover the cost of the childcare vouchers?
Month 3
The woman gets SMP only of approx £512 - they can't deduct anything because its just SMP and you still get the £243 vouchers?
Or have I got this completely wrong?!

Am I totally misunderstand this? If I am on mat leave and claiming childcare vouchers then my employer can deduct these from any part of the mat pay that THEY pay i.e. NOT SMP - and I receive the tax benefit on this. Once I am only on SMP then I can still receive the childcare vouchers effectively for free?? If this is a 'salary sacrifice' scheme and there is no salary to sacrifice then how can I get the vouchers? I work for the NHS if that makes any difference and can't believe that I can get something for nothing from them! Or surely everyone would do this? I must be being thick and misunderstanding - please could someone explain in very simple language? :)

TBJ - the SMP is replacing the salary. Some of the salary has been sacrificed for the vouchers prior to Mat leave commencing.

Once on Mat Leave (after any period when there is occupational Mat Pay), the salary is replaced by SMP. The law says that no deductions can be made from SMP.

HOWEVER the law also says that a woman can't be disadvantaged by virtue of her Maternity Leave, so all contractual benefits must continue. The Vouchers are a contractual benefit. It just happens to be that they are given in return for a lower salary. To discontinue them would be indirect sex discrimination, because only women would be absent through reason of childbirth (at the moment!)

Thanks for that Lougle I wonder how many people know this? And I'd also be really suprised if my employer continued to pay these despite me being on SMP, I just can't believe they would without a fight - that sounds awful I know! When your SMP ends I presume you then can't claim the vouchers, when you are on unpaid mat leave.

Oh, another quick one (sorry for the hijack!) If I did some KIT days then presumably the pay for these would be deducted for the childcare vouchers. So it would only be worth me doing KIT days if I could earn more than £273 by doing them or else I'd be working for free (well, for chilcare vouchers).

Oh dear, another question, so sorry. Would you have to have been claiming the childcare vouchers prior to going on mat leave? Or could you start claiming them when only on SMP? I am claiming them now, but couldn't afford to have my salary reduced whilst on the first part of mat leave. Would I think not be able to start the scheme back up until back at work and being paid normally?

I don't know about the KIT days...I suspect you are right, they would be classed as 'salary' so could be deducted from.

You would need to be careful in deciding whether the vouchers are worth your while. The basic rule about SMP/OMP is that it is based on your average earnings (inclusive of bonuses, overtime, etc.) between weeks 18-25 of your pregnancy. It isn't based on when you earned the money, but when you received the money.

So, for instance, if you qualified for a bonus in week 8 of your pregnancy, but the payroll department forgot to pay you, and only paid you in week 20 of your pregnancy, that amount would be included. Also, if you are monthly paid and worked overtime in week 15 of pregnancy, but were paid it in week 18, it would count. If however, you did overtime in week 23 and were paid in week 28, it wouldn't count as part of your average.

The reason it's important to know this, is that the sacrificed amount for the vouchers is taken from your gross salary. You don't pay for the vouchers, rather you have contractually agreed to receive part of your salary as 'payment in kind'. In other words, you are not earning £20k, you are earning £19k + £1000 in childcare vouchers.