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Childcare vouchers – remuneration or benefit?

What is a salary sacrifice scheme?

A salary sacrifice scheme is where an employee gives up the right to receive a portion of their salary in return for the employer’s agreement to provide a non-cash benefit. This is often used for pension contributions and childcare vouchers.

Once a sacrifice arrangement has been entered into then this will amount to a change in the terms and conditions of the employee’s contract of employment. The employee will receive a reduced salary in return for a non-cash benefit. The non-cash benefit is treated like any other benefit and is not dependent on the employee being in receipt of sufficient salary from which the value of the benefit can be deducted.

Terms and conditions of employment during Ordinary and Additional maternity leave

Employees are entitled to the benefit of all of their terms and conditions of employment save for remuneration during Ordinary and Additional maternity leave. The guidance from the HMRC states that childcare vouchers are a non-cash benefit and therefore employees should continue to receive this benefit during ordinary and additional maternity leave.

Are childcare vouchers remuneration or a benefit?

Despite HMRC’s guidance, it has been a grey area as to whether childcare vouchers are deemed to be a non-cash benefit or remuneration. This has now been considered in the case of Peninsula Business Services v Donaldson EAT/249/15

It was a condition of Peninsula’s child voucher scheme that if an employee was on maternity leave the right to join the scheme was suspended. Mrs Donaldson wanted to join the scheme but refused to do so on these terms and argued that they were discriminatory. She brought a claim in the Employment Tribunal for pregnancy maternity discrimination under the Equality Act.

The Employment Tribunal agreed with Mrs Donaldson and noted that women on maternity leave are entitled to non-paid benefits during maternity leave and it followed that it must be discriminatory to require an employee to forgo such benefits during maternity leave.

Peninsular appealed to the Employment Appeal Tribunal (EAT).

The EAT considered whether the childcare vouchers amounted to remuneration and therefore did not need to be continued through maternity leave.

The EAT held that employers provide vouchers as a benefit in addition to salary. In cases where vouchers are provided by way of salary sacrifice, the true position is that the vouchers represent part of the salary. In the circumstances, the vouchers should be regarded as remuneration, and therefore discontinued during Ordinary and Additional maternity leave.


Clarity has been provided to employers. Where childcare vouchers are provided through normal means it will be deemed to be a benefit, which continue during Ordinary and Additional maternity leave. However, if childcare vouchers are provided through a salary sacrifice scheme the EAT has confirmed that this constitutes remuneration and therefore does not need to be continued during the maternity leave period.

If you have any questions in relation to this, please contact:

Sejal Raja

T. 0207 227 7410


This briefing is for guidance purposes only. RadcliffesLeBrasseur LLP accepts no responsibility or liability whatsoever for any action taken or not taken in relation to this note and recommends that appropriate legal advice be taken having regard to a client's own particular circumstances.